Fly Steamboat program faces funding crisis
February 16, 2011
Steamboat Springs — Resort leaders in Steamboat Springs are studying the creation of a rural transit authority and with it a new countywide sales tax of as much as 1 percent to help stave off what they call an impending crisis in funding the Fly Steamboat program.
The program provides minimum revenue guarantees to airlines that secure commercial flights into Yampa Valley Regional Airport, particularly during ski season. Half of the $2.5 million budget for the ski season jet program comes from a 2 percent lodging tax within a local marketing district that covers most but not all of Steamboat. But officials say even with reductions in the flight program, the operation is burning through reserves.
"We're upside down, and our revenues are less than what we're spending," Steamboat Springs Chamber Resort Association Executive Vice President Sandy Evans Hall said. "With the lodging community discounting rates, we can see that we can't recover off the average daily rates. The lodging industry was hit first and will be the last to come back, and all of our tax revenue is in that one basket."
Chris Diamond, Steamboat Ski and Resort Corp. president and CEO, told the Routt County Board of Commissioners on Jan. 25 that available airline seats have decreased 29 percent from the high three years ago and predicted that the airline program would burn through the last of a $1 million reserve fund by the end of ski season 2012-13. He cautioned that Routt County's economic recovery is at risk if airline capacity continues to decline.
Lodging taxes are down 35 percent from the past two years, and although the local marketing district reserves can fund this winter's airline program and winter 2011-12, the program would go into "an extreme deficit" in the winter of 2012-13 without additional revenues, Diamond said.
City finance official Bob Litzau confirmed Tuesday that annual local marketing district tax revenues have declined from $1.48 million in 2008 to $1.14 million in 2009 and $1.04 million in 2010.
City Council President Pro Tem Jon Quinn said that although the Steamboat Springs City Council has not been formally advised of a bid for a rural transit authority tax, it is monitoring the situation.
"I think funding for the airline program is critical," Quinn said. "Maybe a (rural transit authority) is a solution, or maybe there is something else out there."
Evans Hall said the annual performance of the airline program and its fiscal condition depends on revenue yields from flights. The local marking district board projects its revenues for the coming year.
This year's total airline program budget is a more than $2.5 million, and the local marketing district pledged $996,000 in expected lodging tax receipts toward its share of about $1.3 million, leaving the possibility of spending $346,000 in reserves if the worst-case scenario played out. Projections now suggest that the full $346,000 of reserves will be needed when the final 2010-11 airline cost figures are in, Evans Hall said.
Subsidizing air service
Evans Hall said the board of the local marketing district would spend the spring researching the possibilities for propping up the airline program before choosing a direction in June. Options include creating a rural transit authority that would collect as much as 1 percent sales tax as well as vehicle registration fees to generate from $500,000 to $700,000 annually to supplement the local marketing district for as long as a decade.
"We'll draft sample ballot language, conduct phone polls and educate the community" before deciding whether to seek a ballot question in November, Evans Hall said. If that route is found not to be feasible, the board might turn to temporarily raising the local marketing district tax to bridge the gap.
Evans Hall said the challenges for the local marketing district go beyond declining numbers of visitors and the need to discount room rates to attract vacationers.
The growing prevalence of timeshare and vacation club accommodations, which as private residences cannot be taxed, undermines the ability to fund the airline program. And although the city is doing a better job than ever of collecting lodging taxes from the vacation rental of private homes, the proliferation of vacation rental by owner portals makes the task more difficult.
County Commissioner Doug Monger said Jan. 25 that it appeared that increasing airline program subsidies while passenger numbers declined was not a sustainable model, and he predicted that persuading the community to continue subsidizing the airline program would continue to be a challenge.
Airline Program Director Janet Fischer responded that research shows that an increase in subsidies would continue to return benefits to the community.
Fischer said the cost of subsidies on a per-passenger basis is $30 in winter. Even if the cost of the service jumped to $47 to $50 per passenger, each of those passengers is spending about $1,150 here, justifying the investment, Fischer concluded.
– To reach Tom Ross, call 970-871-4205 or e-mail tross@SteamboatToday.com