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A homeless shelter made up of tarps, chairs and signs sits in the median of Colfax Avenue in downtown Denver on Oct. 2, 2020. (Forrest Czarnecki/The Denver Gazette)

Ask anyone in Denver over the last few decades what issues have beset the city most, and few will fail to rank homelessness near the top of their list.

Ask them again, however, what should be done about the persistent problem or who should bear the burden of solving it, and the consensus quickly clouds.

Meanwhile, against a backdrop of indecision and rent rising faster than income, Denver’s homeless crisis is growing. The number of people experiencing homelessness has increased by more than a quarter since 2017, now affecting nearly 4,200 people, according to the latest Point-in-Time survey taken in January, months before the pandemic sparked soaring unemployment and hurled housing stability further into jeopardy.

Now — faced with mounting public pressure over the management of large encampments, coupled with fewer options to move people into shelters in order to mitigate the spread of the coronavirus — city leaders are taking a shot at a solution by asking voters this November to pass a $40-million-a-year sales tax to fund housing, shelter and services for Denver’s unhoused residents.

Details of the proposal 

The Homeless Resolution Tax would raise Denver’s sales tax by 0.25%, or 2.5 cents on a $10 purchase. The average household would pay about $5.25 a month, according to a Department of Finance analysis of U.S. Bureau of Labor Statistics data.

The new funding would take effect Jan. 1, 2021, and be used in the immediate term to help sustain the Department of Housing Stability’s COVID-19 emergency response.

Part of HOST’s pandemic response has included using federal aid — which expires at the end of the year — to lease more than 900 respite and protection action motel rooms for people with underlying health conditions or who may have contracted the virus. More than 600 people experiencing homelessness in Denver have tested positive for COVID-19, representing about 5% of the city’s total cases. At least seven have died.

“We have certainly no guarantees that we will have a pandemic licked by the end of 2020, and we need to be able to resource those continued efforts in 2021,” Britta Fisher, the city’s chief housing officer, told the Denver City Council during budget hearings Sept. 21.

Additionally in its first year, the sales tax revenue would help the city transition more people to existing housing as well as regrow its shelter capacity by more than a hundred beds. Denver’s shelters have been sliced by 56%, or about 1,200 beds, due to social distancing requirements, according to Fisher.

The new funding will also help HOST provide more equitable service, particularly to people of color, who not only are disproportionately impacted by homelessness, but also underrepresented in home ownership and have a long history of facing racism in the housing market.

Beyond the emergency response, the city plans to use the sales tax revenue to help build 1,800 new apartments over the next decade; create at least 500 new units of shelter or housing “in catalytic projects” that combine shelter or services with housing in the same building; and expand shelters with beds, services and 24-hour accessibility.

Additional goals, metrics and outcomes will be set through annual and three-to-five-year plan processes that will involve community input and require Denver City Council approval.

The measure was referred to the ballot unanimously by the Denver City Council on Aug. 24 and is backed by Mayor Michael Hancock and major service providers, including the Colorado Coalition for the Homeless.

Sponsoring the proposal was Councilwoman At Large Robin Kniech, who called the plan “bold” and “very humble.”

“Humble,” she suggests, because the city is dealing with economic forces that far exceed Denver’s borders and require a national response to address income inequality and the affordable housing crisis that’s plaguing cities across the country. In fact, the U.S. falls short by 7.2 million affordable housing units (and possibly as many as 12 million units), according to the National Low Income Housing Coalition.

But the proposed sales tax is also “bold,” she touts, because “we may not have all the answers, we may not have all the resources at the scale to meet these systems and these structures, but we can still act to improve people’s lives … at a time when our economy is challenged.”

Denver’s current local city sales tax is 4.31%, according to city documents, so if approved, the local tax would become 4.56%, for a total sales tax of 8.56%, when including all state and regional taxes. If the city’s other sales tax measure to combat climate change also passes in November, then Denver’s local sales tax would be 4.81%, for a total sales tax of 8.81%.

If both taxes pass, Kniech said, the city would be in the upper tier of sales taxes in the region, but still not the highest.

Concerns of another failed attempt

The Denver GOP is recommending voters reject the proposal on the basis that it is a “large permanent tax increase to address an issue that has already been used to extract large, permanent tax increases in the past.”

The city’s Affordable Housing Fund, for example, was created by Denver City Council in 2016 and combines property tax revenue and a one-time fee on commercial and residential property to address affordable housing needs across a wide income spectrum. It does not, however, provide dedicated funding for numerous expenditures the Homeless Resolution Fund would, including the acquisition, improvement and operation of homeless shelters, as well as housing referrals and services, temporary motel rooms and more.

The Denver GOP and others have taken aim at the fact that there is no sunset built into the measure, even if it proves to be yet another failed attempt to tackle homelessness.

Kniech said adding an end date wasn’t advised for this particular fund because it would limit the city’s ability to effectively spend what’s in it. Generally speaking, homeless development projects require a 15-year commitment, she said, because “neighbors want to know that funding for services is there, that this is going to be a well-run building.”

Still, she said, hearing feedback around the sunset issue was important because it “really pointed to the question of accountability: How are we tracking? How are we creating metrics and really making sure that we’re reporting … and tweaking if we’re not seeing the outcomes that we want?”

Her answer is an 11-member Housing Strategic Advisors group that will track progress, troubleshoot unmet goals and hold public meetings. The Department of Housing Stability will also provide an online dashboard for the Homeless Resolution Fund that’s updated in real-time and details investments and outcomes, similarly to the reporting system set up for the Affordable Housing Fund.

Questions have been raised, including by District 9 Councilwoman Candi CdeBaca, around the sales tax’s “regressive” nature, which some fear could hurt the very people the policy is supposed to protect.

Kniech has acknowledged the sales tax model isn’t a perfect one but was pursued nonetheless because Colorado’s Constitution largely prevents local governments from passing “progressive” taxes, which rise based on a person’s ability to pay and tax lower rates to low-income earners. Colorado’s Constitution also bars taxing more on “luxury” or vacation properties, and fees on real estate transfers are ruled off-limits by Colorado’s TABOR amendment.

Raising property taxes was a consideration but ultimately tossed out, Kniech said, because it would hurt small- and medium-sized businesses more than households due to the Gallagher Amendment, which governs the state’s property tax rates.

In Denver, sales taxes are “less regressive,” she said, because they exempt food, medicine, fuel and feminine hygiene products, lessening the impact on lower-income households. Visitors to the city partially pay for the sales tax as well.

“This was the most robust source we could get that … spread the payments across people so that it had less impact on individuals; it gathered more money, and it really did help to make an impact at a size that other sources just wouldn't have matched,” Kniech said.

Other worries, including those felt by Councilwoman At Large Debbie Ortega, focused on the impact to small businesses and their employees, who struggle to find footing in the midst of a major recession.

Kniech said small businesses will not be burdened, because the “average neighborhood store” charges sales tax to customers and doesn’t typically pay sales tax on the goods they’re selling.

“The businesses who are more likely to be paying the sales tax are those who purchase large amounts of aviation fuel or a construction company that pays sales tax on materials,” she said in early August when presenting her proposal to Denver City Council’s Finance and Governance Committee.

Support from business advocacy

The Downtown Denver Partnership, a business advocacy organization that plays a pivotal role in shaping the heart of the city, supports the tax.

“Our commitment to supporting people in our community experiencing homelessness is a key part of our mission to build an economically healthy, vibrant, and inclusive center city,” Tami Door, president and CEO, said in a statement Aug. 19.

The Downtown Denver Partnership lobbied for the city’s 2012 ordinance that outlawed outdoor camping, known as the “camping ban.” In May 2019, the group also helped fund the successful fight against Initiative 300, the citizen-led ballot initiative that would have repealed the ban and other laws that advocates saw as criminalizing homelessness.

But the proposal that will appear before voters this fall as Ballot Measure 2B is an improvement, the business group says, and better gets at the heart of homelessness, which isn’t cheap.

The city spends about $26,000 per person experiencing homelessness every year, according to a 2019 report by the Common Sense Institute, a Denver-based, business-focused think tank. The new sales tax increase would add another $10,000 a year, according to Chris Brown, CSI’s policy and research director.

And those numbers are exactly why the plan makes sense, proponents contend.

"It’s ultimately more expensive when we don’t deliver impactful solutions to homelessness," Door told Westword. "When we don’t have an individual in housing or getting the resources they need or in shelter, the overall expenses from both the public and private side continue to grow per that individual."

The slogan for the anti-Initiative 300 campaign was “We Can Do Better,” and now city leaders are confident this solution will show Denver voters they’re doing just that.

“They didn’t want to vote no. They wanted to vote yes. But they wanted to vote yes on the right thing and on something that would make real and lasting change for those who are most vulnerable in our communities,” District 7 Councilman Jolon Clark said. “This is that. This is what I believe our citizens have been asking for.”

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