Highlands lots sell, but city slow to collect

The city of Aspen is apparently losing millions of dollars in revenue as buyers snap up residential properties at the base of Aspen Highlands before the lots are annexed to the city.

Some $4 million or more that could be collected through Aspen’s real estate transfer tax may be lost before the city completes the annexation of Highlands Village at the base of the ski area, according to estimates.

The city has taken the initial steps toward annexation of the roughly 83 acres of terrain at the base of Highlands, and may finish the process as soon as April 10. The village includes 31 free-market lots, 32 townhouses, 73 time-share condos, 38 affordable housing dorm units, and 84 affordable housing condos and townhouses.

On March 13, the Aspen City Council passed a resolution establishing city jurisdiction over the annexation, and a March 27 public hearing will be the first reading of the actual annexation ordinance, said City Attorney John Worcester this week.

At that hearing, the public will have its first opportunity to comment on the proposed annexation, and Worcester and City Finance Director Tabatha Miller will lay out the financial implications of the annexation.

But for every day that goes by while the annexation process goes forward, officials believe, the city is losing money. The lots and as-yet-unbuilt townhomes and condos in Highlands Village are selling at a brisk clip so that the buyers can avoid paying the city’s real estate transfer taxes. The RETT revenues go toward operation of the Wheeler Opera House and into the city’s housing/day-care fund.

According to very tentative estimates by the city’s finance department, the city could still collect some $2 million in RETT revenues from the first round of sales, once annexation is complete.

But, said Miller, those estimates are in no way exact. A sudden rush of sales at Highlands Village before the property is annexed could mean the RETT revenues will be far less than $2 million, she said.

In any event, Miller said she estimates the city will receive RETT revenues from the initial sale of only about 35 percent of the free-market properties. The affordable housing properties, which are sold at far lower prices than free-market homes, yield relatively low RETT revenues.

That means the city is not getting the benefit of revenues from roughly two-thirds of the sales at Highlands, which according to Miller’s estimates, could reach as high as $4 million in RETT receipts.

The city has been unable to proceed with the annexation process sooner for a number of legal reasons, according to Worcester. He said the city could not start the process until after the Highlands Village lands had been subdivided by the county, which did not get final approval until early 1998. After that, the city had to initiate a series of land surveys to establish the legal sequence of annexation of the properties involved.

Worcester said it was not until August 1999 that the city was able to formally start the annexation process, by sending out letters to a far-flung set of property owners for their agreement to the annexation.

In the meantime, developer Gerald Hines began selling off properties to eager buyers.

City officials had no idea how many properties have been sold, but predicted that the sales will continue while the city completes the final details of the annexation process.