Steamboat City Council asked to place sales tax question on ballot
July 15, 2011
Steamboat Springs — 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