Ballot Issue 2R would create the largest dedicated sales tax revenue stream in Denver’s history, greatly increasing the city’s capacity to scale up affordable housing development and programs within its borders.
The measure would tax many items sold in the city by 0.5%, bringing in significant money over its 40-year lifespan to fuel a dedicated city fund. Proponents, led by Mayor Mike Johnston, are calling the campaign Affordable Denver. They hope to use the tax revenue to pay for various programs and efforts to spur more housing development and support renters and people seeking to buy homes.
The proposed tax is a major part of Johnston’s agenda in his second year in office.
What would 2R do if passed?
If voters approve the measure, it will increase Denver’s existing 8.81% effective sales tax rate by 0.5 percentage points, adding 50 cents to the cost of a $100 purchase. The tax excludes some essentials like groceries and gasoline. Denver’s sales tax rate would increase to 9.31%, though it could rise more if voters also approve Ballot Issue 2Q, a 0.34% tax proposed separately to support Denver Health.
The revenue the tax generates would be dedicated to programs that are focused on achieving two major goals, according to the ballot language: Providing more subsidized affordable rental housing, while otherwise reducing rents; and contributing to the construction of more affordable for-sale homes and driving down the cost of buying a home.
Though 2R’s proposed ordinance sets out some parameters, many details are not yet set, remaining to be worked out by the mayor and the City Council.
How much money would it raise?
Issue 2R’s new tax would raise an estimated $100 million a year, a total that’s likely to grow with consumer spending over time. It would come with a sunset date in 2064, allowing for 40 years of taxation (though voters could later be asked to extend it). The city potentially could issue bonds that borrow against future revenue to raise billions of dollars sooner.
What would be the broader impact?
Denver currently has a dedicated affordable housing fund that is drawn from property taxes and fees on most new developments in the city. That, combined with other sources of funding, gives the city the ability to contribute to the creation of roughly 1,500 units of income-restricted housing each year, according to the mayor’s office.
But the Denver Regional Council of Governments projects Denver would need to add roughly 44,000 units of such housing over the next decade to keep up with the amount of residents at risk of being priced out of the city. Johnston has said the much larger, more dependable revenue stream created by 2R would allow the city to meet that challenge.
What do supporters say?
Backers say that without a much stronger, more stable source of revenue to support affordable housing, Denver will be hollowed out by housing costs that are greatly outpacing income growth. That would make it difficult for low- and moderate-income people — including restaurant employees, nurses, teachers and police officers — to afford the cost of living in the city.
Supporters say the proposed tax would meet the city’s need and allow for investment in a varying set of solutions to the housing crunch. They say the average cost for Denverites would be about $2 per week, and they point out that more than a third of sales tax revenue comes from tourists and visitors who don’t live in Denver.
What do opponents say?
Opponents have decried the limited opportunities for community input before 2R was referred to the ballot by the council in August and the lack of a detailed spending plan for the revenue the new tax would bring in. Specific uses for the first year’s revenue are only expected to be finalized in January, after voters have their say.
Opponents also argue the new tax would push Denver’s overall sales tax rate too high, while hurting the financial stability of low-income Denverites the most. The tax also would take effect after a period when inflation battered household budgets, and other city programs — like the city’s pay-as-you-throw trash collection billing and voter-approved sidewalk fees — are either in effect or are about to be added to residents’ bills.
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