The Basalt Town Council voted 6-0 Tuesday night to approve a tax subsidy to help the Willits Town Center developer build a hotel.
The only question is whether future customers of the hotel or town residents will pay for the subsidy.
The council agreed to send a question to the ballot in November that will ask town voters to approve an additional 2 percent lodging tax. If approved, Mariner Real Estate Management, owner of Willits Town Center, would get to use the revenues generated by its 113-room hotel for 10 years to offset its construction costs.
If the ballot question fails, the council agreed that it would give Mariner a $500,000 lump sum payment out of the town’s general fund in 2015 as a tax subsidy. The reasoning was the hotel would boost sales tax revenues and economic vitality of the town.
The assumption is voters would rather have hotel guests subsidizing the hotel than town taxpayers.
“I think voters are smart enough to pass a tax so it isn’t coming out of their pockets,” said Councilman Rob Leavitt.
Mayor Jacque Whitsitt raised the only concerns among the council about the proposal. She said it feels “a little bit like blackmail” to tell voters the tax subsidy will come out of the town’s coffers if the lodging tax increase isn’t approved.
“That doesn’t pass the stink test to me,” Whitsitt said. She said she would prefer working to get the 2 percent lodging tax approved without a connection to the town’s general tax subsidy.
“This is a hot topic,” said Bruce Kimmell, the town’s consultant on public finance issues, referring to the subsidy. He said the town has provided subsidies “time and time again” through fee waivers or other concessions. Most of those cases involved nonprofit entities.
Basalt has an existing 2 percent lodging tax. The revenues go to the town government coffers to market Basalt and provide other benefits. The existing revenues aren’t subject to the subsidy.
If a new 2 percent lodging tax is approved, other lodge operators could use it to improve their properties. The Green Drake owners, for example, are currently upgrading their downtown hotel. The owners will be able to apply to use revenues their hotel generates to offset their investment, if the new tax is passed.
There are also important caveats tied to any tax subsidy that Mariner receives. Mariner must start construction of a 50-unit affordable housing project by the time the hotel is completed or it won’t be eligible to receive any subsidy. It is anticipated that the hotel will be completed by spring 2015.
Mariner must also come to an agreement that provides dedicated parking for public transit to earn the subsidy, though the deadline was vague.
The hotel issue generated about eight comments from members of the public attending the council meeting. Most speakers were in favor of the proposal.
Cole Sjoholm, the chairman of Basalt Chamber of Commerce’s board of directors, said the return on investment for the community will far outweigh the tax subsidy. “We need to get going on this. The time is now,” he said.
But audience member Adam Fink said the time isn’t right if the hotel requires a public subsidy to make it work for the developers. He urged the council to wait until there was enough market demand that an operator would proposed a deal to Mariner that didn’t require a subsidy.
“This is a great state of affairs for a developer,” Fink said. It’s not so great for the community, he added.
Council members were clearly pleased with the proposal. Councilman Rick Stevens said there has never been a development proposal in the Roaring Fork Valley that resolves issues with a hotel, parking and affordable housing.
Councilman Herschel Ross said he liked how Mariner wouldn’t receive proceeds from the lodging tax or the town’s general fund if it didn’t start construction of the required affordable housing.
“That is definitely holding their feet to the fire,” Ross said. “I sure feel better than when I started the day.”
Whitsitt also got over her reservations about the proposed ballot question being “blackmail.”
“There was no commitment to the affordable housing (before). There is now,” she said.
Town Assistant Manager Judi Tippetts and Kimmel hammered out the proposal with Mariner’s development team.
It was approved by Whitsitt, Leavitt, Stevens, Ross and councilmen Mark Kittle and Glenn Rappaport. Councilwoman Karin Teague wasn’t able to attend the meeting.