Compromise may give struggling builders a break

A compromise changing how builders pay El Paso County's use tax might give builders struggling in the weak housing market a break beginning in April.

Approved Thursday by county commissioners, the change puts the Pikes Peak Regional Building Department in charge of collections and cuts the original amount on which builders would be taxed by 20 percent.

Builders will pay the county's 1 percent use tax on 40 percent of a project's value rather than 50 percent as initially proposed by Commissioner Jim Bensberg, who modeled the proposal on what's done in Fremont County, Parker and Manitou Springs.
Use tax is collected on construction materials purchased elsewhere but used in the county.

Ever since the tax was approved by voters in 1987, the city of Colorado Springs and the state have collected the money due the county.

Bensberg called for the change, because he believed some builders avoided paying the tax by having construction materials shipped from other states or countries, which don't collect taxes owed local governments.

City tax collectors don't audit smaller projects, so the county couldn't verify the tax was being paid by everyone.

Staffers estimate the county should have collected $5.6 million in use tax in 2007 based on the value of building permits issued. The city collected roughly $660,000 for the county, and the state's take is unknown because it doesn't track sales and use taxes separately.

County officials can't say if the change will increase collections, because they don't know what's come in in past years, but they said they doubt they'll see a windfall.

The main idea, commissioners said, is better accountability.

"We have a responsibility here, and that was Commissioner Bensberg's intent - to get better accounting of the sales and use tax," Commissioner Sallie Clark said.

As for taxing levels, the Colorado Springs Housing and Building Association argued materials comprise 32 percent of a project's cost, with one developer claiming the figure is 25 percent.

"In the spirit of compromise, we reluctantly agreed," Bensberg said, adding the percentage could be changed depending on how the program works out. Commercial projects still will pay based on 50 percent of the value.

Builders can opt for three payment methods: submit an affidavit promising to pay taxes on materials, pay taxes on 40 percent of the project and later reconcile based on actual receipts, or keep records and pay the actual taxes incurred on materials.
Bensberg said it's better than the old method. "Now we've got a system set up where we can audit them on a random basis," he said.

But the county has no auditors or policies guiding what percentage of accounts will be audited and how. Bensberg said he hopes the county can hire an auditor next year.

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Commissioners also agreed to impose a surcharge per building permit to help cover the county's legal and administrative costs provided to Regional Building. The amount will be set later.

Housing and Building Association representative Kevin Walker said the HBA endorsed the tax measure and the surcharge.
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