Basalt Town Council debates paying property tax refunds or taking issue to ballot

Basalt Town Council is still unsettled on how to solve a property tax overcharge despite insistence from its staff and outside experts that the evidence is clear that refunds are owed.

Councilman Auden Schendler said he had to “respectfully disagree” with the staff direction.

“I think the town got way out over its skis on this,” Schendler said.

Council didn’t dig into the research well enough before the town government declared that there was likely an overcharge, he said. He noted that former Basalt mayors Rick Stevens and Leroy Duroux have gone on the record saying they believed during their tenures that a 1994 town vote set a ceiling on the property tax mill levy and that the annual mill levy could fluctuate in any given year as long as it didn’t exceed that ceiling.

“Leroy’s a legendary fiscal hawk,” Schendler said.

Then he dropped a bombshell in the discussion.

“My position is we should let this go,” Schendler said. “If someone doesn’t agree with that, they can take us to the courts. I think the best action is to let this go and see what happens.”

His declaration visibly rattled staff members and some other council members. No other council member expressed favor for letting the issue go.

Basalt is grappling with a suspected violation of the Colorado Taxpayers’ Bill of Rights, approved statewide by voters in 1992. It limits revenue that can be collected and requires a vote for tax increases.

Local governments had an option of easing the restrictions with a vote. That maneuver was dubbed “de-Brucing” in reference to TABOR’s principal author, Douglas Bruce.

Basalt residents voted 224-42 in April 1994 to de-Bruce. The ballot language allows the town government to keep increases in property taxes and sales taxes due to growth, but it also states there will be no tax increases without a vote of the people.

Basalt increased its property tax mill levy 10 times since 2005. While the mill levy didn’t exceed the 1994 level, it did increase from the prior year.

Basalt’s top administrators are new to their positions within the past two years. Finance director Christy Hamrick reported the mill levy increases to Town Manager Ryan Mahoney and Town Attorney Jeff Conklin. They consulted with outside sources to determine Basalt probably violated TABOR.

Mahoney reinforced that position Tuesday night.

“In my mind, I don’t have any doubt that we over-collected,” he said, adding that he felt it was an accident by previous administrations. “I don’t think we’re OK.”

The town’s outside expert, Dee Weiser, an attorney who is recognized in the state as an expert in TABOR, concurred though he also said, “We’re in unchartered waters.”

No taxing district in Colorado has interpreted TABOR as past Basalt administrations did, he said.

Weiser said if his malpractice insurance was on the line, “I will tell you to refund the money.”

That touched off conversation about how to resolve the issue with voters. Councilman Bill Infante said Basalt has no choice but to ask voters to establish a new property tax mill levy ceiling. If the question fails, Basalt would have to still to a mill levy of 2.562, the lowest level it ever reached post-TABOR.

Infante labeled the issue the “nuclear question” because the implications are so large for the town. Sticking to a 2.562 mill levy would severely impinge revenue.

Council members also kicked around the idea of asking a separate question on whether a refund should be given for property tax over-collection. TABOR limits a taxing entity’s liability to four years. In Basalt’s case, that would require a refund of about $2 million.

If voters approved that question, Basalt would be forgiven for past TABOR violations.

“Someone could still sue you but they wouldn’t prevail,” town attorney Conklin said.

Councilwoman Katie Schwoerer said she wants the path that is least “painful” for the town.

“I’m willing to have a conversation whether we go to the ballot or not” on the refund issue, she said.

Infante also said that it was new information to him that Basalt wouldn’t be exposed to a TABOR violation if voters decided the refunds didn’t need to be issued. He said he needed more time to digest that information.

Mahoney said the staff felt giving the refund without a vote would provide “build a community will” toward approving the mill levy the town seeks.

Going to the ballot on a controversial refund question could potentially make it more difficult to get the mill levy passed in a separate question, Mayor Jacque Whitsitt and other officials said. Whitsitt supports granting the refund and putting the mill levy question on the ballot.

Council didn’t reach a decision but pledged to debate the issue fully at one of its meetings in July.