Tuesday, December 10, 2019

Poor Little Rich Town, Part 2

It Ain’t Easy (being rich and pretty)

By Dawne Belloise

Throughout Crested Butte’s long history and metamorphosis from a mining town to a ski resort, businesses have always come and gone. But recently there seems to be a rash of closings and a migration of residents to more affordable towns where home ownership is realistically attainable. Many feel it’s not the locals who are going to have a say in this town’s future and development—it’s the big money. 

Crested Butte cannot be a town of tourism-based economics if the shops, galleries and restaurants that contribute to its attractive character—and are major players in bringing in tourists and return visitors—cannot financially survive. 

The two main reasons for local business closings, cited by affected businesses, are the escalating cost of space and lack of a consistent workforce. It boils down to the town’s declining residential housing for lower-income workers and commercial building stock being driven up in value by buyers willing to pay the high sales price. Investors and wanna-be-Buttians who buy property at escalating market prices have driven up the accompanying property taxes while depleting the housing stock for locals who make a living in the tourist industry. This not only increases taxes; it affects costs across the board, from new construction to roof shovelers to the price of a meal at your favorite local eatery and, more notably, raises the total cost of a lease. 

Landlords say they are in a tough spot and find they must increase rates, both commercially and residentially, to keep up with the ever-increasing property taxes and other expenses associated with owning property in a resort town. 

The difficulties of being a landlord are straightforward and most say they try to work with their tenants. Every landlord dreads empty spaces. But they’re often caught in the riptide of higher expenses, treading the rising property taxes, dealing with expensive maintenance and repairs, and sometimes handling tenants who can’t keep up with their rent on time or at all, leaving the landlord to fully cover all their overhead.

Jos Rijks, who with his wife, Teresa, has owned Rijks Family Gallery since 1993, feels landlords are stuck between the proverbial rock and a hard place, especially with rising taxes. “People feel that art framing is already expensive—are you going to keep increasing your prices because the taxes are escalating?,” Rijks wonders. 

The Rijks have rented out a section of their store to Valerie Jaquith, who has a thriving soap and body product business, Colorado Real Soap Company, but couldn’t find an affordable commercial retail space in town. The Rijks stepped up in a win-win situation for both businesses, but Jos also warns, “If it comes to the point where we feel our business is not financially worthwhile, why keep working? We’ll simply close the business.”

Because of state laws, commercial property is hit with a sledgehammer when it comes to property taxes. The Gallagher amendment essentially dictates that any tax increase will hit commercial property roughly four times higher than residential. 

On the residential side of things, the county bases property valuations for taxes on property sales; in other words, market value, and as most people understand, market value is high right now. 

In Crested Butte, the average single-family home to date this year sold for well over a million dollars, compared to the 2013 average price of $913,000, and the 2014 price of $1 million. In 2015, prices of single-family houses in town dropped to an average $803,400, while they rose from $1.2 million in 2016, to $1.35 million in 2017, and to $1.3 million in 2018. Two months ago, a single-family residence on Ninth Street sold for $4.46 million, the highest price ever paid in town for a single-family residence. The next county property reassessment, which happens every two years, will reflect these current sales and taxes will most likely continue to rise. 

It is obvious that a middle class working family will not easily be able to afford a free-market house in town. Even deed-restricted affordable units being sold in Crested Butte that might be appropriate for a young growing family can be expensive, costing between about $200,000 to more than $400,000, depending on size and incomes. 

The world, weather and parking all play a role

Businesses now have had to reinvent themselves, expand product or share space to stay afloat. “There’s constant competition from the internet,” says Kim Raines, owner of Mountain Colors, a paint, lighting, supplies, sundries and hardware fixture store. “If I just sold paint I probably wouldn’t be in business. I need multiple things.” 

Raines’ advice to other businesses: “Make sure that 100 percent of your sales aren’t in the valley. I make sure that whatever I’m selling can be sold to other places as well.” Ninety percent of her product is sold out of her store but she also ships her products to second homeowners’ primary homes in other states, notably Texas. Instead of ordering off Amazon, Raines’ clientele have a good business relationship with her, trust her consultation and prefer working with a human who will personalize their experience. 

“It’s not easy to own a business anywhere, but everything seems to be harder in Crested Butte,” Raines says. “Just the day-to-day things, like going to work, are exacerbated by the harshness of winter—tunneling out of your house through deep snow, shoveling your car, blizzard conditions—but these are the circumstances that also keep the hardy in the community and drive out the fair-weather Buttians.”

Businesswoman Kyleena Falzone doesn’t plan on relocating anytime soon. She and her partners own two successful restaurants, the Secret Stash and Bonez, which are doing well but she talks of the challenging costs put on businesses and property owners by the town and county. 

Falzone feels that the town’s parking fees are a barrier to any new entrepreneur who wants to start a business in town. The town charges $13,000 per 100 square feet of commercial space, a one-time charge for businesses that are not grandfathered in, or change the use of the building, which impacts downtown parking. Restaurants and bars impact parking more than a retail shop or office space so, for example, if a retail or office space converts into a restaurant or bar, they would be assessed a fee in lieu of providing parking spaces on their own property, as many of the downtown buildings don’t have the lot space for a parking area. 

Falzone feels those fees are exorbitant and adds, “The town is collecting sales tax on our customers, our business and then they’re charging us parking fees? It’s the most ludicrous thing I’ve ever seen in my life.” 

According to town records, when the Secret Stash (the Company Store building) was converted from several small retail shops and Paradise Café, some of the square footage was already grandfathered for a restaurant but most of the space was assessed the in-lieu-of-parking fee, which totaled $143,000. Bonez was also required to pay the in-lieu-of-parking fee for their outside patio. “Do you know how much money you have to generate to have a profit? It’s a crazy expense for us,” Falzone points out. 

When the Public House converted from retail and office space and expanded their square footage into their basement for a restaurant-bar, they also were assessed the parking fees to the tune of $156,000. They also created three hotel rooms upstairs but had those parking spaces in the back of their lot. 

Falzone says she wouldn’t mind paying those parking fees if the town used them solely to create more affordable housing. The town designates those fees to purchase more parking areas, which come at a premium price for the town with real estate prices soaring. 

Falzone feels strongly that the number one issue for local businesses is employee housing but agrees there also have to be tax breaks on both property and sales taxes, “or we’re going to have a massive problem where nobody lives here and more businesses close.” 

Bonez and Secret Stash employ 165 workers, some of whom have been living out of their cars, vans and, if lucky, an RV. Falzone and her partners bought into the affordable employee housing recently offered to business owners by the town this year because, Falzone says, “I’m compassionate about our workers. We have employees who are living out of vans. What kind of a life is that for them?” 

Falzone also worries, “What happens if we go into another recession? Investors buy up the buildings and hold on to them, depriving locals of business opportunities and property ownership in their own town. I don’t want to see our employees leave or businesses close anymore. I’ve thought about moving my business somewhere else, but I don’t want to leave. This is my community.” 

Franchise protection

Currently, Crested Butte needn’t worry about franchises arriving and opening shop in retail spaces that are available or unaffordable to local businesses on Elk Avenue. The Town Council progressively took the initiative in approving an ordinance last year that limited where formula businesses, or franchises, could be located in town. They cited the threat to Crested Butte’s distinctive character and aesthetics, historical relevance and economic vitality by the “homogenizing effect.” It was forward-thinking and a step in the right direction.

The best plans we can develop will focus on keeping our community intact. More changes are going to come—it’s already happening at a rapid pace but we can find viable and creative solutions to enable affordability for primary residents and businesses when townspeople, workers, business owners, landlords and government officials collaborate and try to create feasible solutions together as a community. More on that next week.

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