Sales tax hike to fund climate change efforts now up to Denver voters

Denver voters will decide in November whether to approve a 0.25% sales tax hike to better fund the city’s efforts to combat climate change.

In an 11-1 vote, Denver City Council members gave final approval on Aug. 3 to a bill referring the tax measure to the November ballot, potentially giving the city a new funding source for its new climate-action office and an ambitious series of proposals outlined by a citizen task force.

The vote brings an end to a yearlong process launched by grassroots climate activists who originally sought to raise those funds through a new tax on energy and natural gas consumption. Resilient Denver, the group that successfully collected enough signatures to place that initiative on the 2020 ballot, has said it will withdraw its measure now that the sales-tax proposal has been referred by City Council.

“Nothing about solving the climate crisis that we face is going to be easy,” Councilman Jolon Clark said ahead of Monday’s vote. “But this is a case where Denver voters will already have something in front of them, and we have the opportunity to put something better, that has consensus from a wide range of people who were brought together specifically to hash these issues out, and come to something that everyone could live with.”

Clark, who represents Denver’s District 7, initially led an effort by some City Council members to refer to the 2019 ballot an energy-tax measure similar to Resilient Denver’s. But that push ran into opposition from business groups and Mayor Michael Hancock, ultimately leading to a compromise in which Hancock’s administration established the city’s new Office of Climate Action, Sustainability and Resiliency and convened a 26-member task force to review potential revenue mechanisms.

The Denver Climate Action Task Force’s report, released in July, outlined an ambitious series of goals for the city to pursue, including net-zero emissions citywide by 2040, and a wide range of policy recommendations aimed at achieving them, from increased investment in public transit and higher-density development to community solar gardens and incentives for all-electric clean heating systems.

Denver’s total levels of greenhouse-gas emissions have declined slightly since peaking around 2007, according to city estimates, but much more rapid progress will be necessary to meet the targets recommended by the task force. While the city’s electricity supply, which is regulated at the state level, has grown significantly cleaner over the last 15 years, emissions from the transportation and buildings sectors — over which Denver policymakers have more direct control — have proven far more difficult to tackle.

That’s in part due to the high cost of emissions-reducing policies in those sectors. Many of the task force’s proposals aren’t cheap; its first set of recommendations, covering a three-year period ending in 2022, carries an “all in” price tag of $200 million annually, according to the group’s rough estimates.

Depending on economic conditions amid the ongoing COVID-19 crisis, the sales tax hike could raise between $36 million and $45 million annually, the report says. Other potential revenue mechanisms proposed by the task force include new fees on parking and vehicle registration, which could bring the total amount of new funding to roughly $80 million.

Clark called the revenue that would be raised by the sales tax increase a “jumpstart amount.” Advocates said that if voters approve the measure in November, much of the new funding would be funneled to climate programs that benefit low-income residents and other vulnerable communities.

“There’s an immediate investment that needs to happen,” Thomas Riggle, a Resilient Denver activist and task force member, told Council members on Monday. “We realize the revenue sources in the beginning are probably not going to be necessarily where we want them. We tried to address the things that we though that we could fund immediately.”

Overall sales tax rate would be 8.81%

Not everyone was happy with the outcome of the task force process. Councilman Kevin Flynn, the only member to vote against referring the measure to the ballot, said that while he believed the original energy-tax proposal was flawed, he preferred it to the sales tax hike.

“It seems to me like this is, because we couldn’t determine a way to make better solutions work that actually change behavior … we settled on the default, the easy way out, which is sales tax,” Flynn said.

Denver voters approved four small increases to the city’s sales and use tax in 2018, and another increase to help fund homelessness programs is expected to join the climate-action measure on the 2020 ballot. If both are approved, the city’s overall sales tax rate would rise to 8.81% — a burden that critics say falls too heavily on lower-income residents.

“I feel that we’re asking too much from our voters right now,” said Flynn, who represents Denver’s District 2.

Councilwoman Candi CdeBaca, who represents District 9, voted to refer the measure to the ballot, but she, too, criticized the regressive nature of the sales tax increase.

“It’s really disappointing that we took a whole year to get to a sales tax, considering what we started out with, and what is currently on the ballot with the Resilient Denver initiative,” CdeBaca said. “I thought that was more courageous. More complex, but definitely more courageous, in shifting the burden to our commercial and industrial users.”

Task force members defended their recommendation, pointing to sharply divided opinions among its members on the energy tax, including opposition from representatives of Denver utility Xcel Energy.

“They told us on the task force this year that they would not administer it, and we would potentially face legal battles if we tried to make them administer it,” said Sebastian Andrews, a task force member and activist with the Youth Sustainability Board.

In contrast, the task force’s vote to approve the sales-tax recommendation was unanimous.

“The support that there is from the different organizations that were part of the task force is strong,” Riggle said. “We’re just in a much better place of getting public support — from polling that we’ve seen as well, the sales tax has much better support than the energy tax does.”