Wheeler real estate transfer tax repurposing a balancing act | AspenTimes.com

Wheeler real estate transfer tax repurposing a balancing act

Aspen City Council agrees to take conservative road in reserve levels if new tax revenue is diverted to another community use

People walk by the still shuttered Wheeler Opera House as the restoration project continues on a spring day in downtown Aspen on Tuesday, April 20, 2021. (Kelsey Brunner/The Aspen Times)

As Aspen City Council members begin to consider asking voters to repurpose Real Estate Transfer Tax revenue away from the Wheeler Opera House for another community use, they told staff Tuesday that they want to be as conservative as possible in keeping high enough reserve funds to support the historic building and its cultural programming.

City financiers presented a few reserve fund options for council to consider during Tuesday’s work session so they can begin modeling scenarios on what percentage of future revenues of the transfer tax could be repurposed without dipping below the agreed upon threshold.

“I would err on the extremely conservative side,” Councilwoman Ann Mullins said, adding that she supports 100% of annual expenditures, or a $7.6 million flat reserve amount. “I think that it’s a threshold that the community is comfortable with too because I think that if we propose too drastic of a decrease in the fund or in the revenues used, I’m not sure that will sit well with the community.”

The city’s current financial policies for the Wheeler require a minimum of 25% of annual budget authority, or about $2 million.

The idea of repurposing Wheeler RETT funds has been discussed by various councils over the span of decades, and has been a more consistent conversation in recent years.

That’s because the Wheeler fund has grown to well over $32 million, thanks to the active real estate market, particularly in the past year.

The RETT generated $8.4 million in 2019 and in 2020, it jumped to $17.6 million.

The Wheeler gets 0.5% of that tax revenue, based on a 1979 vote of Aspen residents.

The ordinance from that vote says only $100,000 from the RETT can be used for arts grants each year, otherwise the money is dedicated to the Wheeler.

Voters have affirmed the tax twice, as it has a periodic sunset provision every 20 years. The most recent extension provided approval of the tax through December 2039.

Those renewals have been focused on extending the tax, and have not considered adjusting its allowable uses, according to City Finance Director Pete Strecker.

With the fund balance continuing to escalate, the opportunity exists for future collections to be redirected for another yet-to-be-determined community purpose.

There are emerging needs that the community may want to fund, whether it’s subsidized child care, replacing an aging storm water system, mental health programs, or increasing funding for arts and cultural organizations, to name a few.

Council directed staff in February to explore and present opportunities on how to leverage future tax collections for other community benefits.

The Wheeler’s $32 million could cover the annual costs of operating the opera house five times over with no revenue coming in.

City staff anticipates $10 million will be needed for capital expenditures over the next 10 years. They also project that subsidy levels over the next 10 years average at $4 million annually.

Council is expected to discuss in May what other purposes or programs should be funded.

Voters would have to approve such a repurposing, and a ballot question could be ready as early as November if council agrees, according to City Manager Sara Ott.

The ballot question would likely ask for an expiration date for the expanded use of the 0.5% tax, or a portion of it, so the community can evaluate the benefits of whatever program is funded.

Council members agreed Tuesday that any expanded use of Wheeler RETT revenue should last between five and eight years, and then ask voters whether to continue it.

At times, council members talked in circles or showed frustration in understanding what the impact of their decision would be regarding threshold reserve levels, or drawing down the Wheeler fund.

They left it to staff to sort out and come back with various options and show how they would affect the fund.

Mayor Torre said this is just the beginning of a long, complicated process.

“This isn’t going to get easier but it can get clearer, so I think the check-in that we’ve had today really speaks about where this council is, the concern we have with the Wheeler fund and going too low and we want to know more about what that looks like as we take it through into the future, and I think this is a good step forward,” he said. “This is a conversation that has been percolating in the community for a while and we are starting that conversation.”