Our View: Winter air service can’t be grounded

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Editorial Board, January through May 8, 2011

  • Scott Stanford, general manager
  • Brent Boyer, editor
  • Tom Ross, reporter
  • Traci Day, community representative
  • Dean Vogelaar, community representative

Contact the editorial board at 970-871-4221 or editor@SteamboatToday.com. Would you like to be a member of the board? Fill out a letter of interest now.

The critical importance to our economy of Steamboat Springs’ ski season jet service underscores the need for a quick solution to the impending funding crisis for the flight program.

The winter air service program works like this: Our resort community negotiates minimum revenue guarantees to commercial airlines, who in turn bring ski-season flights to Yampa Valley Regional Airport in Hayden.

About half of the $2.5 million annual budget for the program is generated by revenues from a 2 percent lodging tax within the local marketing district. The Local Marketing District was created in 2005 to secure a more stable source of funding for the flight program. The other half of the annual budget comes from Steamboat Ski and Resort Corp. Other local businesses contribute a smaller percentage through the Fly Steamboat program.

Of this year’s $2.5 million air service program budget, the local marketing district will contribute about $996,000 in lodging tax receipts and have to supplement that with $346,000 from its reserves. Ski Corp. President and CEO Chris Diamond said in late January that the program will burn through its $1 million reserve by the end of next winter.

Several factors play into the funding shortage of the program. First is that the lodging community has had to dramatically discount nightly rates during the past two seasons to attract guests. Lower rates combined with a down economy and fewer overall visitors has led to a 35 percent decrease in lodging taxes during the past two years. Local Marketing District revenues decreased from about $1.5 million in 2008 to about $1 million in 2010.

The second factor is discounted airlines fares and fewer available seats. Although decreasing fares can lead to higher demand for those seats, it also produces lower yields for the airlines, which then forces the air service program to make up for the increasing gap between what the airlines are making on those routes to YVRA and what the negotiated minimum revenue guarantee says they should make.

Third is the shrinking number of lodging units that are on the nightly rental pool. Although there’s been significant development of multifamily dwellings in the past eight years, many of them aren’t in the nightly rental pool and therefore aren’t subject to the Local Marketing District tax. There’s been a total loss of about 2,000 taxable units since 2003.

Routt County Commissioner Doug Monger wasn’t totally off base when he said recently that increasing airline subsidies while passenger numbers continue to decline isn’t a sustainable model. But cutting off the program or significantly decreasing the available inbound seats to YVRA during winter would have a crippling effect on our economy.

Resort leaders have considered the creation of a rural transit authority that could seek as much as a 1 percent countywide sales tax to, among other things, help offset the funding gaps in the winter air service program. But the urgency of the program’s funding crisis now has resort leaders focusing on a solution geared toward generating revenue exclusively for the air program. Potential funding sources could include temporarily raising the 2 percent Local Marketing District tax or seeking funding from the city and county.

We’re not sure what the best answer is, but we know this: The winter air service program is crucial for a destination resort like ours. Fewer airline seats means fewer potential visitors, which means decreased business activity and less tax revenues for the entire community. And that’s not an option Steamboat Springs can afford to live with.

Comments

ybul 3 years, 4 months ago

While reducing seats will have a drag on the community its effect will be changing not crippling. There is nothing to fear but fear itself. Making a decision based on fear typically yields bad results.

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addlip2U 3 years, 4 months ago

Evidently it is the property management companies that benefit most from the nightly rental: " The fee charged (to the owner) by many is around 50% " .

Let the property management companies benefiting from the nightly rentals contribute a larger percentage of their profit to this program.

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mtroach 3 years, 4 months ago

Why can't the local marketing district tax be expanded to include the 2000 "lost" units? If a home or condo is being used as a vacation rental it should be taxed to provide for this program. Exceptions to this should not be granted, and loopholes should be closed.

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kathy foos 3 years, 4 months ago

To tax rural towns would ask us to pay more for the ski industry tourist to be able to come here,and there is still no public transportation after all of these years for Walden,or South Routt towns,all the way to Radium is this county.What about the rest of us out here?Any plan to get transportation subsidy coming our ways?Asking us to pay for that is way out of line,sorta like taxation without representation. Why not just establish a new district for Walden to Radium,including all populations within ,Maybe some progress could happen to address a transportation issue that would be relevant to us.Everyone is so caught up in the granduer of what Steamboat is about and how to micromanage every detail,no one even thinks of the eastern ,southern,populations.The county is incompletely serviced for locals public transportation in rural towns,that wastes energy , limits access to medical facilitys ,not to have public transportation options.

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hubiem 3 years, 4 months ago

kathy,

i think radium is actually in grand county and i think walden is actually in either jackson county or maybe grand county. not really sure, but i know walden isn't in routt county.

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exduffer 3 years, 4 months ago

In other tourist/convention towns there is a room tax anywhere from 3-10%. In fact Breck just increased theirs to 3.4% Jan.1. Why not do the same here and not penalize everyone when the flights are not flying?

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Scott Wedel 3 years, 4 months ago

The argument presented in the editorial presents false choices. The choices are not between funding $2.5M or no flights to SB.

Pricing is down because demand is also down and there are more empty seats. It would hardly be the end of the world to fund fewer airline seats

It would also appear that the business model for the local marketing district is falling apart because number of rooms under the tax has decreased while number of rooms outside of the tax has greatly increased. So the LMD needs to change their business model. It would appear they have to either focus the benefits of subsidized airline seats only to those reserving rooms covered by the LMD or get the other tourist lodging into the LMD.

Note that this has revealed an inherent conflict in goals between the LMD and Ski Corp's funding of airline seats. LMD needs the revenues of those passengers in their nightly rentals while Ski Corp just wants bodies wherever they happen to be staying. Thus, it would seem that the solution would be Ski Corp funding a portion of all seats while the LMD funds an additional portion of seats filled by people renting rooms covered by the LMD.

Tourism is only part of the local economy. It would be fundamentally wrong to tax all other businesses to subsidy tourism.

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ybul 3 years, 4 months ago

A good hockey player plays where the puck is. A great hockey player plays where the puck is going to be. Wayne Gretzky

It seems to me that the LMD/Ski Corp are playing the game in a reactive mode and not playing to the current economic conditions and more importantly what the world will be in the future. With gas prices heading towards $4/gallon, the macro economic picture is going to cut into the ability of the individual to travel.

I think that when making this decision, one needs to see the end goal of why tax money is being spent. Yes having the airlines here helps many aspects in the community, the question is at what level does it need to exist and would there be a more effective way of putting people in beds to sustain tourism?

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Jesiah Canady 3 years, 4 months ago

I agree with you ybul. I think in many industries over the last few years we have found that reactionary strategy is a failure. Lets call it what it is, subsidization.
Are we really getting those tax dollars back in increased private revenue? Also, are the only people flying into Steamboat staying in a "nightly rental"?

Sounds to me like the LMD has allowed a tax loop hole to continue and now in a not so good economy will find it difficult to find a stop gap measure. Perhaps we should realize that when demand goes down things must be cut. Waste does not make improvement.

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