Vail Valley Voices: Marketing lobby seeks tax source
Vail, CO, Colorado
Editor’s note: The following is an excerpt from the Vail Homeowners Association monthly report. We publish weekly excerpts from the association, which keeps a close eye on economic and political trends in and outside of the town. The newsletter electronic version with links to supporting documents is available at
A special interest business lobby wants a permanent source of taxpayer funding for the millions of dollars in annual funding it receives for marketing and special events, one that is not dependent upon the political maneuvering of elected officials.
Earlier in the year, elements within the lobby had the town poll the local electorate about whether there was support to increase lodging and sales taxes to raise $4 million annually for arts, cultural and entertainment programming.
The findings predicted an overwhelming failure if the tax increases were put before the voters.
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Never take no for an answer: The fallback strategy of the special interest lobby to achieve a permanent, politically unassailable revenue source is to weaken the ability of the Vail Town Council to manipulate annual budget allocations that are funneled to the special interest entities.
Two council members can bring pressure to create the need to hammer out a budget compromise, which in recent years has focused on town employee salaries-benefits and economic development programs. The tactic is to have the voters void a provision in the Town Charter that requires a three-fourths majority of the Town Council to override a 50-50 split between annual operating and capital expenditures. For the better part of a decade the split has been closer to 60-40 operating to capital expenditures.
The strategy would allow the lobby an improved chance of gaining support for larger annual budget allocations and the ability to dip into the town’s financial reserves. Some council members appear to favor doing away with a split altogether.
Critics say a bad move at a bad time: There are those with the view that intensifying town spending, particularly from reserve funds, is premature and predicated on a false sense of security when viewed against the backdrop of national and global economic markers. A bad move at a bad time, they say -particularly when considering predictions that federal budget cuts and tax increases could have a significant affect downstream upon downsizing funding for state and local governments.
Draw down of town reserves could be risky business: The Town Council has directed staff to maintain 25 percent (of annual revenues) as a minimum balance within the general fund. The current reserve fund balance is at 77 percent and projected in 2016 at 64 percent. The town has nearly $22 million in unfunded capital projects on its to-do list.
Another $10 million to $12 million is under discussion for a new municipal building. Any combination of these capital projects, or newly added ones, could further reduce reserves.
The town has recently been called upon to fund special events like the 2015 World Alpine Ski Championships and 50th anniversary celebrations, another drain on fund reserves.
Lowering the reserves excessively could mean indefinitely delaying important capital projects or causing political avoidance of new projects, projects such as a new roundabout intersection for the South Frontage Road improving traffic flow by better safe access to the town of Vail and Vail Valley Medical Center sites or an urban runoff storm drainage treatment system necessary to reduce the problematic pollution of Gore Creek.
Painted into a corner: Currently, nearly all new construction projects in Vail are funded by the municipal government and are therefore tax-exempt. The latent effect, if reserve fund revenues become depleted and if revenue replacement is not forthcoming from real estate sales or sales tax, would be the underpinnings for a property tax increase. Tax increases, particularly property taxes, have never been popular with local voters.
The town could be pushed to its own fiscal cliff, hurried there by overly aggressive entrepreneurial interests who view the town more as a business entity than a government.
Increasingly since the late 1990s, the town has been expanding and changing its role by going into business ventures that compete against other businesses in the community, particularly in the meeting, wedding and private event venues.
Some are questioning whether this behavior is allowed under the town charter. They are concerned that the municipal government has come to serve and favor particular business and political interests over the general welfare of the entire community. They raise the fair-and-equal-treatment issue.
If the fiscal cliff were ever encountered, it could have a substantial impact upon the broader business community, which through a variety of town programs receives millions annually in direct or indirect subsidies.
Core elements of Vail’s business infrastructure are town subsidies for public parking, mass transportation, marketing, hosting of special events, the development of cultural and recreational amenities and affordable employee housing.
As an example, consider the findings of a recent economic consultant study sponsored by the town’s housing authority. The study was to demonstrate its worthiness to business interests of continuing to receive municipal funding for capital expenditures to acquire and build more deed-restricted employee housing.
The town, as an outcome of nearly two decades of underwriting affordable housing acquisitions, has 727 units of deed-restricted employee housing in its inventory.
The report finds this is a core element in Vail’s business infrastructure, allowing local businesses (within Eagle County) to avoid paying $12.6 million per year to house their employees.
These employees spend $6 million per year locally in retail sales. Because many live in Vail, they commute by bus, saving the town $9 million that would otherwise be necessary to expand commuter parking.