This story first appeared in The Outsider, the premium outdoor newsletter by Jason Blevins.
In it, he covers the industry from the inside out, plus the fun side of being outdoors in our beautiful state.
After a billionaire went on a spending spree in downtown Crested Butte — and hordes of out-of-towners bought homes in the pandemic’s urban exodus — the end-of-the-road village of roughly 1,400 has spent close to $7 million on land acquisitions, easements, a B&B for workers and a transition to all-electric cars and vehicles.
That’s all thanks to Crested Butte’s real estate transfer tax, which collects 3% from every property transaction for open space and capital projects, including affordable housing. That tax harvest — fueled by an unprecedented real estate boom — climbed 80% in 2020 over 2019 and 90% in 2021 over 2020.
For the 12 mountain communities where voters approved real estate transfer taxes in the 1970s and 1980s — known as RETTs — before the passage of the 1992 Colorado Taxpayer’s Bill of Rights — or TABOR — the recent swell of home buying has filled real estate transfer tax coffers to record levels.
In 2020 and 2021, as the mountain real estate market exploded, RETT collections in 10 of the 12 communities — Aspen, Avon, Breckenridge, Crested Butte, Frisco, Gypsum, Snowmass Village, Telluride, Vail and Winter Park — climbed to an all-time high of $178 million. That’s an 84% increase from collections in 2018 and 2019, when collections reached $96 million.
Those real estate transfer tax funds, which collect 1% to 3% on every property sale, collapsed in 2009 as the recession rattled mountain real estate. Town budget writers have been keenly aware of the roller-coaster ride that defines the high country real estate market, but since 2012 or so, those 12 towns have seen steadily increasing home prices and sales resulting in slow-and-steady bumps in annual RETT collections.
Slow-and-steady became a firehose of funds in 2020 and 2021. Coffers for open space acquisitions, affordable housing, capital funds and special projects have never been fuller for these 12 towns. Still, towns are budgeting the flow of RETT very conservatively and municipal leaders rarely set goals based on what usually is a short-term surge in property values and home sales.
Already RETT revenues are falling in 2022 as the high country real estate market settles from its exceptionally frothy run in 2020 and 2021.
In Crested Butte, for example, RETT collections through June are down 23% compared to the same stretch in 2021, reflecting the fickle nature of the tax anchored in unpredictable market trends.
Crested Butte has recently spent $4.3 million in RETT funds for land acquisitions, $750,000 for an easement and $2.3 million for the Ruby B&B for worker housing. The bump in 2020 and 2021 also “provided a level of budget comfort” as the town transitions to all-electric vehicles and equipment, said town manager Dara MacDonald.
“So, yes, we budget conservatively for RETT because it can fluctuate so substantially,” MacDonald said. “And then we are pleasantly surprised if we have a strong year allowing us to invest in one-time large expenditures or set money aside for when revenues decline again in the future.”
TABOR does not allow communities to raise RETT collections or create a new RETT. So there have been no communities approving taxes on property sales since 1992. In 2017, state lawmakers proposed an amendment to the state constitution that would drop the prohibition on new real estate transfer taxes to create a fund for affordable housing. The proposed 0.1% transfer tax could have raised $58 million a year, according to legislative analysts who studied the plan before the 2020 real estate boom. The proposal never made it out of committee.
The overflowing RETT coffers coincide with a flood of sales tax revenue for Colorado’s mountain towns.
The 2021-22 winter was the best ever for ski resort operators, with record traffic and peaking profits.
It was pretty good for ski towns, too. Visitors and locals spent $4.75 billion from November 2021 through April in 18 Colorado mountain towns, a 55% increase from the same span in 2018-19.
Spending in the 18 towns near ski areas — Aspen, Avon, Breckenridge, Crested Butte, Durango, Frisco, Glenwood Springs, Mountain Village, Mount Crested Butte, Pagosa Springs, Salida, Silverthorne, Silverton, Snowmass Village, Steamboat Springs, Telluride, Vail and Winter Park — hit an all-time high during the 2021-22 ski season. All the towns have seen consistent winter-over-winter increases in net taxable sales in recent years, but the ski-town spending spike last winter was extraordinary.
Tax harvests have been growing for all Colorado municipalities since 2018, when a U.S. Supreme Court decision allowed states to collect sales tax on internet purchases. And online shopping boomed in the pandemic.
Still, the spending in ski towns is outpacing the statewide increase. From 2018 through 2021, taxable sales in Colorado climbed 26%. In that same span in the 18 ski towns, wintertime taxable sales increased more than twice as much as the state.
Ski town sales tax coffers are swelling. Municipal leaders will tell you so is the demand on their services, infrastructure and workforce housing.
In November 2021, Aspen voters expanded the use of RETT beyond the Wheeler Opera House and allowed the tax revenue to support arts organizations, artists and the Red Brick Center for the Arts. Aspen also directs RETT revenue to affordable housing and the city is finishing 79 new affordable housing units that will open next year. The city’s new 280-unit, $390 million Lumberyard housing project is set to break ground in 2026, thanks in part to RETT funds.
Sara Ott, Aspen’s city manager, said she’s proud her city council continues to direct RETT funds into affordable housing. And she knows her city is the envy of many other mountain communities that wish they had piles of real estate tax revenue to add worker housing.
“The pressure to support a diverse population base, workforce needs, and create community is enormous in this escalation of free-market residential housing prices,” Ott said. “The state legislature owes our Colorado communities a real debate on the merits of revisiting the RETT limitation in the state constitution. Local communities should have the ability to self-determine if a RETT is appropriate for their needs.”
No one is betting the sales tax and RETT surges are sustainable. Things are slowing down. The high country real estate market is finally settling after two years of frenzied buying and selling. Retailers are seeing stuff sell a bit more slowly. Same for lodge keepers, who are seeing a slight slowdown in occupancy after record gains in the past year as demand for mountain holidays boomed.
Destimetrics, which tracks lodging in 17 mountain destinations in seven Western states, shows lodging reservations through the summer are down while lodge owner revenues are up 29% versus the pre-pandemic summer of 2019. For the 2022-23 winter through January, reservations are down 3% while room rates are up 35% compared to the same months in 2019-20.
Towns across the high country are reporting similar trends, with fewer visitors spending more on their holidays, which is keeping sales tax collections robust while not stressing under-staffed restaurants and hotels like the summer of 2021.
“Many lodging properties are still struggling with adequate staffing issues so having fewer guests while still maintaining impressive bottom-line revenue makes it possible for lodging properties to do a better job servicing their facilities with fewer employees,” said Tom Foley with Destimetrics in a statement outlining the latest occupancy numbers in August.