City sets aside $10m for its RETT lawsuit
Aspen will set aside $10 million in real estate transfer tax revenues and half of all future funds it collects from the taxes until a lawsuit challenging the taxes is resolved.
The moves will have a significant impact on the amount of money available to fund future affordable housing projects, but the planned Truscott Place housing expansion can proceed, City Manager Steve Barwick assured the City Council Wednesday. Planning work for other housing projects, including Burlingame Village and Aspen Mass, can also go forward, he said.
“The main question is, can we continue those things right now and the answer is, `yes we can,’ but with conditions,” Barwick said.
Barwick and the city’s finance department have been crunching numbers since the filing of a lawsuit this month that calls into question the city’s method of calculating real estate transfer taxes, assessed when properties are sold. The city has a 0.5 percent RETT dedicated to the Wheeler Opera House and a 1 percent RETT that funds affordable housing.
The lawsuit claims the city improperly assesses the taxes based on both the value of the land and improvements on it. The language of the RETT ordinances only allows the city to apply the taxes to the value of the land, according to the suit.
The $10 million – a portion of the RETT revenues the city has in its coffers now – is the amount the staff believes is necessary to cover claims the city could face if it loses the lawsuit and must make refunds, according to Barwick. He declined to comment on how many years’ worth of transactions the city believes it may be held liable for if it loses the suit.
The city will continue to collect its RETTs based on the value of both the land and improvements when real estate changes hands, but 50 percent of the revenues will be set aside to pay claims in the event the city loses the suit, Barwick said.
“We’re just taking it out of our revenue stream,” he said. “For now, what we need to do is start reserving those revenues as they come in.”
Of the $10 million, $6.6 million is money collected from the housing RETT. The remainder comes from the Wheeler tax and essentially represents the Wheeler’s current budget balance, according to Barwick.
“It may have some impact on this year’s capital construction at the opera house,” he said. A $375,000 upgrade to the heating, ventilation and air conditioning systems is under way at the Wheeler.
Staffers have not fully analyzed the impact of the cutback in available funding at the Wheeler, as they have been scrambling to assess the implications of the curtailed funding to the housing program, Barwick said.
Especially pressing is the impact of the lawsuit on the Truscott project, which is slated to begin this spring. “Our recommendation is continue full steam ahead with Truscott, and we believe you can continue planning for the other projects, too,” he said.
In its most recent discussion on financing Truscott, the council contemplated using day-care revenues generated by a housing/day-care sales tax to subsidize 10 bedrooms at Truscott that would be set aside for employees of local day-care providers. In addition, the council agreed to look to the private sector to subsidize an additional 16 bedrooms.
If those bedrooms can be financed as planned, the city can build Truscott and still maintain a positive cash balance, Barwick said. If those subsidies fall through, the city will see a shortage of funds in 2002 and 2003, he said.
To cover that shortfall, Barwick suggested the city consider asking the voters to authorize some short-term borrowing. The city already plans to ask voters in May for permission to seek bonding for Truscott, to be paid with rental income from the new units.
If the city really runs into trouble, Barwick said, it can proceed with the Truscott expansion in phases. Reconstruction of the intersection at Highway 82 that serves as the entrance to Truscott and the municipal golf course can proceed this spring as planned, he said. The city can also build the first half of the 99 new units planned at Truscott without difficulty, Barwick said.
The projected cost of the Truscott expansion is $29.4 million. Planned in conjunction with construction of the new rental housing are improvements to the golf course, a new clubhouse/restaurant, new tennis courts and the intersection improvements. The total price tag is an estimated $33.6 million.
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I try to remember to give thanks every day I spend outside, whether it be floating the Colorado or Roaring Fork, fishing an epic dry fly hatch on the Fryingpan, or teasing up tiny brook trout on a remote lake or stream. We’re spoiled rotten here, so it’s easy to be thankful.