Snowmass facing Town Hall bill
August 27, 2008
SNOWMASS VILLAGE ” Payments on Snowmass Village’s new Town Hall will nearly double next year as the facility’s permanent financing mechanism kicks into gear.
The $10 million facility (so far, expenditures total $9.8 million, excluding the land) was financed with a Certificate of Participation after voters turned down a bond issue in 2005. After making an interest-only payment of $349,425 in 2008, the payment jumps to $679,425 in 2009.
That will have a significant impact on the town’s general fund, according to town Finance Director Marianne Rakowski. The general fund is the primary source for the COP funding, with some additional monies ” a total of around $2.1 million, to come from the annexation of Cougar Canyon.
“That’s putting a significant drain on the general fund,” Rakowski said about next year’s COP payment.
Town Manager Russell Forrest said that when the COP mechanism was chosen, there was an assumption that Base Village revenues would be coming in by this time. But only a handful of businesses will operate in the developing base area this year, hence the projected squeeze.
Forrest, who was working in Vail when the COP method was chosen, said, “Not many communities do it this way.”
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The more common approach is to float a revenue bond to pay for a capital improvement of this kind. But voters decidedly said “no” to higher taxes to fund Town Hall in 2005, which prompted then-Town Manager Mike Segrest and the council to look for alternative funding methods.
At the time, there was a sense of urgency, as the town feared losing its expansive rental space in the Snowmass Center due to a pending redevelopment. But because of revisions to the center plan, the urgent need hasn’t materialized.
The town was also spending more than $200,000 annually on rent payments and some elected officials, including former Mayor T. Michael Manchester and current Mayor Doug “Merc” Mercatoris, felt it was finally time to stop renting and start buying.
Opponents included citizen (and another former mayor) Jeff Tippett, who felt that, because of the project’s anticipated high costs, the town was better off in the rental market.
The Certificate of Participation operates not unlike a home mortgage with the town’s three-member building authority functioning as the oversight agency.
Rakowski explained it simply: “We own the land. The building authority borrowed money from bond underwriters who were selling certificates. The town makes lease payments that pay the certificates.”
The COP didn’t require voter approval.
“If you had 20-20 hindsight you might have done it differently,” said Carolyn Purvis, a member of the town’s Financial Advisory Board. “At the time, we thought these are reasonable assumptions,” especially the assumption that Base Village would have been farther along in development. In fact the decision to use the COP was made “before crazy stuff with mortgages and the economy” unfolded. “At the time we thought it was doable,” she added.
While sales tax collections for the year are up by 5.59 percent as compared to 2007 – thanks primarily to a strong winter – the summer had a slow start. Still, Rakowski said “we’re still up 2.8 percent over budget” for the year. Figures for July, which is really when high season hits in Snowmass, are due next week.
While 2008 was originally budgeted for a 4 percent increase in sales taxes, that figure has been rebudgeted to 3 percent for the year, according to Rakowski. In 2009, the town could be looking at only a 2 percent increase in sales tax revenues, she said.
“We projected that it would be a tough summer. But it’s not as bad as we thought. We’re very interested in what July will be,” said Russ Forrest.
Long-term, Forrest said it would be preferable to turn the COP into a traditional bond payment but also recognizes “what a tough sell that could be.” Especially since the original vote to take that route fell flatter than a Swedish pancake.
Yet a general fund that gets depleted from a mortgage payment can also put the town into a weakened position. Already, the town has been unable to fill several key maintenance positions because prospective employees are looking at higher paying positions in the county and City of Aspen, Forrest said. Add to that the escalating expenses that municipalities are facing, especially in fuel costs that are up by more than 100 percent over this time last year, plus an anticipated downturn in the tourist economy and the short-term economic forecast looks bleak. In addition, real estate transfer tax revenues that are down by about $200,000 for 2008.
“The challenge for this budget is how do we remain competitive in the labor market” and still fulfill the obligations of the town’s debt service, Forrest said.
Anticipated revenues and expenses for 2008 are in the $13 million range, he said.