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HomeMy WebLinkAboutStudy Session Agenda Packet 12-21-20STUDY SESSION AGENDA CITY COUNCIL CITY OF WHEAT RIDGE, COLORADO December 21, 2020 6:30 p.m. This meeting will be conducted as a VIRTUAL MEETING. No members of the Council or City staff will be physically present at the Municipal building for this meeting; the public may not attend in person. The public may participate in these ways: 1. Provide comment in advance at www.wheatridgespeaks.org (comment by noon on December 21, 2020) 2. Virtually attend and participate in the meeting through a device or phone: • Click here to join and provide public comment • Or call +1-669-900-6833 with Access Code: 993 3527 1030 3. View the meeting live or later at www.wheatridgespeaks.org, Channel 8, or YouTube Live at https://www.ci.wheatridge.co.us/view 4. Individuals who, due to technology limitations, are unable to participate in the meeting virtually (via the Zoom platform) or by calling in on the telephone may contact Danitza Sosa, Assistant to the Mayor and City Council, at 303-235-2977 by noon on the day of the meeting. Arrangements will be made for those individuals to access City Hall during the meeting to view the meeting and provide public comment if desired. These comments will be heard and seen in real time by members of Council and City staff. Individuals accessing City Hall must practice social distancing, wear a mask or other facial covering and be free of COVID-19 symptoms. Individuals with disabilities are encouraged to participate in all public meetings sponsored by the City of Wheat Ridge. Contact the Public Information Officer at 303-235-2877 or wrpio@ci.wheatridge.co.us with as much notice as possible if you are interested in participating in a meeting and need inclusion assistance. Citizen Comment on Agenda Items 1. Building materials use tax exemption for public housing authorities 2. Staff Report(s) 3. Elected Officials’ Report(s) ADJOURNMENT Memorandum TO: Mayor and City Council FROM: Patrick Goff, City Manager Jerry Dahl, City Attorney DATE: December 16, 2020 (for December 21, 2020 Study Session) SUBJECT: Building Materials Use Tax Exemption for Public Housing Authorities ITEM: Section 22-68 of the Wheat Ridge Code of Law (Building materials and supplies) requires that “every person who builds, constructs, reconstructs…any building, dwelling or other structure…in the city…shall pay a use tax.” Section 22-67 of Code exempts public school, Wheat Ridge Housing Authority and Renewal Wheat Ridge projects from the city’s use tax. Jefferson County Housing Authority, d/b/a Foothills Regional Housing (“Foothills”), owns several low-income projects within the City, including the Caesar Square Apartments which is currently under renovation. Foothills paid building materials use tax on the Caesar Square and two other projects in Wheat Ridge. They are requesting a refund of that use tax as they believe Foothills, as a housing authority is exempt from all taxes pursuant to Colorado State Statute. PRIOR ACTION: None FINANCIAL IMPACT: Building materials use tax in Wheat Ridge is calculated at 60% of the building permit value of a project multiplied by the current sales and use tax rate in Wheat Ridge of 3.5%. Therefore, a construction project valued at $5.0 million would owe $105,000 in building materials use tax. Foothills Regional Housing has pulled three permits on two current construction projects in Wheat Ridge and paid a total of $67,509.20 in building materials use tax. They are mid-way through these projects and expect to pull additional permits in the future. Foothills is requesting a refund of this amount as they believe their organization is exempt from building materials use tax. BACKGROUND: On October 20, 2020, Foothills submitted three claims for refund of building materials use tax paid on permits for two projects in Wheat Ridge as they believe Foothills in exempt from City building materials use tax pursuant to State Statute. The City’s Finance Division denied those refund claims on October 30, 2020 based on direction from the City Attorney’s Office. Item No. 1 Building Materials Use Tax Exemption December 16, 2020 (for December 21, 2020 Study Session) Page 2 The City of Wheat Ridge adopted a home rule charter under Colorado’s constitution. This means that in matters that the law has defined as of “local and municipal concern”, the City’s ordinances prevail, if there is a conflict with a State law. One of those areas of local concern is the City sales and use tax. Tax exemptions created in State law, such as the exemption adopted by the Legislature through HB16-1006, exempting public housing authorities from all taxes, does not apply in home rule municipalities. This was most recently reaffirmed by the Colorado Supreme Court in Winslow Construction v Denver where the Court ruled a State tax exemption did not apply to home rule municipalities. Holland & Hart, attorney’s for Foothills, disagrees with the City Attorney’s Office interpretation of the law and, on November 25, 2020, submitted a petition to the City for a hearing on claims for refund. Staff communicated with Foothills that this issue would be brought forward to City Council for determined if an exemption would be granted through an amendment to Wheat Ridge Code. The proposed ordinance would extend the City’s present building materials use tax exemption to all “housing authorities”, as defined in State law. This would mean that such purchases by Foothills and the Wheat Ridge housing authorities (as well as any other public housing authority that may be operating in the City) would be exempt. Additionally, the ordinance makes the exemption effective from July 16, 2020 and directs refund of any taxes collected after that date. This would authorize the refund of use taxes paid by Foothills on July 17, 2020. Foothills protest to the City’s denial of a request for a refund of these taxes is pending; the adoption of this ordinance would resolve the issues in the protest. The present use tax exemption specifically exempts Wheat Ridge Housing Authority purchases of building materials. In order to avoid legal issues of alleged “special legislation”, the better drafting practice is to describe the category of undertaking or activity being exempted, rather than naming a particular beneficiary. The proposed ordinance corrects this drafting issue. Subsection 22.67(3) also specifically names the City urban renewal authority as beneficiary of the tax exemption, thus raising the same drafting issue described above. The proposed ordinance cleans up this language, by substituting a generic reference to “urban renewal authorities”, as defined in State law, for the specific reference to Renewal Wheat Ridge. RECOMMENDATIONS: Although there are differing opinions concerning the tax exemption for housing authorities, which could be litigated in court, Staff recommends that council amend the Wheat Ridge Code of Laws to provide for a building materials use tax exemption for public housing authorities. An exemption from City building materials use tax will align the City’s Code with State Statute and the current exemption in City Code of the Wheat Ridge Housing Authority. MEMO PREPARED/REVIEWED BY: Jerry Dahl, City Attorney Patrick Goff - City Manager ATTACHMENTS: 1. Petition for a Hearing on Claims for Refund, dated November 25, 2020 2. Draft Ordinance T (303) 295-8000 F (303) 295-8261 555 17th Street, Suite 3200 Denver, CO 80202-3921 Mailing Address: P.O. Box 8749 Denver, CO 80201-8749 www.hollandhart.com Alaska Colorado Idaho Montana Nevada New Mexico Utah Washington, D.C. Wyoming Arthur A. Hundhausen Phone:(303) 295-8548 Fax:(303) 975-5498 ahundhausen@hollandhart.com November 25, 2020 VIA E-MAIL (cmiller@ci.wheatridge.co.us) Mr. Chris Miller City Treasurer City of Wheat Ridge 7500 West 29th Avenue Wheat Ridge, Colorado 80033 Re: Petition for a Hearing on Claims for Refund Jefferson County Housing Authority d/b/a Foothills Regional Housing Dear Mr. Miller: In accordance with Section 22-45(b) of the Code of Laws of the City of Wheat Ridge (the “Code”), Jefferson County Housing Authority, d/b/a Foothills Regional Housing (the “Housing Authority”), by its attorneys, petitions for an informal hearing on three Claims for Refund of Wheat Ridge use tax filed by the Housing Authority on October 20, 2020 (the “Claims). Copies of the Claims are enclosed with this petition for a hearing. The City of Wheat Ridge (the “City”) denied the claims via an e-mail from Mark Colvin to the Housing Authority dated October 30, 2020 (the “Denial”). A copy of the Denial is also enclosed with this petition for a hearing. The Housing Authority is an “authority” or “housing authority” as such term is defined in C.R.S. § 29-4-502. As a county housing authority, the Housing Authority’s primary function is to effect the planning, financing, acquisition, and construction of dwelling accommodations at rental prices within the means of families of low or moderate income within the boundaries of Jefferson County, Colorado, including the City of Wheat Ridge (the “City”). C.R.S. § 29-4-507 states that a county housing authority and the property of such an authority “shall be exempt from all taxes and special assessments on the same basis and subject to the same conditions as provided for city housing authorities in sections 29-4- 226 and 29-4-227.” ATTACHMENT 1 Mr. Chris Miller City of Wheat Ridge November 25, 2020 Page 2 www.hollandhart.com Alaska Colorado Idaho Montana Nevada New Mexico Utah Washington, D.C. Wyoming Under C.R.S. § 29-4-227(1)(b), A project that is owned by, leased to, or under construction by an entity that is wholly owned by an authority, an entity in which an authority has an ownership interest, or an entity in which an entity wholly owned by an authority or of which an authority is the sole member has an ownership interest is exempt from both property tax and, during construction, from the payment of sales tax and use tax to the state or any county, city and county, municipality, or other political subdivision of the state in proportion to the percentage of the project that is for occupancy by persons of low income. (emphasis added). As outlined in the Claims, the Housing Authority owns several low-income projects within the City of Wheat Ridge, including the Caesar Square Apartments, that have been and continue to be 100% occupied by persons of low income (collectively, the “Projects”). The Housing Authority recently became aware that City sales and/or use tax was paid in connection with the construction of the Projects, pursuant to the City’s building permit process. The Claims requested a refund of such use tax on the basis of the exemption provisions outlined above. The Denial asserts that the City will not follow C.R.S. § 29-4-227(1)(b), even though such provision references an exemption from the payment of sales and use tax “to the state or any county, city and county, municipality, or other political subdivision of the state.” The Denial cites the City’s home rule municipality status under the Colorado Constitution, as well as the case of Winslow Construction v. City & County of Denver, 960 P.2d 685 (Colo. 1998), for the proposition that: “tax exemptions created by Colorado state law . . . do not apply in home rule municipalities.” The Housing Authority disagrees with the City’s conclusion as a basic matter and requests that the City promptly refund all of the City use tax paid in connection with the construction of the Projects, plus statutory overpayment interest. In accordance with Code Section 22-45(b), the Housing Authority provides the following information in support of its petition for a hearing: Mr. Chris Miller City of Wheat Ridge November 25, 2020 Page 3 www.hollandhart.com Alaska Colorado Idaho Montana Nevada New Mexico Utah Washington, D.C. Wyoming A. Taxpayer Name: Jefferson County Housing Authority d/b/a Foothills Regional Housing. B. Taxpayer Address: 7490 West 45th Avenue, Wheat Ridge, CO 80033. C. Taxpayer License Number: n/a D. Copy of notice sent by Wheat Ridge: See copy of Denial, attached. E. Taxable period: July 2020 (City use tax paid through City’s building permit process). See below for details of amount disputed. F. Amount Disputed: The Housing Authority’s request for refund seeks a refund of $67,509.20 of City use tax paid in connection with the City’s building permit process for the Projects: $14,700 of such total was paid in connection with Permit 202000616 (9271 W. 48th Ave) on or around July 17, 2020; $25,509.20 of such total was paid in connection with Permit 202000673 (9355 West 48th – Caesar Square) on or around July 17, 2020; and $27,300 of such total was paid in connection with Permit 202000676 (Site Work – 9355 W. 48th Ave. N. – Caesar Square) on or around July 17, 2020. The Housing Authority also seeks interest on such overpaid amounts. G. Statement of Grounds Upon Which Taxpayer Bases Its Claim: By their terms, C.R.S. § 29-4-507 and C.R.S. § 29-4-227(1)(b) set forth an exemption from the payment of sales and use tax “to the state or any county, city and county, municipality, or other political subdivision of the state.” The City is a municipality or political subdivision of the state, and the exemption provided by these provisions was clearly designed by the legislature to apply to home rule municipalities such as the City (note that the only jurisdictions that fit the “city and county” category as found in C.R.S. § 29-4-227(1)(b) are the City and County of Denver and the City and County of Broomfield, both of which are home rule jurisdictions). Contrary to the City’s position as found in the Denial, Winslow Construction v. City & County of Denver does not flatly shield the City from the application of the exemption. Mr. Chris Miller City of Wheat Ridge November 25, 2020 Page 4 www.hollandhart.com Alaska Colorado Idaho Montana Nevada New Mexico Utah Washington, D.C. Wyoming Instead, Winslow outlines a “factor” test that takes into account several elements to determine whether a state-level statute involves a matter of statewide concern. If so, then the Colorado General Assembly may adopt legislation, including tax legislation, that legally applies to a home rule jurisdiction and that such jurisdiction must recognize. The “factor” test takes into account whether there is a need for statewide uniformity of regulation, whether the municipal regulation has an extraterritorial impact, whether the subject matter is one traditionally governed by state or local government, and whether the Colorado Constitution specifically commits the particular matter to state or local regulation. In this case, it is clear that there is in fact a need for statewide uniformity – such uniformity is necessary in order to encourage low-income housing where it is needed throughout the state. If the City may ignore the state legislation and exemption that is clearly meant to cover all state and local jurisdictions, the cost of low-income housing will be greater within the City than in other jurisdictions, with a resulting shortage of needed housing in the City. Overall, this is a fundamentally different situation than the one described in Winslow, where Denver collected use tax only to the extent that the Denver use tax rate exceed the rate previously paid to another jurisdiction. Denver had a legitimate local interest in preventing tax avoidance through purchases being made outside of Denver’s city limits, where the sales/use tax was lower, where the purchased items were then brought into Denver for use there. The imposition of the Denver use tax in this context burdened the taxpayer no more than if the taxpayer had originally made the purchase in Denver. The same cannot be said for the City’s denial of the exemption at issue, which represents an absolute increase in tax compared to the scenario where the exemption is allowed. The increased tax is not offset by any corresponding decrease in tax in any other jurisdiction – it results in an additional cost of constructing low-income housing in the City as compared to other home rule jurisdictions that allow the exemption. In addition, if the exemption is unavailable in connection with City use tax, this will create an obvious extraterritorial impact. Low-income housing will be diminished or reduced within the City, even when it is needed. The result will be that persons who need such housing will be forced to move to another jurisdiction where it is more readily available. All of these factors, as directly outlined in Winslow, indicate that the City is legally required to comply with the state-level exemption for the Projects. In this regard, the Housing Authority and its counsel are unaware of any other home rule municipality in Mr. Chris Miller City of Wheat Ridge November 25, 2020 Page 5 www.hollandhart.com Alaska Colorado Idaho Montana Nevada New Mexico Utah Washington, D.C. Wyoming Colorado that has denied this sales and use tax exemption solely on the grounds of the municipality being a “home rule” jurisdiction. Other home rule jurisdictions have recognized, and continue to recognize, this exemption. Finally, as the Supreme Court states in Winslow, the Colorado constitution does commit the imposition of municipal taxes to home rule jurisdictions; however, this is not a blank check to home rule jurisdictions to avoid any and all state-level statutes concerning taxation. To the extent that an election is required by law at this time, the Housing Authority elects to have proceedings subsequent to local remedies governed by section C.R.S. § 29-2- 106.1. The Housing Authority will be represented by: Arthur A. Hundhausen, #30360 Holland & Hart LLP 555 17th Street, Suite 3200 Denver, Colorado 80202 Telephone: 303-295-8548 Mark Kozik, #11437 Holland & Hart LLP 555 17th Street, Suite 3200 Denver, Colorado 80202 Telephone: 303-295-8191 A Power of Attorney authorizing our representation of the Housing Authority in this matter is enclosed with this petition for a hearing. The Housing Authority reserves the right to supplement this petition for a hearing by raising additional grounds in support for its request for refund and by furnishing additional information. Mr. Chris Miller City of Wheat Ridge November 25, 2020 Page 6 www.hollandhart.com Alaska Colorado Idaho Montana Nevada New Mexico Utah Washington, D.C. Wyoming Very truly yours, Arthur A. Hundhausen for Holland & Hart LLP Attorney for Jefferson County Housing Authority, d/b/a Foothills Regional Housing enclosures cc: Ms. Lori Rosendahl Ms. Amy Case AAH Enclosures 15788676_v1 ATTACHMENT 2 CITY OF WHEAT RIDGE, COLORADO INTRODUCED BY COUNCIL MEMBER ___________ COUNCIL BILL NO. _______ ORDINANCE NO. _________ Series 2020 TITLE: AN ORDINANCE CONCERNING USE TAXES, AND IN CONNECTION THEREWITH, AMENDING SUBSECTION 22- 67(3) OF THE WHEAT RIDGE CODE OF LAWS TO PROVIDE A BUILDING MATERAILS USE TAX EXEMPTION FOR PUBLIC HOUSING AUTHORITIES WHEREAS, the City of Wheat Ridge is a home rule municipality having all powers conferred by Article XX of the Colorado Constitution; and WHEREAS, pursuant to its home rule authority, the City, acting through its City Council (the “Council”), is authorized to adopt ordinances regulating matters concerning use taxation and exemptions from tax; and WHEREAS, in the exercise of this authority, the Council has previously enacted subsection 22-67(3) of the Code of Laws, providing a building materials use tax exemption for a specific housing authority, but not for all such authorities providing service in the City; and WHEREAS, the City Council now desires to extend a use tax exemption for building materials to all housing authorities providing services in the City and refund any tax collected since July 16, 2020. NOW THEREFORE BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF WHEAT RIDGE, COLORADO: Section 1. Section 22-67(3) of the Code is amended as follows: (3) Building materials and supplies for city projects, PROJECTS FOR HOUSING AUTHORITIES, AS DEFINED AT C.R.S.29-4-203(1), AS AMENDED, OR PROJECTS FOR URBAN RENEWAL AUTHORITIES, AS DEFINED AT C.R.S. 31-25-103(8.50, AS AMENDED Wheat Ridge Housing Authority projects and Renewal Wheat Ridge projects, whether purchased by the city, wheat Ridge Housing Authority A HOUSING AUTHORITY, AN URBAN RENEWAL AUTHORITY or Renewal Wheat Ridge, or a contractor for the same, ON OR AFTER JULY 16, 2020, shall be exempt from the city's use tax. TAXES COLLECTED ON SUCH PURCHASES SHALL BE REFUNDED TO THE TAXPAYER. Section 2. Severability, Conflicting Ordinances Repealed. If any section, subsection or clause of this Ordinance shall be deemed to be unconstitutional or otherwise invalid, the validity of the remaining sections, subsections and clauses shall -2- not be affected thereby. All other ordinances or parts of ordinances in conflict with the provisions of this Ordinance are hereby repealed. Section 3. Effective Date. This Ordinance shall take effect upon passage, as provided by Section 5.11 of the Charter. INTRODUCED, READ, AND ADOPTED on first reading by a vote of ___ to ___ on this ____ day of ____________, 2020, ordered published in full in a newspaper of general circulation in the City of Wheat Ridge, and Public Hearing and consideration on final passage set for ____________________, 2020 at 7:00 p.m., in the Council Chambers, 7500 West 29th Avenue, Wheat Ridge, Colorado. READ, ADOPTED AND ORDERED PUBLISHED on second and final reading by a vote of ___ to ___, this _____ day of ______________, 2020. SIGNED by the Mayor on this _____ day of ____________, 2020. Bud Starker, Mayor ATTEST: Steve Kirkpatrick, City Clerk Approved as to Form Gerald E. Dahl, City Attorney First Publication: Second Publication: Jeffco Transcript Effective Date: Published: Jeffco Transcript and www.ci.wheatridge.co.us