Denver affordable housing sales tax passes onto floor of City Council

Denver Mayor Mike Johnston’s big November wishlist item took a critical step forward Wednesday when a City Council committee advanced his proposed sales tax for affordable housing to the full body for approval.

The 0.5% increase in the sales tax — currently 8.81% in Denver — would raise an estimated $100 million per year for affordable housing work if approved by voters. The council will consider referring it to the ballot later this month.

The Safety, Housing, Education and Homelessness Committee’s vote came two weeks after that same committee hit pause on voting it on to the floor out of concern over how fast it was moving and a lack of specificity in the proposed ordinance language. Johnston and supporters first unveiled the proposed tax less than a month ago, on July 9.

If passed, the 0.5% fund would be the largest dedicated sales tax in the city’s history. The full 13-member body will decide if that levy should join another 0.34% sales tax increase proposal on city voters’ increasingly crowded ballots in November. That one would support Denver Health’s services for uninsured patients.

Wednesday’s meeting was notably less contentious than when the committee first debated Johnston’s tax referral ordinance two weeks ago.

Jamie Rife, director of the city’s Department of Housing Stability, and some of the council’s five co-sponsors ran through changes that have been made over that time. She noted that the language discussed on Wednesday was the 22nd version of the ordinance since it was first drafted.

Here are some key takeaways from the committee’s discussion:

More specific resident income targets

Limits on what prospective tenants can make to be eligible for subsidized housing are based on the area median income, or AMI, a central metric used by governments when approaching their affordable housing needs. The early drafts of the sales tax legislation drew criticism from council members, including Jamie Torres, for not spelling out which AMI levels the city was seeking to support with the possible new revenue stream.

The latest draft highlights a study that found most of Denver’s affordable needs are for people in households making 60% of the area median income or below. That level includes $54,780 a year for an individual or $78,240 for a family of four.

The ordinance now says that for apartments and other rental housing, funding from the tax “shall be used to serve the demonstrated community housing needs for households living at or below 100% of Denver’s Area Median Income” — preventing higher-income renters from benefiting. The money can also be used to support homebuyer assistance and other homeowner-focused programs for people living at or below 120% of AMI. That’s $109,560 for an individual or $156,480 for a family of four.

Councilman Chris Hinds on Wednesday wondered if the proposal should go further when spelling out the AMI levels the revenue should go to support. It doesn’t require minimum spending on lower-income brackets.

“I certainly want to make data-driven decisions. I’m wondering if there’s a thought about allocating the funds … or at least prioritizing funds to match the buckets of need,” Hinds said.

Co-sponsors indicated they were open to further conversations about how the ordinance language addresses AMI.

Will Denver supercharge upfront investments?  

Voters are unlikely to know before Election Day if Denver will issue bonds upfront, allowing it to borrow large amounts it can spend sooner and then pay off using the new tax’s revenue.

Councilwoman Amanda Sawyer referenced some of the informal discussions taking place in city hall about that idea, but nothing is certain. Rife said Wednesday that bonding plans remain up in the air. More specific uses would be spelled out in a first-year spending plan that would be drafted after voters have their say.

“I think we haven’t fully decided what we’re going to do,” Rife said. “And that will be part of the year one plan, right? It’s figuring out whether or not like do we want to but what does that look like?”

Council’s power at issue

Another change to the ordinance language over the last few weeks specifically gives council members the final say on that first-year spending plan. The plan must be submitted by Jan. 30 and then council would then have 30 days to vote on it or it would automatically take effect. That language is similar to rules governing the city’s budget approval process every year.

That wasn’t good enough in the eyes of some council members. For one, Serena Gonzales-Gutierrez wanted the automatic approval deadline removed. She and other members are also insisting that the council be granted the power to vote on the spending plan every year rather than just in Year 1.

“We should never as the legislative branch give away our constituents’ power to push something through quickly. We want to always have a bite of that apple,” Councilwoman Stacie Gilmore said.

An re-write of that section may also be in the offing.

What comes next? 

Now clear of the committee level, the referral ordinance will make it first appearance on a full council agenda on Monday. A courtesy public hearing has been scheduled for that evening after 5:30.