At a July 10 meeting, the city council in Westminster, Colorado doled out $700,000 worth of “fee and tax rebates” to a private company to build an Alamo Draft House Theater. You might reasonably think that when fees and taxes are paid to a city government, that money is going to pay for city services. But not so in cases like this. Fees paid by privileged businesses, and sales and use taxes paid by you actually get “rebated” back to the business for a certain period of time, and the business keeps the money.
In other words, this is where capitalism gets twisted into cronyism, with planners and politicians picking economic winners and losers by granting special privileges in the form of public subsidy, while everyone else pays full freight.
Sweetheart deals like this amount to corporate favoritism (or as it is also known, corporate welfare). They also almost certainly violate the Colorado Constitution.
Here’s what Westminster gave away (the July 10, 2017 city council agenda that includes the agreement is available here). All of the following exclude public safety and open space taxes:
- A 100 percent rebate of building permit fees (excluding utility fees) for construction (approx. $77, 403).
- A 100 percent rebate of use taxes on construction materials (approx. $120,000).
- A 100 percent rebate of sales and use taxes on furnishings, fixtures and equipment (approx. $105,000).
- A 100 rebate of sales taxes generated by food and beverage sales for three years (approx. $238,437).
- A 100 percent rebate of admissions taxes for three years (approx. $159,160).
Westminster politicians couldn’t wait to dole out the tax dollars, the rebate scheme passed 5-1 on first reading. The lone dissenting vote was council member Bruce Baker.
This isn’t Westminster’s first time ladling taxpayer gravy on private business through tax “rebates,” nor is the city alone in this practice. But simply giving away public money to a corporation is specifically banned by the Colorado Constitution. Article XI, section 2 is quite clear: “Neither the state, nor any county, city, town, township, or school district shall make any donation or grant to, or in aid of … any corporation or company… ”.
Sales and use taxes, and permitting fees are clearly public money. And simply giving that public money back to the business that remitted it to put in their pocket is pretty clearly aid to a corporation or company, making Westminster a prime recent example of corporate favoritism gone wild.
Mike Krause directs the Local Colorado Project at the Independence Institute, a free market think tank in Denver.