Tuesday, September 22, 2020

Poor Little Rich Town: Part 3

The more things change, the more they stay the same, or, I’m not from here, I just live here

By Dawne Belloise

Crested Butte was founded in 1880 as a coal mining town, having been a supply point for prospectors in the 1870s. In the mid 1950s, as the mines closed and the railroad tracks were pulled up, the town began losing its long-time families and the face of Crested Butte began to change.

When Dick Eflin and Fred Rice saw the opportunity to create a ski resort on the mountain in 1960, ski bums and hippies began arriving with new lifestyles and free-thinking concepts. They weren’t always accepted or appreciated by some of the old-time mining families, who liked their close-knit community and way of life that had been going on for almost a century.

Hippies were a strange, undisciplined wild breed, but some of them had a vision. Life without a mine was just fine for them and they organized and rallied the posse of new residents and won big in the local elections, essentially taking over the town. Then they proceeded to change everything, from the dusty streets to the ramshackle buildings and homes, eventually making Crested Butte the artsy and desirable resort town that seemingly everyone now wants to live in.

This is essentially what is once again causing the issues surrounding the rising costs and the changing times and demographics of Crested Butte.

There are potential and partial solutions to these issues, some of which have been discussed at some level of local government, and some that have been acted upon, such as the push for affordable local housing and the taxation and special fees to short-term rental owners.

But can more be done for locals who are being displaced by the rising costs of living?

The reason so many neighborhoods are dark due to empty houses that were once homes to full-time locals is that now those houses accommodate the occasional part-timers who bought their properties to enjoy a week or two, or maybe a month or two, during the glorious summer, perhaps returning for a week to ski during the holiday season. Some short-term-rent their properties. Their houses are immaculate, the owners employing management companies to manicure the yard, remove the snow, greet rental vacationers—but the houses seem soulless most of the year. As real estate prices rise, with many out-of-towners willing to pay the price to own a house in paradise, so do the property taxes.

Ideas…

There is a Colorado property tax break for seniors 65 and older who own their home and have claimed it as their primary residence for at least 10 years. The problem with this is that many seniors downsize at that age, which resets that mandatory 10-year primary residency. Seniors can wind up paying even more if they downsize than if they had stayed in their larger home. The other issue with the senior property tax break is that it’s for seniors only and not the entire population of primary residents.

The state of Florida has its so-called Save Our Homes or Homestead Tax break, which is exclusively for primary homeowners who, to apply, must live in the state for at least six months of the year, have a valid state driver’s license, pay utilities and receive mail at their address. The Homestead Tax caps the property’s valuation increase at 3 percent every reassessment. It’s a slow increase and it doesn’t necessarily increase 3 percent, or at all, during reassessment but it ensures that full-time and long-term residents can afford to stay in their neighborhoods and homes.

This tax break for primary residents puts the escalating tax burden on luxury and second-home owners who have flocked to the touristed state, paying exorbitant prices to live in tropical climates part-time and then retreat to their northern homes. A primary residence tax break such as the Florida Homestead law could be a large part of a solution to help keep the local residents from selling and moving to an affordable location elsewhere.

Unfortunately for Colorado residents, a combination of the TABOR and Gallagher amendments, along with Amendment 23, prohibits similar action unless things change at the state level. These regulations are exceedingly complex. Crested Butte town manager Dara MacDonald explained that currently, Colorado State law requires that all taxpayers be treated equally, as far as property taxation goes.

Some good change has to come from the state. MacDonald explains that the Gallagher Amendment sets the commercial property tax rate at a certain amount and then residential adjusts accordingly but the total amount of tax is set by TABOR (the Taxpayer Bill of Rights) at the state level. TABOR also restricts the growth of the state’s budget, and there can be no new taxes without voter approval. While this seemed like a good plan to lawmakers initially, many didn’t foresee its complicated future repercussions.

One of the possible solutions that the Crested Butte Town Council is considering is an Empty House tax, a flat tax on unoccupied houses, which will be discussed at the December 2 regular meeting. The basic concept of this proposed tax is to incentivize—or penalize, depending on your perspective—homeowners who leave their houses empty for a large portion of the year. The idea is that with a considerable fee, they might give thought to renting their houses out to locals; and if not, the funds collected could then be used to secure additional affordable housing for working locals.

The Empty House tax would have to be voter-approved and prior to a vote, subject to a multitude of public hearings that would address details such as how many months in a year qualifies as unoccupied, how much of a fee should be charged and where the collected monies will be spent.

Should an Empty House tax pass a town vote, the monies could be designated specifically for additional affordable housing for locals. There’s also talk of designating some of the funds for local climate issues. The measure could go on the ballot as early as next November.

It’s a progressive and viable solution to fund local housing but not without issues. There are many primary resident locals, especially seniors, who leave during the winter, no longer able to navigate Crested Butte’s icy season. There are also those who, during the five months of off-season (April, May, part of June and October, November and most of December) take the opportunity to travel. Some must travel for work, but still, Crested Butte is their primary home.

As of last year, 2018, MacDonald noted that there were approximately 430 units of housing in town that were either second homes or short-term rentals that were not occupied as a primary residence. Out of the town’s 1,500 housing units, 65 percent are long-term occupied. If the unoccupied units were charged a tax of $5,000 a year, that could generate more than $2.1 million, which could then put a real dent in providing new affordable housing.

Council also wants to consider a program similar to Vail’s InDeed program, which would pay owners of free market units in Crested Butte to put a loose deed restriction on their home. The owner would receive upfront money in exchange for ensuring the house or condo will be lived in by a local.

Looking at the housing projects, camping and STRs

As town is wrapping up the construction on the Paradise Park affordable local housing, they look toward the two acres bordered by Gothic Road and Butte Avenue as the next place for a major workforce housing push.

Part of that property that is being considered for annexation was the old town dump and has already been cleaned up. Conceptually, 40 to 70 affordable units could be built there, with a mix of single family and some apartment/condo style units like Poverty Gulch, with ownership mixed in with rentals. MacDonald feels that both the Mt. Crested Butte and Crested Butte town councils are working really hard. “Both towns have gained permanent tax revenue sources now to tackle affordable housing, in Crested Butte through our short-term rental tax, which contributes $300,000 yearly, and in Mt. Crested Butte with their new lodging tax that will contribute about $900,000 yearly.

“By collaboration and working together, MacDonald continued, “There’s a better outlook in terms of public funding and input into housing. For us to have over $1 million a year in funding for affordable housing in the north valley is a big game changer.”

Hard numbers can’t be verified but word on the street is that there were scores of locals living in the woods, mountains and campgrounds this summer who said it would be a plus having a designated place to park their vans and RVs without the worry of having to move every two weeks, as required by the U.S. Forest Service.

Most of these campers are employees of various town businesses. Having electricity for heat, clean water and a place to shower is a basic necessity of life, let alone a requirement for being presentable at work. One immediate solution to the housing issue might be to create a camping space with basic necessities, or a public bath house (Sunshine’s Bath House was a popular establishment in its day) for the locals willing to live out of their campers and vans to work in town, at least until a sufficient amount of permanent affordable housing is a reality.

There is also a flip side to the short-term rental debate. For a local trying to stay financially afloat in a rising tide of living expenses, short-terming a room or house can be the difference between staying or selling and leaving. Some primary resident locals essentially short-term-rent their home in order to cover the escalating taxes, maintenance and general cost of living in town. While there are two separate licenses for short-term rentals, the more affordable one of $200 caps the rental time at 60 days, which barely covers taxes for some.

Many working locals lucky enough to have bought their homes years ago when houses were cheaper, can’t afford the initial $1,500 outlay for an unlimited STR license and annual $750 cost. Additionally, a local who short-terms a room in their shared home can’t charge as much as they might for a whole house.

Perhaps a small step in helping to keep some locals in their homes would be to revisit the concept of further varying the structure of rental time limits, fees and taxes to differentiate between primary resident locals who short-term and those who are merely capitalizing on our community’s unique character and saleability.

As for commercial property taxation, Gunnison County officials understand the burden commercial property owners and landlords face when it comes to the quickly rising commercial valuations and thus commercial property taxes and are currently looking into possible alternatives in valuation methods (see sidebar). But their hands are tied by the state.

Need to solve our own problems

“We have to come up with a restaurant and retail organization. We can’t just wait. We have to solve our own problems, before we lose our mom and pop businesses,” says Kyleena Falzone, one of the owners of the Secret Stash and Bonez. She feels that a representative could then address the needs of the business community to the Town Council and on a county level, with a list of necessities for business survival. “We also need to bring back Western’s [Western Colorado University in Gunnison] hospitality program. They have the students, we have the jobs. Real-life experience for their students. We all could benefit.”

Rob Zillioux, Crested Butte’s finance and human resources director feels that the local business decline is also linked to the advent of online stores where you can get anything delivered to your door. Local shops may not have the availability of product and variety of goods that can be found online at mega stores like Amazon, whose quantity enables cheaper prices so mom and pop shops can’t compete.

But a dollar spent with Zappos or Amazon is a dollar not spent at Paradox or Townie Books. Much like Walmart decimated Main Streets across America in the 1990s, Zillioux says, “Amazon will now be the final nail in the coffin for many area retailers, unless they are somehow truly unique. High rent rates are problematic, but it is not the only issue hurting local retail. Amazon is cheaper of course, but at what cost to the local retailers and the environment?”

He points out that while town’s total sales tax collections (all categories) grew 5 percent last year, out-of-state sales grew 33 percent. “Out-of-state is a good proxy for mail order. Out-of-state includes businesses such as Amazon, Zappos, Apple, etc. It also includes companies such as Atmos, though. Nevertheless, out-of-state sales are increasing much more rapidly than town sales.”

Zillioux also points out that implied out-of-state sales have grown to nearly $6 million in 2018, up from about $3 million in 2014.

With rumors flying as to what will happen to Donita’s now-empty space, one way to make it affordable is to compartmentalize the space into retail shops and offices, splitting the rent between several separate businesses under one roof. The property owner has already applied to BOZAR for this permit. It’s a major outlay of capital expense for the owner but is also a potential solution to affordability while creating more shop space.

Meanwhile, another group of local business owners is coming together to buy their building, condominiumizing individual spaces so each will have their own unit. It’s a fortunate situation where the landlord is basically stepping up and helping locals stay in business. There can be solutions.

Crested Buttians have always been innovative in their approach to making their lifestyle work. It’s the lifestyle and character that we’ve created in this town that keeps us here and is worth the struggle to resolve these issues, because Crested Butte is a community that you’ll not find anywhere else on the planet. But too many of us are too often feeling like a poor little rich town.

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