After Avon voters rejected a four percent excise tax on building materials last fall, the city will likely put a revised question to voters this November.

Sixty percent of Avon’s 1,115 residents – among 2,981 registered voters – who cast their ballots in 2023 rejected the excise tax ballot question. Avon voters also rejected an excise tax on building materials in 2002.

There are a handful of important differences between this year’s version of the ballot question and the one voters saw in 2023

Why try again so soon?

Avon is a special case in Eagle County in that it has no tax on the use of building materials; Gypsum, Eagle, Minturn, Red Cliff and Vail all have excise taxes on building materials between 3% and 4%.

Many other Colorado mountain communities, including Glenwood Springs and Steamboat Springs, also have excise taxes.

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At the Avon Town Council meeting on August 13, officials discussed the reasons for putting the question back to voters after it was overwhelmingly rejected last November.

In July, Avon staff presented recently completed voter surveys that showed a majority of voters will support the building materials tax – if they are educated about how the tax works and what the funds will be used for. The city has already launched a marketing campaign in favor of the tax.

Another reason for revisiting the issue is the higher voter turnout.

“In presidential election years, there are always more voters,” said Avon Mayor Amy Phillips. “Last year, we held the election in a gap year, so not as many voters turned out. And I also think that with the makeup of our community, if we have a higher voter turnout, it’s more likely to affect the people who are suffering from the lack of public housing, and that alone will probably persuade at least 5% of the people who haven’t voted in the past to vote for it.”

Council member RJ Andrade expressed fears that the referendum on the consumption tax could fail again this year, after it was rejected by voters last year.

“I think we have to wait,” Andrade said. “I think we’re taking an unnecessary risk by putting it now where it just failed.”

Six of the seven City Council members voted to delay the tax until the November ballot. Andrade, while in favor of the excise tax, objected, arguing that the city should wait before putting the question before voters again.

“I really hope I’m wrong,” Andrade said.

How a building materials consumption tax works

If the excise tax passes in Avon, most builders would have to make an upfront payment of 4% on half the estimated cost of their construction project to obtain their building permit.

The 50% is calculated assuming that the other half of the construction costs are labor costs.

If a completed project costs less than estimated, the developer can recoup the difference paid to the city through a petition process. In addition, builders of single-family homes and duplexes can request to pay the use tax at the end of the construction period rather than at the beginning.

The key detail is that the excise tax should not increase the cost of a construction project. If Avon’s excise tax passes, those who pay the excise tax or receive an exemption will no longer have to pay the city’s 4% sales tax or the sales tax of any other municipality where they purchase building materials.

The city government prefers the building materials tax to a sales tax because it is easier to collect. Sales taxes are often difficult to track and tax rates can be manipulated by purchasing materials outside of Avon, whereas a use tax can be collected more consistently.

Differences in this year’s consumption tax

This year, the funds Avon raises from the excise tax are earmarked specifically for public housing, which helps people of all income levels who live and work primarily in Eagle County rent or buy a home in Avon.

While the last ballot proposal had an exemption limit of $50,000, meaning projects up to that amount would not be taxable, the exemption limit proposed for this year is $125,000. The exemption is intended to exempt those who undertake smaller home improvement projects from tax liability.

Since 2021, Avon has issued 366 building permits. Of the total building permits issued, 252 permits were filed for construction projects valued under $50,000, another 56 permits were filed for projects valued under $100,000, and another 17 permits were filed for projects valued under $150,000. If all of these projects were exempt from the excise tax, the city would lose a total of less than $200,000 over three and a half years.

In addition, there is the possibility of increasing the exemption in the future to take account of rising construction costs.

The possibility of increasing the exemption amount in the future is something that will be discussed at a future council meeting after city staff further examines the legality of such a measure, since tax changes typically have to be put to voters.