Financial Implications of Annexation
A major concern is what the financial impact would be in annexation:
Property tax would see a light increase. Interacting with county assessor, Sarah Enders, the difference is as follows:
Town of Telluride is taxing area 101.
Lawson Hill includes taxing areas 103 and 104.
In Lawson; Residential assessment rate, 2022 - 6.95% (decreasing to 6.765% in 2023.)
Commercial assessment rate, 2022 - 29% decreasing to 27.9% in 2023.
Most recent mill levies (tax year 2021, payable in 2022):
Lawson Tax Area 103 - 38.651 (multiply by .038651)
Lawson Tax Area 104 - 38.51 (multiply by .03851)
Town Tax Area 101 - 44.235 (multiply by .044235)
Actual Value x Assessment Rate = Assessed Value
Assessed Value x Mill Levy = Tax Value
For example, Using one of the study group’s house's assessed value in 2023 it is $414,560 and located in Tax Area 104:
$414,560 x 6.765 % = $28,810 Assessed Value for Taxation
$28,810 x .03879 = $1.117.56 Tax
In comparison, the house's 2022 estimated tax value if annexed to the Town of Telluride would be as follows:
$414,560 x 6.765% = $28,810 Assessed Value
$28,810 x .044604 = $1,285.04 Tax
The house used in this example is a four bedroom, three bathroom house originally moved from the east of town when Lawson Hill was first developed and later remodeled. The annual increase in tax is $167.48 or an increase of 14.99%.
Currently, Lawson Hill residents pay a 25% premium on water and sewer. All town parties asked felt the Lawson rate would be reduced to the town rate if annexed. In the annexation negotiation, this should be noted and included. With the current water/sewer rate of $294.12 every 2 months, in town residents pay $236.31 every 2 months. This would be a $57.81 saving every billing period, or $347 savings per year.
Additionally, Lawson Hill residents would be relieved of the SMC Solid Waste Disposal District (currently 0.407 mills, separate from the County’s mill levy). For the example above, this would reduce the cited owner’s taxes as follows: Assessed value $21,860 x .000407 = $8.89
For the house used in the property tax example annexation would create a $211 annual savings. Homes with a lower assessed value would see a greater dollar savings. Homes with an assessed value up to approximately $875,000 would see an annual cost savings combining property tax, water and sewer, and SMC Solid Waste, after annexation to town.
The wild card is sales tax: Current sales tax applicable to Lawson Hill (State and County) is 3.9% plus Lawson Hill sales tax of 4%, for a total sales tax on Lawson commercial interests of 7.9%. The Town of Telluride imposes sales tax of 4.5%. After annexation, assuming the 4% Lawson Hill tax is dropped, total sales tax would be 8.4%. Currently, Businesses located in Lawson Hill pay a Lawson Hill Property Owners sales tax of 4%. The difference charged by Lawson businesses would be .5% assuming the Lawson Tax is eliminated. We felt it is reasonable that the town would take on services to reduce our HOA expenses enough to offset the loss of sales tax revenue.
Online purchases would see an increase in sales tax if collected by the online sales entity. Currently, Lawson residents pay state and county sales tax on online purchases amounting to 3.9%. LHPOA tax is not charged on those purchases. If annexed, the Town sales tax of 4.5% would additionally apply if the entity collects sales tax. Durable goods like cars would be taxed at the town tax rate if they are delivered to Lawson. If buying a new car, this could be a substantial cost. According to Pam Hall, “A $35,000.00 vehicle in Lawson, the tax now is $1,365.00 If delivered to a TOT address, the tax would be $2,940.00 ($1,575.00 more in sales tax). If on line sales include sales tax, those items delivered to Lawson would see the increase in sales tax of 4.5% as on line sales currently do not pay Lawson Hill sales tax. If the household in the tax example above had annual on line or delivered goods purchases of $5,000 with sales tax added, the savings in water bills and solid waste levy would be outpaced by sales tax.
If annexed and Lawson Hill Property Owners Association would likely no longer collect sales tax. The reduction in sales tax revenue to Lawson would be $300,000 according to the 2022 budget. It can be assumed that LHPOA would no longer be responsible for $37,000 negative revenue flow for Telluride Housing Authority. This leaves a net reduction in revenue of $263,000. Assuming LHPOA continues to collect RETT and other revenue sources, their income would decline to $220,000. In annexation negotiations, town provided services would need to be negotiated so the property owners’ association could operate within this budget.
There would be costs to Lawson in the annexation process. It would be judicious to have legal counsel to help conduct the process and draft appropriate documents, or examine documents produced by the Town, and provide expertise in the annexation process. As mentioned earlier, it would be the Town of Telluride’s expense to conduct the election for annexation.
