Town council considers geothermal regulations, sales tax collection

The Pagosa Springs Town Council took a first step in codifying its Geothermal Department’s heating regulations during its May council meeting this past Monday, with draft regulations presented to the board by Geothermal Supervisor Phil Starks.

“We believe there’s a need for geothermal heating regulations,” said Town Manager David Mitchem, presenting the draft along side Starks. “This is a really good step towards a more functional and consistent long-term operation of the geothermal heating system.”

Previously, the town’s geothermal heating system had been administered without formal regulations. Although the system has operated without apparent problems sans regulations (up to this point), recent notification by the Department of Natural Resources, Division of Water Resources, expanding the town’s authority to fully utilize its geothermal resources provided the town impetus for drafting formal regulation of those resources.

Not opposed to development of regulations, council was nonetheless uncertain with much of the language in the draft.

Council member Don Volger initiated the conversation, asking, “Did counsel review this?”

Starks replied that Town Attorney Bob Cole had not only reviewed the document but had helped draft several of the provisions in the document.

From there, the board picked apart language in the draft, seeking clarification on several points, asking for specifics on other points.

“There’s a lot of ambiguity,” said council member Stan Holt, “I’d like to see something more specific.”

Indeed, it was Holt who provided the lion’s share of critique, at times taking issue with a single word in sub-sections while other times, offering wholesale changes to the document.

“I have a section you don’t have,” Holt said, referring to the document’s completion at Section 1-12, “Section 1-13. We don’t have a grandfather clause.”

With regulations requiring customers to be metered (with costs for the meters shared between the town and the individual customer) and new equipment to be installed, Holt wondered about the widespread effect on existing customers.

“Are you going to go to all existing customers,” Holt continued, “and tell them, you have to have this valve here and that valve there, or are you going to grandfather them in?”

Council member Darrel Cotton, for his part, took issue with wording in the draft that would restrict funds collected by the geothermal system strictly for operating, maintaining, or upgrading the geothermal system.

“I don’t like wording like that,” Cotton said.

Mitchem pointed out that funds would most likely be required for improvements to the system, saying, “Given the age of the infrastructure, we anticipate expending money to improve the system.”

With numerous proposed changes, both to language of the draft and additions of policy, Holt moved to table the regulations, giving staff time to make the necessary changes for review at the noon mid-month council meeting May 21 at Town Hall.

Council also considered a proposal by Mitchem for the town to collect its own sales taxes.

“I had a conversation with (County Administrator) Greg Shulte regarding self-collection of sales tax,” Mitchem began. “Experience with other home rule municipalities is that revenue actually increases because the collection tends to be more attentive.”

However, Mitchem qualified the proposal by saying, “a state statute change may be in order to allow municipal collection.”

Currently, the state of Colorado collects the 4-percent sales tax for the county and town, which is then split between the two entities. Although audits are conducted regarding the payment of those taxes, it is not unusual for some businesses to avoid paying their tax, Mitchem said, due to the infrequency of state audits. Given the possibility of a more intensive auditing process due to self-collection, Mitchem reiterated that his considered opinion, based on the research he had done, was that the town would realize an Increase in sales tax revenues due to a more efficient collection system.

According to Mitchem, collecting sales taxes would require the hiring of three new staff members who, in turn, would be responsible for collections, data input, auditing, and other duties. To that end, Cotton was skeptical regarding the value of the proposal.

“You’re talking about adding to the bureaucracy,” Cotton said. “We need to be careful when we expand government to increase revenue. I suggest we be very cautious.”

Caution requires time and Mitchem predicted It would take at least three years before a necessary statute change would allow the town to begin collecting its own sales tax.

“Still,” said Holt, “There’s no harm in looking into it.”