Aspen sales tax revenue: Some sectors up, some down
Tax revenue for Aspen in 2024 has so far been a mixed bag, according to the latest numbers.
According to data presented during an Aspen City Council work session Monday, taxable sales through April showed an overall 6% increase compared to 2023, driven by notable gains in the luxury goods and clothing sectors, which saw jumps of 101% and 24%, respectively.
Tax revenue for sporting goods and construction, however, declined by 5% and 13% compared to last year, respectively.
A closer look at the projected sales for 2024 indicates tempered optimism, with a 3% increase expected for the year, slightly surpassing budget expectations. This translates to an extra $400,000 in tax revenue, totaling $30 million, and benefiting various community projects.
Sales tax projections for 2025 also show steady growth, with an expected 2% increase, bringing the annual total to $30.8 million. Dedicated funds for parks, transportation, affordable housing, and education are set to rise.
Meanwhile, the short-term rental tax (STR) for the first 12 months has been realized. Aspen Finance Director Pete Strecker said that this was a new source that was started in May of 2023.
Since then, the city has imposed a 5% STR on owner-occupied or lodge-exempt permitted properties or a 10% STF on investment/second homeowner “classic” permitted properties.
“After the first 12 months, we basically collected $6.8 million,” he said. “The majority of this goes to the affordable housing program, which is about $4.8 million. The remaining two efforts, capital infrastructure and environmental initiatives, received the remaining $2 million.”
Strecker said short-term rental investments dropped by 10% this year compared to last.
“The rationale for that reduction was from seeing a small drop in permits once the tax went into place,” he said. “The larger impact was because the long-term rental activity for those properties went up significantly.”
City Councilmember Ward Hauenstein asked how can the city tell from that STR report if they are making any gains on housing for locals. Strecker said that the STR community is not obligated to share its data with the city.
Mayor Torre said he does not have much excitement around those numbers.
“I do not think we have impacted long-term residential housing for locals,” he said. “Just talking with anyone who is doing rentals, the long-term rental rates being charged are serving, if it is locals and not vacationers staying longer, a very small niche of locals.”
Torre said that he has been wanting to talk with City Council about reviewing the STR permit program.
“I want to be sure the STR permit program is being effective in other areas,” said Torre. “I want to make sure it’s being effective in other areas. I just do not think we’re getting those long-term local rentals in that sense and certainly not in the affordable category.”
He added, “This data is only for one year, so I am interested in learning more. I do not need to jump to this now but I think as we get more information, either this council or a future council, should revisit the STR permits to see if our quotas and caps are in the right place.”
Lodging taxes present a more nuanced picture. While the average daily rate increased by 1%, occupancy dipped by 7%. Traditional lodging venues performed well with a 9% increase in taxable sales, whereas short-term rentals saw a 5% decline.
Strecker said that some of this data is inconsistent due to the ski season ending and now having higher lodging availability in the off-season. He said that like the STR tax, the majority of the lodging tax is used for affordable housing, with the rest going to capital infrastructure and environmental initiatives.
The real estate transfer tax (RETT) market experienced a 40% rise in transactions but a slight decrease in total cash value, reflecting a 29% drop in average transaction value. Despite this, actual tax receipts remained stable, suggesting a potential revision of RETT expectations is warranted.
Investment portfolios have performed well, with $375 million invested and an average annual return of around 4%, generating $5.7 million in income. Corporate bonds and municipal bonds make up a significant portion of these investments, indicating a cautious yet strategic approach.
Hauenstein showed concern with having such a large portion of funds wrapped up in investments but Strecker said the returns have been able to cover 25% of some program funding for the year.
Looking ahead to 2025, the city plans to implement a total compensation philosophy to maintain its competitive edge in the labor market. Health insurance premiums will see adjustments, maintaining $0 premiums for employee-only plans while increasing cost-sharing on other tiers. Merit increases are recommended to be up to 5%, aligning with local and regional competitive benchmarks.
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