Steamboat Springs As Steamboat Springs grows and real estate prices soar, conversations often have turned to whether the city can remain an affordable place to live for its working class. Using salary schedule information from the Steamboat Springs School District, the Pilot & Today met with local financial planners to assess how a hypothetical first-year school teacher could expect to live in Steamboat, and whether goals such as owning a home are within reason.
The results, for the most part, were discouraging. On a teacher's salary, minimal savings require major sacrifices. Home ownership - at least in Steamboat proper - is a pipe dream, and a second job is a virtual necessity.
"If you don't have at least two jobs in Steamboat, you're unemployed," said Joe Birkinbine of ATP Financial Services.
Birkinbine used the school district's salary schedule to create a budget for the hypothetical teacher. Assuming 20 percent goes to taxes, the teacher's first-year gross salary of $31,382 would net $25,105.
Birkinbine said living in Steamboat requires sacrifices, but people should also balance their lifestyle with some indulgences. Therefore, while the budget uses average costs for things such as rent (including utilities) and car insurance and assumes sacrifices in monthly costs for food and recreation, it does provide for luxuries such as cable television, Internet and a cell phone.
If the teacher were to try to save $100 a month, they would end up $335 in the hole by the end of the year. And that's assuming the absence of the credit card and loan repayments many people have when they leave college.
When it comes to saving money, Birkinbine advises his clients to treat themselves like a business. He said the key to a successful business is not how much it makes, but how much it retains. Therefore, Birkinbine said it is important to "pay yourself first" and put away some money into a savings account before doing anything else with a paycheck.
"The first few months, it's going to hurt," Birkinbine said.
While saving money might mean making sacrifices such as giving up a few six-packs a month, Birkinbine said being disciplined early is well worth the cost. He likes to use the example of two clients, one who begins saving for retirement at age 30 and another who saves more, but doesn't start until age 40. The first client could contribute $2,000 a year for 10 years to a retirement fund with an 8 percent compounded rate of return, and that fund would have a value of $214,295 at age 65. Starting 10 years later, the second client could contribute the same amount a year for 25 years and that fund would be worth only $157,909 at age 65. Despite contributing $30,000 less, the first client's fund is worth $86,386 more.
"You can't live all for today because you're losing out on the key part of the formula, which is time," Birkinbine said. "Set goals, be disciplined and have balance."
Birkinbine said it is also important to pay attention to your money, and make sure it is earning interest, at all levels. Birkinbine said too many people settle for checking accounts that earn zero interest, when there are plenty that offer interest.
Many of these accounts, however, require large minimum balances. For example, online bank Everbank requires a $1,500 minimum balance for its interest-paying checking account.
Ed Allbright of Columbine Mortgage believes that before savings, any financial discussion should begin with having a good credit score. Allbright said this is the first place lenders look when considering a mortgage or any other type of loan.
"The biggest mistake I see people making is not focusing on improving their credit," Allbright said, adding that most people should be able to achieve a credit score above 700.
In the case of buying a home, Allbright said the next thing lenders look at is assets. They want to see at least three to six months worth of the mortgage payment saved, Allbright said, to ensure the ability to pay in the event of unexpected expenses such as car repairs.
"Mortgage people don't have a sense of humor," Allbright said. "They want to get paid first."
But even with a good credit score and modest assets, buying a house in Steamboat is still probably unattainable for many in the local working class, Allbright said. Besides the 3 to 10 percent down payment that would be required on a home purchase, Allbright said monthly mortgage payments would be unaffordable.
Taking into account the debt-to-income ratio of about 40 percent that lenders like to see, Allbright said a starting teacher could probably afford a mortgage in the neighborhood of $100,000, when a more realistic figure in Steamboat would be $400,000.
Daniel Foley, a certified financial planner with Sleeping Giant Financial Services in Steamboat, said home ownership in Steamboat is an unrealistic goal for anyone making less than $50,000 a year.
"I don't care where you live, you don't own a house right away," Foley said. "A school district person starting out is not going to be able to afford a condo."
Foley said taking on a second job is a reasonable idea.
"The bottom line is, if they can't afford to pay for their lifestyle and desire to own in Steamboat, then we're blessed in this town to need more labor," Foley said. "People are scrambling for good people."
Foley said with the current workforce shortage in Steamboat, finding a second job shouldn't take more than a week.
"I think that, quite frankly, is the only alternative," Foley said. "That or rent."
The other option, Allbright said, would be to settle for a home in an outlying community such as Hayden or Craig.
"The easy answer is commute," Allbright said. "That's just the way life is."
Birkindine, Allbright and Foley agreed the struggles of the working class are nothing new and not Steamboat-specific.
"When you look at comparable places in the country that have allure and draw, we're not that much different," Birkindine said.
Foley said living in a high-amenity community requires sacrifices, and for many people, just living here is enough.
"You already are rich living in Steamboat," Foley said.
No end in sight
According to the most recently available data from the Bureau of Economic Analysis, when adjusted for inflation, Routt County's per capita personal income increased from $38,712 in 2003 to $41,558 in 2005. That 7.4 percent increase was higher than Colorado's as a whole, which was 3.8 percent.
Scott Ford, co-founder of the Mountain Learning Network, said per capita personal income usually moves at a glacial pace.
"When it does move up and down significantly, something's going on in the economy," Ford said.
And that something isn't that people such as teachers are making 7.4 percent more money. Rather, affluent people, with income largely derived from pensions and investments, are increasingly moving to Steamboat, pushing up real estate prices and pushing out the working class. Ford said the trend is a threat to Steamboat's infrastructure.
"I don't think anybody's denying that it's an increasing problem," Ford said.
Exacerbating the problem, Foley said 75 million baby boomers are expected to retire in the next 15 years. If only one-twentieth of one percent of these baby boomers decide to move to Steamboat, that would mean an additional 37,500 new people in the city, further intensifying the housing shortage.
"It's going to be a big problem," Foley said.