Steep decline in property values impact Mt. CB budget

Town “set up to survive”

Ever since property value notices hit mailboxes in May, it’s been no secret that property values in Mt. Crested Butte have declined. But as of August 26, the final numbers are in—and they’re as grim as expected.

The total value of Mt. Crested Butte has dropped from $1,468,558,400 in 2010 to $954,592,370 this year, including a drop in the value of the Elevation Hotel from $150,163,310 to $51,333,290. That means budget cuts for the town and the Downtown Development Authority (DDA).
According to Town Finance Director Karl Trujillo, Mt. Crested Butte’s general fund will lose $225,000 and the capital fund will lose the same amount. That amounts to 8 percent of the general fund and 32 percent of the capital fund. Mt. Crested Butte’s assessed property values—the actual value of a property adjusted by the state assessment rate of 7.96 percent for residential properties and 29 percent for commercial properties—fell by 32 percent. The taxable assessed values fell from $156,605,000 to $106,766,420.
That means Mt. Crested Butte will collect fewer property taxes, which are determined by multiplying the assessed value by the mill levy. When values decline, taxing districts can increase mill levies, but in Mt. Crested Butte that would mean taking a ballot initiative to the voters.
“We’re using our full amount, 5 mills, and that currently brings in about $850,000 to the general fund,” Trujillo said.
Instead, Trujillo said, the town has been preparing for the decline by taking measures like freezing wages for the last three years and decreasing the number of full-time staff from 24 to 19.
“We were already set up to survive,” Trujillo said. “The biggest effect will be a lot of capital items will be cut out. We haven’t adopted the plan yet but everything from new graders to sweepers to the condition of the rec path will be put on hold.”
DDA revenues, which fund capital improvements for economic development in downtown Mt. Crested Butte, also fell by about $360,000. But Trujillo doesn’t expect that to have major implications for DDA priorities.
“The plan is to spend all our money on the performing arts center and do a bond issue. [After the decline] it’s pretty tight, and I’ll have to wait and see what the underwriters say. But we’re still in there where we can still do it,” Trujillo said. “But that’s a big drop that means we’re probably not going do anything else.”
There is a bright side, however. According to Trujillo, sales tax revenue is on the rise. And that goes right into the general fund.
“We just had a record-breaking July for sales tax revenues. There were almost $2.7 million in taxable sales,” Trujillo said. That puts Mt. Crested Butte’s July sales tax collections at $134,000.
 In July of 2010, taxable sales were $2.5 million, a record breaker at the time. And the year before that, July brought in just under $2 million in taxable sales. The steady rise is encouraging, and Trujillo said that winter also came in higher than expected. And the losses in the DDA are a worst-case scenario. Other taxing districts, like the Mt. Crested Butte Water & Sanitation District, still have the flexibility to raise mill levies as they respond to drops in assessed value.
The Mt. Crested Butte Water & Sanitation District, which serves Mt. Crested Butte and Meridian Lake, saw a decrease in taxable assessed value from $172,996,620 to $117,976,550, or nearly 32 percent. But with certified numbers first available on Friday, August 26, Finance and Administration Manager Nettie Gruber said she hasn’t had time to determine what that means for the district.
“At this point I can’t say much, but yes I’m sure it will affect us,” Gruber said.
The declines also impact major businesses like the Elevation Spa and Hotel, whose actual property value declined by two-thirds, and Crested Butte Mountain Resort. CBMR Vice-president of Planning and Permitting Michael Kraatz confirmed that CBMR is also seeing declines. Kraatz is focusing on the long-term benefits.
“What it means is it is a buyers’ market and for people looking to buy a mountain property, values have never been better,” Kraatz said. ”We are seeing sales to end users for the most part as opposed to buyers looking to flip a property, and this is good for the resort and the community at large because it means these buyers are not only making an investment but they are making a commitment to come to Mt. Crested Butte and the resort to ski and visit.”
In comparison to Mt. Crested Butte, Crested Butte is facing a 20 percent decrease in the taxable assessed value, down from $106,373,220 to $84,941,360. According to Crested Butte Finance Director Lois Rozman, it’s still too early to say what that will mean for the town budget or property taxes. But unlike Mt. Crested Butte, Crested Butte has not maxed out its mill levies.
“In the past we have not used the maximum mill levies allowed us, so we have some room increasing the mill levy to absorb this decrease in assessed property value, but we’ll be working on the value with the Town Council in the next couple months,” she said.
The county as a whole has fared better than expected, according to County Manager Matthew Birnie, with the overall assessed value declining by 16 percent instead of the 27 percent to 30 percent originally expected.
“At this point we haven’t gotten far enough along in the process, even in staff-proposed budgets, to determine what the outcome of all that will be, but the decrease was less than we had predicted the way it all shook out. I hate to say that is good news, but compared to 30 percent it’s better news,” Birnie said.
The current mill levy for the county is 10.221, well below the 17.075 allowed. When property values were on the rise, the county was still subject to a 5.5 percent annual cap on property tax revenue increases. So Birnie warned that a decrease in property values does not necessarily mean a corresponding decrease in the county’s mill levy.
The Board of County Commissioners has not yet determined the mill levy for 2012, but Birnie does not anticipate a full 5.5 percent increase. Once they do complete the budgeting process, what individual property owners see will depend on what happened to their property values.
“The mill rate is across the county so if their valuation went down significantly then their taxes could go down, even if the county revenues are flat. If we set a mill rate so county revenues are flat, it will have different effects on different properties depending on what happened with their properties,” Birnie said.
Taxing districts will continue to assess the impact of property values as they enter into the budgeting process this fall. Gruber expects the Mt. Crested Butte Water & Sanitation District to begin reviewing assessed values this week. And according to Trujillo, the Town of Mt. Crested Butte will review the budget and the town’s five-year plan in the coming weeks. In that sense, it’s business as usual.