Overview of Findings
Lawson Annexation Study Group
Report of Findings
Jan 2023
As time has passed, there is a change that can be perceived in the culture and values in the Telluride community. There has been an astronomical increase in property value. In the Town, there has been a progression in long term rentals converting to short term rentals. An influx of remote working telecommuters has reduced availability and driven up the cost of long-term rental housing. These factors combined to drive away much of the salt of the earth population that long made up the Telluride community.
There is not an official count of the number of people living in the Lawson Hill deed restricted area. The best guess is around 600 people. The most influential and impacting governmental entity in the region is the Town of Telluride. In the last election, approximately 1300 people voted in the Town of Telluride. Not being in the town limits, Lawson Hill residents are precluded from voting on town matters. Assuming around 400 people in Lawson are qualified to vote, if Lawson were included in the town, Lawson Hill residents would make up approximately 23.5% of the vote. Since the Lawson Hill population is made up of the local workforce, adding them in the vote would alter cultural influence on the Town of Telluride in direction and policies. If annexed, Lawson residents would be eligible to vote and to hold office in the Town of Telluride. Being incorporated into the town would allow Lawson residents to participate in town boards and help shape policy and operations to benefit our neighborhood as well as the overall region.
In this context, a volunteer group of Lawson Hill residents formed the Lawson Annexation Study Group (LASG) last spring to find what would be involved in annexing Lawson Hill into the Town of Telluride. The study group has delved into what is required in the process of annexation, what advantages and disadvantages would there be in annexation, the history and experience of Lawson Hill regarding annexation into the town, and what could be expected in costs to the inhabitants of Lawson Hill if annexed. This is a report on the findings of this group.
This has been explored before. What’s different now?
In 1999, Lawson Hill explored annexation to the Town. At that time, it was concluded that there was not enough value in annexation to pursue the option. There was concern that annexing to the Town would increase living costs. The Lawson Hill Property Owners’ Association, is well funded and managed, providing a good level of service. Because our owners’ association has performed well, there is not a perceived need for town provided services.
The time of the 1999 annexation study was prior to the internet’s impactful morphing of short-term rental. Many of the Town of Telluride rental homes at that time were long term rentals occupied by service employees. Since then, VRBO and Air B&B have changed that. Much of the town’s workforce has moved to Lawson Hill. The proportion of town voters that work and live in the town has been depleted. With that 1999 evaluation being prior to the purchase of the Valley Floor, there was not contiguity (a physical connection with town limits) between the town and Lawson, which was a complication in annexation. Since the Valley Floor is now owned by the Town, there now is contiguity with Lawson. At that time, water and sewer rates for Lawson residents was right around $100 bimonthly. The out of town water and sewer rates have increased nearly three-fold since then. There is a deeply ceded belief, that annexation would increase the cost of living in Lawson. We have collected information on what the cost differences could be. There is a feeling that the process is extremely complicated. We studied what is involved in the process. The process is involved with several checks and balances. The Town has gained experience in the process that it had not had the last time it was approached. Although the town sees it as an involved process, it does not see the process as daunting.
The Process of Annexation
To gain insight into what is required for annexation, LASG met with Telluride Town Attorney, Kevin Geiger to illuminate the process: He is well versed in the process. Additionally, we have studied the Colorado Municipal League publication, “Annexation in Colorado”. Most annexations involve undeveloped properties with one or a limited number of property owners. In our case, we have a developed neighborhood with a significant number of landowners. Given the robust community in Lawson, it is more complicated than an area with limited ownership. In initiating an annexation, three people are picked to be election commissioners, one is from the town, one is from the landowners. Those two commissioners pick a third commissioner. These commissioners run an election of the area proposed for annexation. The town is required to pay for this election. In the election, a majority of electors (over 50% of qualified electors meaning renters and owners) living in the area of annexation and a majority of the land ownership (over 50% of the land area in the annexation) would determine the outcome. If approved by the voters, the result goes back to the district court which then prompts the town council to consider legislation for annexation. Representatives of Lawson Hill would then negotiate the terms of services and other factors pertinent to the annexation.
The County would have the ability to protest the election if they chose to do so. If the county determines that loss of the tax revenues causes a serious detriment to the county, this Protest could be invoked. The likelihood of this is low as there would be no substantial loss of revenues to the County according to our County Assessor.
A petition could be circulated in the town, requiring an election by the entire town to approve annexation. There have only been a limited number of reported elections for annexation in Colorado. The town is responsible for the cost of this election. Two members of the town council have approached us to champion the annexation. In meeting with the mayor, she adamantly supports the idea.
As mentioned above, the terms of annexation would be negotiated between the town and the annexed community. The HOA would continue to exist and would provide services negotiated in the annexation. The HOA would be a vital partner in negotiating terms of annexation. In the negotiation it will be decided what services would be provided by the town. According to Geiger, it is unlikely that the town would make changes in the terms of the deed restrictions created in the original Public Unit Development process. If there were to be changes in policy (e.g. dogs), it would be decided by the HOA.
Financial Implications of Annexation
LA 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.
OTHER FACTORS
In Lawson Hill, commercial entities have a strong voting power in neighborhood matters, as they have one vote per 1000 sq feet of space. If annexed to the Town, commercial would not have a vote except if they live within the expanded town limits. The commercial entities will have a strong voice in deciding about moving forward with annexation. The .5% increase in sales tax could be perceived by commercial operations as a potential negative. We did outreach to commercial owners Bill Gordon and Kathy Green and both indicated they are in favor of annexation.
Currently, every property has one vote per residential unit (not per person). If annexed, every person residing in the area of voting age would be allowed to vote in town elections.
A number of years ago, there was an annexation proposal for the east end of town (Idarado Legacy). After a lengthy process, the Town held an election and voted. The Annexation was defeated. Since that time, the need for worker housing has grown dramatically. The Idarado Legacy proposal carried the burden that a substantial infrastructure investment by the town would have been required. Lawson would not have that same burden.
The town does have economic scale advantages in providing services. They have specialized personnel to expand services available to our community.
There are members of the Lawson Hill Community that don’t want to be affiliated with the town. We have a community that has its own identification and functions well. But many others would like to be affiliated with the town and have their voices heard in the direction of the overriding community. We feel it is time to ask Lawson Hill residents what their desire is, given the information we have collected.