Vail Recreation District pondering new property tax for aging sports facilities
Gallagher amendment explained
The Gallagher amendment was approved by voters and adopted in 1982 in response to homeowner concerns over rising residential property taxes. It requires that residential assessed values comprise no more than 45 percent of the state’s overall assessed value. Non-residential properties make up the remaining 55 percent.
Most years, Gallagher doesn’t come into play. If commercial values and home values rise at a similar pace, there’s no need for an adjustment.
But when there’s a state-wide housing market boom — as there has been over the past several years — coupled with a business downturn, like the recent dip in the oil and gas industry, homeowners can wind up contributing more than their 45 percent share. That throws the ratio out of whack, triggering a mandatory tax cut for homeowners under the state constitution.
Since 2003, the assessment rate for residential properties has been unchanged, at 7.96 percent of market value. Next year, that’s projected to drop to 7.2 percent. The Town of Vail then applies that rate to our assessed property values and tax mil levy to calculate how much revenue will be generated from residential properties in town.
Since the town won’t receive updated assessed property values until August, town staff has calculated the impact of the Gallagher Act assuming flat property values. Based on the new residential rate of 7.2 percent, the town will see a reduction in property tax revenues of approximately $377,000 for the 2018 budget year. This will be offset by any increase resulting from an update of assessed values, since 2018 is a re-assessment year (the County re-assesses property values every two years).
Source: Town of Vail
VAIL — The Gallagher Amendment, inflation and even the federal Affordable Care Act have been cited among the reasons the Vail Recreation District is hurting for funds.
But most of all, it’s wear and tear on facilities. The district is projecting $12.5 million needed for improvements throughout the next decade, of which it can fund about $4 million. The district is funded through program fees (52 percent) and property taxes (48 percent).
A solution could be found in more property tax revenue; the district plans on gathering feedback from taxpayers in July to inform a decision on whether or not to go for a new tax, for which ballot language would need to be certified by the end of August. As an alternative to the property tax increase, however, an increase in program fees was also suggested.
“We would have to raise our fees about 35 percent across the board,” recreation district director Mike Ortiz told the Vail Town Council Tuesday. “And then you also assume there’s no decrease in participation.”
MORE PEOPLE, LESS MONEY
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Capital improvement projects aside, the district has one of those good problems to have — people can’t get enough of its programs.
The kids camps are crammed; the adult programs are packed; and there’s more and more participation every year which, of course, increases revenues from program fees. That increased participation, however, also creates more expenses as those growing programs are themselves subsidized by the property tax portion of the recreation district’s revenues.
The property tax component of the district’s revenues has been decreasing, first from the 2008 recession, and now from the state’s Gallagher Amendment, which says commercial property tax should be 55 percent or more of the state’s overall property tax collections. The town is projecting a $377,000 reduction in property tax revenues for the 2018 budget year due to residential and commercial property tax adjustments. This will result in less revenue collected by the rec district.
“Thankfully it’s not going to be quite as drastic as we thought it was going to be, but it will happen, and it will happen again the next valuation,” Ortiz said.
Finally, the Affordable Care Act added to expenses even more, but in looking back Ortiz says it was probably a good thing. “At the time, the word was that was going to become mandatory to have everybody (receiving health insurance),” he said. “It didn’t happen, but we’re actually glad we have all those employees benefited now.”
AGE OF fewer GOLFERS
In this age of participation in golf declining, there are municipal courses around the country have been able to stay profitable.
The Vail Golf Club is not one of those courses.
“In the old days, the golf course was the cash cow that paid for everything,” Ortiz told the council Tuesday.
These days, the Vail Golf Club is running at a deficit of about $100,000 to $150,000 every year, Ortiz said.
In addition to being a cost center, the course is a significant source of augmented income, it was pointed out. But it’s not being frequented by tourists like it once was.
“It’s mostly residents,” Ortiz said. “Our demographic is 55 years and older.”
The bridges on the Vail Golf Course are among the many capital improvements factored into the $12.5 million the district is projecting it will need throughout the next decade. The town of Vail and the recreation district would split any repairs or replacements of those bridges, which, as pointed out by Ortiz, are not in good shape.
“Those bridges … are critical for safety in the surrounding area,” said Mayor Dave Chapin.
If an increase in property tax or an increase in program fees turn out to be the only solutions to the recreation district’s financial woes, then the fees themselves will likely amount to more than the tax would for area homeowners who also participate in recreation district programs, Ortiz said.
Those 55 and older golfers were used as an example.
“We don’t know what the exact amount (the tax would be),” Ortiz said. “But it will be less than one mill. Right now, our figuring is one mill is about $80 on a $1 million evaluation … if we raise your golf pass by 35 percent, it’s a lot more.”