Judging Vail’s potential conference debt
VAIL ” The town of Vail estimates that proposed and already-passed taxes would cover the costs of a Vail conference center ” and a “trigger” would be in place to raise more taxes if funds get tight.
“It’s a very conservative look as far as the budgeting,” said Jim Steinbach, vice president of sales at the Vail Valley Chamber and Tourism Board, which supports the center.
But some opponents say there’s always a chance the conference center will need more money than the approved taxes can cover.
In a worst-case scenario, that could mean taking money from other town funds or a downgrade in Vail’s credit rating that could affect future borrowing.
Tom Steinberg, a longtime Vail resident who opposes the center, said there’s significant risk in the financial plan. Plus, because there’s no “sunset” for the tax, it will be collected until the Town Council decides not to collect it any more.
“This goes on forever,” he said. And once you build the center, you can’t unbuild it, he said.
The revenue from taxes levied for the Vail conference center ” from the taxes passed in 2002 as well as the lodging tax voters will consider Tuesday ” is expected to bring in over $5 million each year by 2012.
That’s projected to be enough to pay for the expected yearly operating loss of the center as well as the debt the town would have to pay for 30 years, plus a 20 percent cushion.
And if the balance of the conference center fund goes below $5 million, the town will increase the lodging tax , if it’s approved, from 0.79 percent to 1.5 percent.
Residents will go to the polls Tuesday to vote on a ballot question that would allow the town to levy up to 1.5 percent in additional lodging tax to help pay for the center. The approval of the ballot initiative won’t raise taxes for residents ” it will raise taxes for people who stay in hotel rooms.
If the ballot questions goes down, the project will be killed.
The town has estimated that it must pay $3.66 million in debt each year to pay off the $112.295 million it will owe after it issues bonds.
Dee Wisor, the town’s bond counsel, said the first priority will be paying the debt service. After the debt is paid, the town must also pay operating losses.
By some estimates, the center is expected to operate at a loss of about $1 million per year once the conference center “stabilizes” in 2012. Conference centers without an attached hotel generally operate at a loss.
The town expects to have more than $7 million in its conference center fund by 2012. That fund is expected to grow each year.
But if the town comes up short in the amount of money it has from sales tax and lodging tax for the operating costs after it pays debt service, the Town Council would have to look for another source of money, perhaps from other town funds.
“There is nothing legally prohibiting looking to other town revenue,” Wisor said.
It could also mean looking at the way the conference center is operating ” maybe getting new management or changing the way it operates. That could mean shutting down the center for part of the year.
A worst-case scenario would be poor snow or a Sept. 11-type event that severely damaged the town’s economy and prevents the town from making debt payments, Wisor said.
In that case, the Town Council would probably look at refinancing or restructuring so they don’t default on the bonds, Wisor said.
If the town doesn’t pay its debt service, that would probably affect its ability to borrow or the price at which it can borrow money for other purposes in the future, Wisor said.
But bond-holders wouldn’t have legal recourse against the town to recover the funds if the town can’t pay its debt, Wisor said.
Staff Writer Edward Stoner can be reached at 949-0555, ext. 14623, or email@example.com.