Cortez residents on Tuesday pressed city officials for alternatives to the tax over‑collection and for clarity on which purchases will be exempt during the sales tax holiday.
During the City Council meeting, community members asked about potential solutions for returning the $2.8 million in overcollected taxes and how the temporary suspension of the city sales tax will affect businesses and shoppers. The overcollection occurred after City Council failed to enact a voter‑approved reduction of the recreation center sales tax, which left shoppers paying an inflated rate from 2021 to 2025.
Director of Finance Randy Bailey told residents that the refund process is complex and will require businesses to adjust the city sales tax rate twice: to 0% on Oct. 18 and back to 3.85% on Jan. 1, 2027.
“As you can imagine, this is a pretty complicated process,” Bailey said. “If you think about it, we're going to make two major changes in the fourth quarter.”
The current aggregate sales tax is 7.69%. With the temporary elimination of the city’s portion, the rate will drop to 3.84% for the rest of the year. Bailey said businesses will need to change point‑of‑sale systems and tax settings twice to comply.
“We fully recognize that this is a burden upon our businesses, and we thank them for their patience and willingness to work with us,” said City Manager Drew Sanders. “The burden may be compensated somewhat during the holiday season hopefully with some increased sales.”
Sanders has previously described the timing of the sales tax pause as a benefit for residents. With tourism slowing in the fall and the holiday shopping season approaching, he said the refund period should help local shoppers most.
“For every $10 spent, that will equate to 38 cents saved and for every $100: $3.85, and for $1000: $38.50,” Sanders said during the financial impact presentation.
However, not everyone was satisfied.
“I am all for sales tax reductions. I’m not as convinced that it’s going to affect our community as much as it is maybe being presented,” said Morgan Head, the treasurer for the Montezuma Cortez Softball Association. She and other members of kids’ softball and baseball activities in Cortez attended the last City Council meeting on Feb. 10 to advocate for renovations on the failing South Softball Complex.
Head asked why the overcollected revenue couldn’t be directed to the complex. City Council candidate Charles P. Borchini Jr., who faced questions about the historical association of his business name “Work Brings Freedom LLC” to Nazi concentration camps from KSJD, also took the stand during public comment to ask the same.
“We were thinking the same way you were. However, when we got with the TABOR attorney, he goes ‘Oh, no, no, no, we cannot do that,’” said council member Dennis Spruell. “ That's why it wasn't done. It’s not because we didn’t want to; it’s because we couldn’t.”
Colorado’s Taxpayer’s Bill of Rights regulates the revenue the state and local governments can keep and requires refunds when revenue exceeds the limit.
“One of the problems with an overcollection is if you don't refund it and fairly quickly, the public has the right to sue the city under TABOR,” said City Attorney Patrick Coleman.
City Council candidate Carly Wolf, co‑owner of The Doobie Sisters Recreational Dispensaries, asked whether the sales tax holiday would apply to marijuana purchases. Sanders said it would and asked Bailey to address additional questions about which grocery items and other goods are taxed.
“We basically tax tangible goods. That doesn’t necessarily translate to all grocery items,” Bailey said. He offered to compile a detailed list of taxable items for City Council after reviewing the city’s tax code.
“We will, as soon as we can, nail down every specific step of those mechanics,” he said.
Bailey added that business owners with questions should contact him or Finance Assistant Sara Coffey at the Finance Department at (970) 565‑3402.
The Finance Department is working on public outreach and implementation planning ahead of the October start date.
“We will be working with businesses between now and October,” Sanders said in a follow‑up phone call to The Journal. “Businesses just need to wait and we will be in touch.”
The ordinance passed unanimously.
“It’s not only the right thing to do, it’s the only thing to do,” council member Bill Lewis said.
avanderveen@the-journal.com
