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Tweaking the revenue stream

Geraldine Haldner

In 1972, when Vail adopted a home-rule charter<making sales taxes half of the town1s income<it seemed like a good way to go.What little infrastructure there was to maintain was comfortably covered by the 4 percent tax at the bottom of every sales receipt paid by guests from near and far.Any leftovers went towards building new infrastructure as the town and its reputation as Colorado1s<and later North America1s<premier ski resort steadily grew.Vail1s business model worked well<until about 1990. Then things changed.3Our primary revenue source started slowing beginning in 1991, O92, Vail Town Manager Bob McLaurin said during a recent Vail Town Council work session. The session was dedicated to finding different revenue sources following more than a decade of flat sales tax receipts.3The rate at which (sales tax revenues) were growing began to slow at the same time that the cost for services we provide began to climb, McLaurin explained.Financial gymnasticsIn the last two years, the town has had to dip into the Capital Projects Fund<originally meant to fund everything from fixing potholes to building a new pavilion<to cover $1 million in operating costs.3Most of our general budget budget goes to labor costs, McLaurin told the council. 3We saw a huge shortage in labor, which resulted in wages going up.In addition to having to compete with downvalley employers who benefit from being closer to where the majority of Vail Valley labor pool lives, the high-flying economy made everyone from heavy equipment operators to janitors an expensive asset to have. Since 1998, the town of Vail1s payroll has hovered just below $12 million<but staying there, McLaurin told the council, took losing 14 positions over the past three years.The town is operating with a veritable skeleton crew, McLaurin told the council, adding that further cuts will be felt by the community and guests.3(Staff cuts) is one of the ways we try to keep our cost in check, he said. 3(More cuts) will have to come in specific service reductions. Such cost-cutting measures could range from running less buses to deploying fewer snowplows to cleaning toilets in the town1s two parking structures only once a day.Nothing Osacred1Spoiled by double-digit growth rates from 1980 to 1995, Vail is now scrambling to make up for flat sales tax revenues.In 2001, for example, the town collected $15.5 million in sales taxes, barely enough to cover payroll and only about 1 percent more than the town collected in 2000. With inflation eating up about 3 percent of anything of value, the town is really on the retreat when it comes to revenues.With a $40 million annual budget<up from $36 three years ago<the town may be hard-pressed for cold cash. And if trends continue the way they have, with revenues dropping and expenses rising, Vail could be looking at a dim future. Late last year, the council decided that no source of revenue was 3sacred enough to be excluded from the council1s quest to round up more funds.3We pretty much said we need to look at all revenue sources. There should be no sacred cows that we wouldn1t look at, Vail Mayor Ludwig Kurz reminded his council before individuals members began wracking their brains for better ways to pay for town services.But before the brain-storming kicked up much dust, a majority of the council made it clear that an increase in property taxes will likely not be the path they want to pursue.While property taxes make up only 7 percent of the town1s income<approximately $2 million per year<council members said asking voters to shoulder more taxes is bound to be an unpopular choice, even if the majority of the increase would be shouldered by second-home owners, most of whom don1t vote in Vail.3We are in the resort business. I don1t see us moving away from the sales-tax economy, said Town Councilwoman Diana Donovan, who along with five colleagues deflected repeated attempts by the seventh council member, Greg Moffet, to convince Vail voters that raising property taxes is the 3fair and equitable way towards making the town pay for itself.Moffet, who first questioned the validity of Vail1s business model last fall, told his colleagues that doing away with sales taxes and supplementing the missing revenue with property taxes would be a better way to go.3At what point are you being penalized for having too much house, he asked rhetorically, adding that an increase in property taxes would hit those who<according to town staff<generate the highest demand for town services.3We need to tax those that generate the need for services, Moffet argued unsuccessfully.Tweaking the revenue streamInstead of overhauling what Moffet characterized as a 330-year-old business model that is 3broke, the other council members said they want staff to explore measures that will tweak the town1s revenue stream a bit, as well as balance the town1s budget quickly without too much political pain.By late April, the council agreed, several ways to make more money should be considered, including:? Raising fees for utilities, such as cable television, gas and electricity.? Advocating passage of a 3de-Brucing law, allowing the town to raise the town1s Real Estate Transfer Tax, or RETT, which generates $3 million annually by taxing 1 percent of every real estate transaction.? Negotiating with Vail Resorts for a 3voluntary contribution from on-mountain sales.? Asking voters in November to approve a mil levy increase to pay for a new fire station.? Advocating a partial-property tax increase, or 3homestead tax exemption, in the state Legislature that would allow the town to raise property taxes on homes that are not primary residences.Vail the city/countyA final item, proposed by Town Councilman Rod Slifer, would without a doubt be the most ambitious and least likely to succeed< exploring the possibility of a 3City and County of Vail.Forming a new county<last done by the City and County of Broomfield a little over a year ago<requires approval of a state-wide ballot question and would cost thousands of dollars to organize and set up. Four years ago, the 5,000 residents of El Jebel and Basalt contemplated a secession from Eagle County or a switch to Pitkin County, but the effort quickly lost momentum.If Vail had jurisdiction over Vail Mountain as part of a new county, it could very well garner part of the on-mountain county sales taxes now collected by Eagle County.It won1t be easyArguments against at least two of the above options are strongRaising RETT taxes requires not only participation of the Legislature and a statewide vote to rescind the 1992 Taxpayer1s Bill of Rights, or TABOR. It also would require convincing voters at home that additional RETT money should be used for expenditures other than the acquisition and maintenance of open space and parks<its original intended use when was passed in 1980.And judging from past conversations the council and the ski company have had on the subject, simply asking Vail Resorts to contribute money may not cost anything<but likely wouldn1t result in much cash, either. While the town thinks it is unfair that the county and the state get money from sales at Two Elk Restaurant or Adventure Ridge, as prescribed in the ski company1s public land-use permit, the ski company has said in the past it isn1t using the town1s infrastructure at all to sell a burger at Two Elk or rent skates at Adventure Ridge.3We created all the infrastructure. It1s not in town limits, said Vail Chief Operating Officer Bill Jensen back in December. 3The town does not provide us any services, so any request for us to collect sales tax on items sold outside town limits is without justification.


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