Paul W. Menter: Guest Opinion
July 29, 2009
To put the cart before the horse: Cicero may have coined the phrase. In Greek a hysteron proteron, a proverb meaning to put second what should be first. Is the city of Aspen putting the cart before the horse in its Wheeler expansion planning?
Here are two issues of concern:
1. There has been no discussion with the public of council’s intent to reverse its adopted policy of eliminating the 0.5 percent Real Estate Transfer Tax (RETT), by allowing it to lapse upon expiration in 2019. This prevarication threatens the chance for a voter-approved renewal, critical to operating the Wheeler.
2. To my knowledge there is no budgetary forecast demonstrating that the RETT, along with other Wheeler income, will generate sufficient revenue to construct and operate the planned second theater.
The City Council created the Wheeler Endowment through Ordinance 46 of 2002. Council’s intent in this ordinance was clear: Permit the RETT to expire in 2019, and replace it with the endowment as the Wheeler’s primary source of funding …
“WHEREAS it is the … intention of the City Council to have no less than 40 Million Dollars … in principal in the Wheeler Endowment … to secure the long term financing of Wheeler … operations … upon the date that the real estate transfer tax is currently anticipated to expire in the year 2019.”
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Once established the endowment exploded from $6 million to $26 million in six years, fueled by unrestrained, and subsequently unsustainable, growth in Aspen real estate prices and transaction volume. From this point investment earnings alone might allow it to reach its $40 million goal by 2019.
So, why does the current City Council want to change adopted policy and ask the voters to renew the RETT, cash in most of the endowment and build a second theater? Because the endowment cannot succeed. A $40 million endowment with a 5 percent spending policy produces $2 million per year. Even with $1 million in ticket and rental revenue – 33 percent more than was collected in 2008, it will only support a $3 million annual budget. 2009’s adopted operating budget is already $4.2 million. What will it be in 10 years when the RETT expires?
So, with the original plan kaput, does the endowment, combined with the hoped-for RETT voter renewal, make possible a two-theater Wheeler?
A few facts from the city’s audited financials and adopted budgets might help here:
1. From 2001 to 2006, RETT income grew from $2.6 million to $6.6 million. In 2008 it plummeted to $3.1 million, and is unlikely to return to pre-2008 levels soon.
2. From 2001 through 2008, Wheeler operating expenses grew from $1.56 million to $2.91 million, a 12.2 percent annual average. The Wheeler’s $4.2 million 2009 operating budget exceeds anticipated RETT revenues by more than $1 million. How do you fund two theaters when RETT revenues are less than the cost to operate just one?
3. The city spent nearly $2.7 million on capital improvements to the Wheeler since 2001. It’s expensive to maintain old buildings.
4. In 2008 the Wheeler required $2.1 million, or $5,840 per day in RETT tax revenue to subsidize its operations.
So, why is the City Council still considering this project? Perhaps it’s the “Aspen Air of Fiscal Invincibility” rearing its head. Created by five years of unchecked growth in tax revenues, this haughty sentiment continues to influence council policy in the face of a stark new economic reality.
I love the Wheeler: Aspen’s iconic, historic, living center for the performing arts. A second Wheeler would be fine by me. I don’t have a dog in this hunt, but in my opinion, the city’s dog won’t hunt.
City Council needs to put the horse back in front of the cart.
First, admit the adopted city policy of eliminating the RETT was a mistake. Relegating to footnote status their intent to change that policy bites the hand that feeds them. History shows Aspen voters react negatively when their leaders don’t tell the whole story, and once lapsed, the RETT can never be renewed. Douglas Bruce saw to that with TABOR. The Wheeler needs the RETT, second theater or not, and forthrightness dramatically improves the likelihood of renewal.
Second, before moving forward and spending another dime on planners and architects they should show the fiscal prudence to complete a detailed budgetary forecast, so that they can look the voters in the eye with certainty and tell them they can afford to not only build but operate a second theater once it’s finished.
If they can, I will be the first to admit I was wrong.