City of Fort Morgan General News & Announcements

Posted on: October 4, 2017

Facts About Proposed Sales Tax for Streets

In response to inquiries about the reasons for placing a proposed sales tax increase on the November election ballot (Ballot Issue 2C), the City of Fort Morgan offers the following factual summary of the background and the basis for the proposal:

In several informal surveys of the community in the last three years, Fort Morgan residents repeatedly identified the condition of city streets as one of the biggest problems in the city and the one they would most like to see improved. In 2016 the city commissioned a scientific assessment of street conditions by consulting firm Infrastructure Management Services (IMS), which showed that most city streets were in marginal to poor condition, the city’s average Pavement Condition Index (PCI) was below the national average, and the estimated cost to bring the average PCI up to the national average and clear the backlog of needed improvements was about $26 million.

For at least the preceding five years Fort Morgan had budgeted approximately $900,000 per year for streets improvements and maintenance, but the IMS study showed an annual investment of about $2.475 million was needed to arrest the decline of the city’s street conditions, resolve the backlog and set the city on a sustainable course to acceptable street conditions citywide.

The Fort Morgan City Council directed city staff to explore options for financing such a street improvement program. Staff considered options including a property tax mill levy increase and cuts in the General Fund budget as ways to produce the funding needed for the program. A property tax increase would have to be prohibitively high to generate the needed revenue, and would also place the entire financial burden on city residents and property owners. Budget cuts would need to be in the neighborhood of 20 percent across the board in the General Fund, which would have drastic impacts on other city services and programs including police and fire protection, parks and recreation, and administrative functions.

Staff ultimately identified a sales tax increase as the best solution, one that would generate the needed revenue while spreading the financial burden not only on city residents but on all those who use the city streets when they come to Fort Morgan to shop, dine or otherwise spend money. A 2016 analysis by The Retail Coach showed that Fort Morgan draws shoppers and visitors from a regional market of about 38,000 people in the surrounding area, which is more than three times the city population.

Such a sales tax increase would require an affirmative vote of Fort Morgan residents, so staff proposed placing a ballot issue before voters in the November 2017 election. A 1 percent increase was chosen because it would produce the amount of revenue required to make the annual investment identified by the pavement assessment study, when combined with the city’s recent budgeted funding for streets. Based on historical sales and use tax collections in the city, a 1% increase was projected to generate approximately $1.8 million a year. The range of annual collections can vary widely, however, based on broader economic factors as well as local conditions, so it was proposed that the ballot question allow the city to collect up to $2.4 million in the first year. Although that amount would be a near-record level of sales tax collections in a single year, wording the ballot issue in this way was intended to prevent the need for refunding excess sales tax collections in the event the city happened to have an outstanding sales tax year in 2018. 

In the course of seeking public feedback on the proposal for a sales tax increase city staff found that many residents were supportive of the increase, but only if they were assured that the revenue from the tax would be spent only on street improvements and not diverted to some other use. For that reason the ballot language was also drafted to clearly state that the revenue would be for that specific purpose and no other. Community input also indicated a strong desire among residents to see the city’s many alleys improved, so alleys were also added to the ballot language in addition to streets and related infrastructure. 

The last sales tax increase in the City of Fort Morgan was enacted in 1982 – 35 years ago. The last property tax increase was in 1990, and Fort Morgan’s property tax mill levy is among the lowest of taxing entities in Morgan County.

 The City of Fort Morgan owns and maintains 54 centerline miles of streets, which were identified in the IMS study as the city’s most valuable infrastructure asset with an estimated value approaching $65 million. Historical data obtained from local pavement contractors indicate that the costs for paving work have risen approximately 28 percent in the last five years, and with that trend likely to continue the cost of improving and maintaining the city’s street network can only be expected grow.

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