This week, Manitou Springs City Council unanimously approved an ordinance submitting a ballot issue to voters of Manitou Springs for the City’s Nov. 4 regular election to increase the City’s excise tax on ticket sales and admission fees. This ballot question is part of the “balanced approach” plan for addressing the City’s projected $4.3 million budget shortfall advocated by Councilor John Shada and Mayor Pro Tem Natalie Johnson. In addition to increasing the “amusement tax” from 5% to up to 14%, the City will also need to divert $1.9 million of parking revenue to the streets department.
The “amusement tax” has not been adjusted since 1972, and would only apply to businesses charging admission fees or utilizing tickets. “A zip line ticket, a $99 zip line ticket would be an increase of $9,” explained Johnson during a Jul. 29 town hall. “A train ticket, $67, would be an increase of $6, … and then, again, an admission ticket of $12.75 would be an increase of $1.15.”
Two members of the public spoke in opposition to the proposed ballot measure. “I certainly recognize and appreciate the budget deficit that we’re facing and know that that’s a complex issue for us to navigate,” said resident Steve Czarnecki, who expressed concern over the city’s lawsuit with the Cog Railway. “Obviously there’s ongoing litigation that may limit the benefit, and potentially eliminate the benefit of this tax actually reaching to city coffers. And for us to put the majority of our eggs in a basket that might have a giant hole in the bottom of it to cover this tax deficit may not be the wisest path forward.”
Robert Hefner, owner and operator of the Manitou Cliff Dwellings, expressed concern over the impact it would have on his business. “Shouldn’t we as Manitou City Council be worried that a triple tax on tourism is going to affect us and what the long-term effects of that are going to be?” he asked. “I guess I’m asking you guys to not allow four entities, which would be us, Iron Springs Chateau, Miramont Castle, and Adventures Out West Zip Lines to pay this tax, or pass it on to our guests and hope that they stick around for it. It just does not seem fair to have four businesses — I know there’s the Cog, but the Cog has a whole other deal where they are a $500,000 cap limit, so really, unless there’s something that’s going to change with that, the Cog is not going to be somebody who is paying this tax to you guys or you’re going to re be reimbursing the #2.5 million or the $3 million you collect over $500,000. So I just feel like we’re still going to be at a major shortfall and this is not the solution.”
In April the Cog Railway filed a lawsuit against the City of Manitou Springs, claiming that the City has failed to honor the 2018 Tax Incentive Program Agreement. Manitou Springs and the Cog entered a 50-year agreement to provide tax revenue to the city, preventing a budget crisis. Under the Agreement, the Cog Railway made payments totaling $1.25 million to the City between 2018-2020 to prevent a budget shortfall and provide tax revenue to the City. In exchange, the City agreed that it would thereafter annually reimburse excess excise tax above $500,000 to MPPR. The lawsuit claims that on December 3, 2024, during adoption of the 2024 budget, City Council voted to not appropriate at least $638,536 in funds to MPPR for Excess Excise Tax reimbursement for 2024 and to instead allocate those funds to the City’s general fund.
On Aug. 15, Ted Johnson, general manager of the Cog Railway, wrote a letter to Mayor John Graham and City Council. “It should be of grave concern to the City and to its citizens that a huge increase in a tax primarily targeting one of its most important businesses, combined with the City’s bad faith attempts to shirk its obligations under the Tax Incentive Program Agreement, will alarm and worry potential lenders and investors in the City,” wrote Johnson in a copy of the letter obtained by the Bulletin. “Countless other public-private agreements throughout the state depend on a municipality honoring their financial obligations and promises such as those upon which [Manitou & Pikes Peak Railway Company (MPPR)] relied. The City’s actions undermine the ability to do business with the City and call into question the predictability of other business arrangements in which private entities depend on Colorado public entities to honor their agreed-upon, multi-year obligations.”
Johnson claimed the proposed tax is a response to the Cog’s lawsuit. “The Proposed Ordinance appears to be a retaliatory measure by the City in response to the effort by MPPR to resolve the dispute under the Agreement over unpaid amounts,” he wrote. “Although most of the impact of the proposed ordinance will fall on MPPR, the proposed ordinance also threatens other existing and potential businesses in the City. The City’s blatant disregard for the agreement, and its continuing bad faith conduct towards a significant business and corporate citizen, threaten to undermine future businesses’ desire to locate in Manitou Springs as well as the ability of any business to rely upon the commitments of the City.”
Councilor Julie Wolfe spoke in favor of the ordinance. “I think this is worth a try,” she said. “There’s no guarantee that the outcome of the litigation will be that we have the authority to appropriate or not appropriate funds, even though our contract with the Cog says that that’s our right — is to appropriate or not appropriate annually as the need may be. I understand that the last 10 or more years that the Cog has been in business, the number of visitors rarely changes each year, even though they’ve more than doubled their price of their ticket over the years. I’m not too concerned that it’s going to cause a decrease in the number of patrons who choose to ride the Cog. I have nothing against looking in the future at other opportunities such as the lodging tax increase or other things that may bring in, you know, nominal amounts of money but still something. I think we should move forward on this.”
Council voted unanimously to refer the ordinance to voters.
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