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Can sales tax sustain Vail?

Matt Zalaznick

Vail’s bike trails, police officers and free buses are paid for, in part, by the sales tax collected in the town’s shops, hotels and restaurants. But that pile of money has been stagnant or shrinking each year for the past decade, leading some to argue the town needs to increase the money it collects in property taxes.

“The advantage of using sales tax is that it’s predominantly funded by visitors to Vail,” says Rick Scalpello, a close watcher of Vail’s economy. “Sales tax is a fair way to do it, but it may not be sufficient because it simply is not growing.”

Private sector pinch

The town collects about $15 million in sales tax each year compared to about $2 million in property taxes. But Vail’s property taxes also fund Eagle County’s government, the Eagle County School District and the Vail Recreation District, among other entities.

“I think the days of double-digit sales tax growth are over. I don’t see a catalyst that’s going to change it,” says former Mayor Rob Ford. “We probably need to go to a property tax system.”

Town Councilwoman Diana Donovan says a property tax hike is unnecessary.

“When you have major hotels closed, when you have major spaces in Lionshead closed, what do you expect?” Donovan says, referring to the sales tax slide.

While the Town Council has been criticized over the stuttering economy, Donovan says there’s not a whole lot that local government can do about it.

“We’re moving forward – the town is moving forward on infrastructure and has been,” she says. “It’s the private sector that needs to get their act together.”

For example, Donovan says, the town has recently funded extensive street repairs in Vail Village, a project that will include installing a snow-melt system on Bridge Street and its cross streets.

The town also is close to approving construction of a Four Seasons Resort at the entrance to the village, Donovan says.

“Our taxes wouldn’t be that bad if the Vail Village Inn was open, if the Holiday Inn was open, if six stores on bridge were open,” Donovan says.

The hotel that will be demolished to make way for Four Seasons Resort was once operated by Holiday Inn.

Crisis of confidence

Property tax hikes have been proposed – and defeated – before, most recently last November, when the town wanted to use the increase to repair streets in Vail Village and boost funding to the fire and police departments.

Alan Kosloff, president of the Vail Village Homeowners Association, says the measure probably would have passed if either second-home owners were allowed to cast ballots or if voters had more confidence in the Vail Town Council.

“There isn’t a lot of confidence in the Town Council,” says Kosloff, whose organization is made up predominantly of second-home owners, but also includes full-time residents. Second-home owners own about 70 percent of the homes in Vail.

“I think a lot of people voted against the property tax because they weren’t sure the money would be spent wisely. We need a town council and a town manager that give us confidence,” Kosloff says.

A town survey completed earlier this year, residents and second-home owners gave the council a score of “average” for its performance. The Town Council’s ratings in the annual surveys have been decreasing steadily – within the realm of average – over the last few years.

Spending spree?

Kosloff also criticizes the town for spending more of its budget on “operations” –which includes salaries – than on public construction projects such as street repairs.

“I think that the town budget, which for many years was 50 percent capital projects and 50 operational costs, has continued to slip away from that proportion,” he says. “It’s very important it goes back to that balance.”

Kosloff says members of his organization would probably support a property tax hike, under the right conditions.

“The new town manager has to take a hard look at operational expenses,” Kosloff says. “We would support an increase in property taxes based on a Town Council that we have confidence in – and use the money to fix some of things in town that are crumbling – like the streets.”

Vail’s new town manager, Stan Zemler, takes over early next month.

Scalpello says slumping sales tax will continue to strain the town.

“A modest increase in property tax could take pressure off of town services,” Scalpello says. “From my perspective, one good starting point is streetscape improvement –the sales taxes aren’t enough to pay for it, and if we don’t it, the sales tax will go down further and put even more pressure on the town.”

Donovan says sales tax may not help the town much, considering how much of those revenues go to other local agencies.

“Increasing property taxes doesn’t do us much good,” she says, “because we don’t get much back.”

Matt Zalaznick can be reached at 949-0555, ext. 606, or via e-mail at mzalaznick@vaildaily.com.


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