Steamboat City Council asked to place sales tax question on ballot

Advertisement

— The Steamboat Springs City Council is expected to consider a resolution Tuesday that would put the question of a .25 percent sales tax to support winter airline service before voters in November.

Steamboat Ski and Resort Corp. President Chris Diamond made the case Thursday for the new tax, which he said would allow the resort community to gradually rebuild the capacity of the ski season air program, which has lost 44,340 seats since the winter of 2007-08.

Diamond told about 40 people gathered for the annual summit of the Yampa Valley Airport Authority that the revenue guarantees demanded by airlines to fly direct to Yampa Valley Regional from major hub cities during the four primary months of ski season is rising dramatically while traditional revenues are in decline.

Neither the language of the resolution to put the question to voters, nor any proposed ballot language, was available at City Hall on Thursday.

City Council President Pro Tem Jon Quinn said although he and other council members have attended informational community gatherings about the proposed tax measure, Tuesday night will be the first time the City Council will see the full proposal. He said he expects it to include sunset plan that would, if the tax were approved this year, send it back to voters in five years.

City Finance Director Deb Hinsvark said Thursday that the tax, if approved, will collect 25 cents on every $100 spent. She said it would raise the overall sales tax in Steamboat from 8.4 percent to 8.65 percent and estimated that the new tax would raise $1 million to $1.3 million in its first year.

Although she stepped back from discussing the tax proposal during its formulation, she said she thinks if the question goes to voters it will be straightforward.

Moment of realization

Diamond said he experienced an epiphany right after the Christmas holidays last ski season.

“It was Jan. 4, and we’d had a decent Christmas despite some frigid weather,” Diamond said. “We looked ahead at (reservations) pacing, and we were 6 percent off.

“I’m looking at the broader community and saying, ‘How the hell are we going to come out of this recession?’ It’s not going to be construction. It’s not going to be real estate. And summer is summer — we’re about as full as we can be,” Diamond said.

He said he began meeting with business leaders to look into new sources of revenue and then backed off and turned the project over to the Steamboat Springs Chamber Resort Association.

Historically, Ski Corp. took the full brunt of the revenue guarantees needed to secure ski season airline service while the Chamber solicited donations from member businesses that peaked at about $250,000.

Intent on finding a more secure and productive funding source, the resort community successfully proposed in 2005 the creation of a local marketing district to add a 2 percent lodging tax devoted to the airline program that captures most of the guest lodging district.

Ski area Airline Program Director Janet Fischer told Thursday’s gathering that the marketing district generated close to $1.5 million in its best year, but receipts have dropped 30 percent in the past two years.

Fischer said airline mergers that have reduced competition, reductions in aircraft fleets and the volatility of oil prices have all contributed to increased contract demands by the airlines. And they would never fly to a small leisure market like Steamboat without minimum revenue guarantees because routes into bigger cities that are traveled by business fliers are more lucrative.

YVRA received 118,360 inbound seats in ski season 2010-11, with the maximum cost capped at $2.69 million. The inbound seats were down 14 percent from 138,000 the previous winter, which was down 13 percent from the winter of 2008-09.

Next winter, the airline program hopes to bump inbound seats modestly to 122,700, but the maximum cost the resort must plan for has gone up to $3.35 million.

In a good year, airline revenues will be sufficient that the Fly Steamboat program won’t pay the full $3.35 million, Fischer said, but it still must budget for the larger figure.

She predicted in January 2009, when there were 165,000 inbound airline seats, that the airline program might begin eating into its $1 million reserve fund in 2010-11. However, she said Thursday that United Airlines’ decision last winter to add more seats over and above its contracted amount resulted in a better financial performance than expected for Fly Steamboat, and the reserves haven’t been depleted.

Diamond said the .25 percent tax proposal was calculated to generate similar amounts to the figure Ski Corp. guarantees annually to support the airline program and the amount generated by the local marketing district lodging tax. The new tax would result in roughly one-third, one-third, one-third shares among the community, lodging properties and Ski Corp, he said.

Quinn said that in his mind, should City Council decide either Tuesday or at its lone August meeting on Aug. 2 to send the tax proposal to the voters, it doesn’t necessarily signal its endorsement of the plan.

To reach Tom Ross, call 970-871-4205 or email tross@SteamboatToday.com

Comments

babette dickson 3 years, 2 months ago

How about IF "we" say ok, however ski corp has to make a REAL gesture for the locals.... LOWER our season pass price.... particularly for anyone working in education: Are we skiing Mon thru Fri? Nope. How can we ski and teach from 8 to 3:30? I will vote Yes on this: Only when I see some give back on that nature. If not, I'll vote NO!

0

pitpoodle 3 years, 2 months ago

one question: why should anyone working in education have preference over anyone else? Are you feathering your own nest?

0

sledneck 3 years, 2 months ago

"I'm special... soooo special, I gotta have some of your A- TEN- TION, give it to me.. bump bump bump bum... bump bump bump bum..."

No kidding podle

0

Steve Lewis 3 years, 2 months ago

It is my hope that City Council reconsider the model of this program. Without question this is an artificial inflation of the local economy - an economic bubble. Certainly there are benefits for everyone. But we should recognize the hazards of this bubble going forward. And also recognize the costs to maintain it will grow. And grow.

My main concern is the stability of this bubble. Consider the earlier representations by Chris Diamond that he could burn through the program's reserves in 2011-12 and have severely depleted funds for the subsequent year. That may work for a corporation who measures its life by fiscal quarters, but is unacceptable for the long term stakeholders in this community.

Worse, a corporation such as Ski Corp might time its strategy for this airline program according to the disposition of its significant real estate holdings.

If the tax passes this year, and grows larger, what hazard will we have if it is rejected in 5 years? Will the fund have anticipated that possibility via a tapering of expenditures over several winters, or will it crash in one year, as contemplated now by its current managers?

Simply passing this tax to a ballot is the wrong answer. Without regulatory constraints from City Council that will stabilize and smooth the path of this program, be it upward or downward, I will vote against this subsidy.

0

Scott Wedel 3 years, 2 months ago

Note the key information not mentioned - percentage of seats occupied. As I recall those numbers, they suggested that it was hard to fill additional seats. So while 120,000 might have been mostly occupied, adding capacity would have added a lot more empty seats. That the 44,000 more seats a few years ago carried much less than 44,000 more passengers than flew last year.

Also, immediately after the tax board notes how sales tax on food is regressive and unfair then an increase of that same tax is proposed so that low income families struggling for feed and shelter can further subsidize rich people taking expensive vacations and large resort corporations?

0

bubba 3 years, 2 months ago

Is it still true that lift tickets are not subject to sales tax? I wonder if anyone has done the analysis whether a .25% increase in sales tax would raise more money than ending that exemption?

Our tax policy always seems so focused on sticking it to tourists to pay for niceties for the locals, but it seems the biggest draw for tourists is somehow exempt from sales tax, while necessities (like groceries) are not.

Maybe there's a reason that this makes sense, but it's never been apparent to me what that reason is.

0

bellyup 3 years, 2 months ago

When you buy a lift ticket, you are paying for services. Off the top of my head, I can't think of any other services that have sales tax.

0

addlip2U 3 years, 2 months ago

Unless all City residents have guaranteed access to the "special airfares" offered by Steamboat Central Reservations to those who purchase a vacation package, I'll vote NO!
The idea that residents and their guests have to purchase a vacation package to book the "special airfares" offered by Steamboat Central Reservations has got to change if Ski Corp (owner of Steamboat Central Reservations) expects a sales tax to be approved by the voters.

0

bubba 3 years, 2 months ago

Actually, bellyup, that does make sense (sort of).

I really don't know why they would bother putting this on the ballot though - I really don't believe there is a chance that it would pass, not just because it's a tax to support private businesses, but for the reasons that addlip2u stated as well.

0

ybul 3 years, 2 months ago

--The idea that residents and their guests have to purchase a vacation package to book the "special airfares" offered by Steamboat Central Reservations has got to change if Ski Corp (owner of Steamboat Central Reservations) expects a sales tax to be approved by the voters.--

^^^^ This ^^^^ Always wonder why friends can stay in a condo with tickets for a weekend for less than staying with us, makes no sense. But then neither does passing this tax to support an ever increasing subsidy.

0

housepoor 3 years, 2 months ago

Why not make this $$ dedicated to year round air service? It could be valuable in attracting the next goose(as opposed to the passé baby boomer seeking a 2nd home) to lay its golden eggs in the yampa valley ………”the location neutral professional”………

0

Scott Wedel 3 years, 2 months ago

The whole problem is when it is private sector money from Ski Corp then it is going to be focused on being repaid from the customers it attracts into it's vacation packages.

But if it were to become largely publicly funded subsidy then the public will expect it be operated for "public benefit". And that becomes a purely political game of the presumed group of people that it is supposed to help. And it becomes much more likely to be poorly managed because it is other people's money to those that are spending it.

The deep challenge facing the air subsidy program is that 10,000 more seats does not mean 10,000 more tourists or even 10,000 occupied seats. That the flight program is promising the airlines that a certain number of seats will be occupied. So when the program gets fewer seats then it costs much less because natural market forces can fill those seats. But all guaranteed seats above that cost more and more because they are more and more likely to be unoccupied.

If the program is for location neutral businesses then Chamber should create a program where businesses or people commit to some number of airline trips and thus get discounted prices. Unfortunately for local businesses, it is just not sensible to have year round flights to anywhere other than Denver to connecting flights. Which means it will always be an option to drive to Denver to have more convenient options for more flights including discount airlines.

Personally, I think City should limit itself to matching $2 or $3 of private sector airline subsidy money per dollar of public funds. So if Ski Corp and Chamber programs are willing to invest $3 mill then it is reasonable for City to match with $1 and hence the sales tax. But if it is $1M sales tax revenue for the City to have a major influence in the airline subsidy program then it'll be a complete waste of money.

0

Scott Wedel 3 years, 2 months ago

BTW, anyone ever notice how far the City is willing to go for a couple hundred jobs along with matching support from the Pilot, but when a similar number of jobs is threatened in the local MMJ businesses then they become silent on supporting local job creation. And those local businesses are so highly regulated that a tourist is unlikely to ever be aware of any of the MMJ business locations.

0

Steve Lewis 3 years, 2 months ago

In today's NYTimes: "24 Small Towns May Lose Air Service - Delta Air Lines says half-full planes and the high cost of fuel are leading it to reduce service to rural America."

http://www.nytimes.com/2011/07/19/business/economy/24-small-towns-may-lose-airline-service.html?_r=1&nl=todaysheadlines&emc=tha25

0

Scott Wedel 3 years, 2 months ago

Steve, But the airports in the article have about 10,000 annual passengers. SB has over 100,000. The only relevance of the article to SB is that flying empty planes is too expensive.

One could extrapolate from the article that SB's air subsidy program of providing direct flights from major cities is going to face ever increasing costs.

0

Requires free registration

Posting comments requires a free account and verification.