Economic Impact Questions

When you combine all of the businesses and residents and find that they are paying more in state or federal taxes than they did the year before, even though the tax rates have stayed the same, it means that the community, as a whole, has generated more revenue than the year before. Imagine the community as an individual: if in one year you make $1,000 and get taxed at 25%, you then pay $250 in taxes and keep after taxes $750. If in the next year, you make $2,000, and the tax rate is still 25%, then you pay $500 in taxes and keep $1,500. You’ve paid $250 more in taxes in the second year, but you’ve kept $750 more after taxes, so you are better off.

The response to the second half of your question is funding would include support for a grant writer so that foundation grants could be part of any funding plan. Access to state and federal funding, such as Colorado’s Universal PreK funding, would also be tapped if available. Beyond that, actions — and this applies to ANY public initiative — can be funded through the reallocation of existing public spending, and/or through taxes or fees, and/or public-private partnerships.

It is worth noting that because there are so many different possible places where funding could come from (individual donations from people inside Montrose, individual donations from people outside Montrose, from foundations inside or outside Montrose, from state or federal grants, from reallocation of existing local government spending from any combination of parts of the city and/or county budgets, from any one of various forms of sales taxes or property taxes), it would be irresponsible for our economist, or Unify, to guess which sources would be used and how much would come from each source. And each source creates a different economic impact. So the economic impact based on sources could not be responsibly factored into Dr. Perry’s analysis.

The article in the paper suggested incorrectly that there would be a loss of tax revenue for the county. In fact, Dr. Perry’s analysis does not show any loss of tax revenue to the county based on estimated spending on any of the actions. What the numbers showed is that there are subsidies (related to childcare) paid by the state and federal government to Montrose that are greater than the taxes generated from economic activities of the actions. However, this was not clear in the early draft.

The article also implies incorrectly that Montrose will suffer a loss because of additional taxes paid to the state and federal governments. The additional tax revenue is a result of additional economic activity. For example, if a coffee shop in Montrose sells more cups of coffee, then it generates more revenue, and thus generates more in taxes to collect. Again, this was not clear in the early draft.

A few Delegates and facilitators got an accidental preview last week of an early economic impact draft, which was still in draft form and confusing (to our Unify team, too). We're sorry about that and did not intend to release it before finalizing with local economist Dr. Nathan Perry. After rerunning the budgets, based on Delegate improvements, a full and final explanation of the tax impact tables (thank you, Dr. Perry) is now available right here.

The other question raised by the article is why the cost of the actions and the sources of revenue are not included in the calculations. That’s a reasonable question. And that question is answered below.

Different funding methods have radically different consequences for the economic analysis.

If the funding comes from a grant or donation from outside of Montrose, that has one impact. If funding comes from reallocating existing dollars in the city or county’s budget, that has a different impact. If it comes from a new tax, then there is a different impact.

Because we do not know what methods of funding might be used for each action, our economist Dr. Nathan Perry, could not calculate that into his analysis. What the analysis shows is the general impact of spending on these actions on the Montrose economy, without regard to source of funding.

Per Dr. Perry: “The model makes no assumptions about who takes the jobs. Economic impact modeling does not model people, it models economic activity and jobs. Spending creates economic impact, which creates jobs. These are new jobs. So if someone leaves job A working in an office for newly created job B in the childcare industry, there is new economic impact because instead of just job A existing now there now exists two jobs (A and B). It is assumed that someone else fills job A.”