As our City continues to grow and evolve so does our commercial district. These changes often spark conversations and lead to questions about what new business may come to town or why a particular business may have closed. There are many reasons why a business may choose to locate in the City and just as many reasons why a business may decide to shut its doors. Right or wrong, good or bad, the City of Castle Pines is not often involved in these private business decisions. However, the City can encourage economic development with resources and policies that support business success.
Independent Private Businesses
Businesses looking at Castle Pines have no obligation to contact the City. Often, the City is contacted about a potential business coming to town or relied upon as a resource for existing businesses. Other times, the City is not aware of a particular business coming to town until they apply for a business license, sign permit or building permit.
The same is true when a business decides to divest from the community; the City is likely not contacted or involved in that private business decision. Typically, those decisions are personal, confidential, and may be the result of any number of factors.
The Role of City Government
That being said, the City considers itself to be a great resource for both existing businesses and businesses that have yet to locate in Castle Pines. One of City Council’s highest priorities is the retention and expansion of local businesses. Assisting these businesses requires a significant level of understanding of what’s happening within our local economy and business community. This starts with building relationships, preparing studies and reports and adopting policies that ensure success. We work hard to have a sense of which businesses are looking to locate in town and which businesses may be struggling to find their place in the market or are experiencing other challenges.
Operating a Business in Castle Pines
The City has gone to great lengths to understand the opportunities and overcome the challenges associated with the commercial area and the nuances to running a successful business in Castle Pines.
Cost of Rent
One of the biggest factors in locating or operating a business in Castle Pines, besides prevailing market conditions, are rent prices which, among other factors, are tied to property taxes. Rents in the commercial area typically account for property taxes, insurance premiums, and common area maintenance (CAM) fees. Rents are a component of private lease agreements executed between property owners and business owners. Leases are a binding contract between two parties and are often subject to nondisclosures and always have a termination date or clause. It should be of no surprise that the City is not privy to these private agreements and as a result may not know how much a particular business pays for rent or when their lease expires.
As previously mentioned, property taxes play a big part in how rent is assessed which can have an impact on how successful business may or may not be. This is generally the same when you decide where to live, your rent or mortgage is based, in part, on property taxes and may impact your personal decision on where to rent or buy. In Colorado, we have a unique way of taxing commercial and residential properties. In 1982, voters approved a state constitutional amendment (Gallagher Amendment) which impacts how much homeowners and commercial property owners pay in property tax. As a result, residential properties are currently assessed at a rate of 7.15% while commercial properties are assessed at a rate of 29%, almost 4 times as much!
Below is an example of a typical property tax rate in Castle Pines. Bear in mind the tax rate, or percentages, stay the same between residential and commercial properties; however, the difference in tax burden for commercial properties is attributable to an increased assessment rate of 29%.
To research information on your property taxes, visit the City's website here.
Another factor a business may take into consideration is sales tax. Sales tax is a tax paid by the consumer when purchasing some type of tangible property. It is not a tax paid by the local business. Therefore, a business might not be as concerned about sales tax rates at the local level because every consumer is paying the same sales tax rate. The business owner is simply collecting the tax and passing it along to the proper entity. However, sales tax rates play an important role on a regional scale where a local business may be selling the same product as a regional competitor and the consumer may decide to purchase the product that has the lower sales tax. This is especially true when it comes to high dollar, big-ticket items. The good news is that Castle Pines has a local sales tax rate of 2.75% (and a total sales tax of 6.75% which includes the County, State, and SCFD rates) which is one of the lowest sales tax rates in Douglas County.
At the end of the day, independent businesses need to consider a variety of factors when choosing where to operate. From market data to tax burden, each individual business makes private decisions based on what’s best for them. The City will continue to support our local and future businesses by providing resources and developing policies to help expand the local economy and, in turn, create a thriving community.