Friday, August 21, 2015

Fact-checking Breckenridge's lift-ticket tax proposal

#Breckenridge, Colorado.

Summit Daily News Link

Breckenridge voters will soon have the power.
The town of Breckenridge is in the process of adding an admissions tax, also called a lift-ticket tax, to the November ballot to capture sales tax from lift tickets and season passes used at Breckenridge Ski Resort as well as the ski area’s summer activites.
Town officials hope for a tax arrangement similar to the longstanding one between the town of Vail and Vail Mountain and will use the money to fund parking and transit improvements. Town council members said they chose to go to voters after the council could not reach an agreement with Vail Resorts after months of negotiations.
Vail Resorts has been fighting the tax. Company representatives have said they don’t want ski area visitors to pay for parking and transit they may not use, and the company has questioned the town’s process and financial need.
With contradicting information circulating, we hope to clear confusion with the following questions and answers.
Would the tax raise lift-ticket and season-pass prices?
Vail Resorts representatives have said the company would not raise its prices to absorb the Breckenridge tax as it does the town of Vail’s tax, so the tax would be paid by resort visitors on top of what they pay for lift tickets and access to resort facilities. The company says how visitors would pay the tax on season passes remains unclear; the town has said it would likely apply the same process used in Vail.
Do Colorado ski areas pay sales tax on lift tickets and season passes?
No. Colorado ski areas have never paid sales tax on lift tickets or season passes, as skiing is not an event or activity that meets the state sales tax code. The town of Breckenridge’s sales tax code was written before the ski area was developed. A few resort communities have added an admissions tax to capture taxes on revenue generated from lift ticket and season pass sales.
Do other communities assess an admissions or lift-ticket tax on ski areas?
If the ballot question passes, Breckenridge would become the fourth resort community in Colorado to assess an admissions or lift-ticket tax behind Vail, Snowmass and Mt. Crested Butte. Outside Colorado, other states assess sales tax on resort lift tickets and season passes including Utah and Minnesota, where Vail Resorts has been paying sales tax on its lift revenue.
How does the tax work in Vail?
It’s complicated. Vail Mountain visitors don’t see the tax as it does not appear as a line item on lift tickets or Vail Resorts season passes.
After Vail Resorts introduced its first multi-resort season pass in 2003, then-company executive Bill Jensen outlined in a written memo to the Vail Town Council how the company pays the town a 4 percent tax on all lift revenue.
With lift tickets, the company’s scanning system records daily revenue generated by dividing the ticket’s purchase price by the number of days it can be used. With season passes, the company divides the pass price by how many days it estimates the pass will be used that season to calculate daily revenue generated, and that revenue is credited to the resort where the pass is scanned. Adjustments are calculated throughout the season and at the end of ski season based on actual pass usage to ensure accurate revenue information.
The company analyzes this revenue data to determine how products are used at its resorts, and, in Vail, it compiles the data and pays a 4 percent tax on that revenue to the town of Vail on a monthly basis.
The town of Vail understands that methodology to still be in use. In a 2011 memo, town staff quote Vail Mountain COO Chris Jarnot as saying Vail Resorts’ “practice of recognizing revenue for lift tickets and season passes has not changed fundamentally ... Obviously, prices and products have changed, and we have continued to adjust our estimates of how many days different passes will be used based on what has actually occurred over time. We continue to true-up within the year based on what usage actually occurs so that Vail — and each of our resorts — recognizes its accurate share of the overall pass revenue for passes used at the resort.”
Town of Vail finance director Kathleen Halloran said the tax goes into the town’s general fund. In 2014, the tax collections totaled roughly $4.4 million.
How would the tax be collected in Breckenridge?
The town plans to define the tax-collection process after the ballot question is approved. Town staff have pointed to the methodology Vail Resorts uses to pay a lift ticket admissions tax to the town of Vail and indicated the Breckenridge tax would work similarly. Vail Resorts vice president of mountain community affairs Kristen Kenney Williams said the Breckenridge tax won’t be collected like the Vail tax because that started as an agreement in the 1960s that was formalized as a tax in the 1990s with the passage of the Taxpayers Bill of Rights. She said the onus would lie on the town to determine the complicated process of collecting the tax on multi-resort season passes. Town manager Tim Gagen disagreed and said the legal responsibility for determining how to collect a tax falls to the collector, but he added that figuring out how to tax season passes would require both parties.
Why make the tax 4.5 percent?
Originally, the town asked Vail Resorts for a 4 percent contribution on revenue from all ticket and pass products, equal to the arrangement in Vail. After the company did not agree to that contribution or offer another the town considered suitable, the town moved to a ballot question and the town council at its Aug. 11 meeting discussed increasing the tax to 4.5 percent. Council members each said they felt that amount would be fair because all other businesses in town (with the exception of marijuana and lodging businesses) pay a 4.5 percent sales tax to the town. For the same reason, the council also decided at that meeting to tax admissions revenue at the ski area only instead of all businesses in town.
Where would the tax funds go?
The town drafted the ballot question to tie the tax funds to parking and transit improvements. If the ballot question passes, the cost of parking and transit operations would be taken out of the town’s general fund and put into a new separate fund. Then, unlike in the town of Vail, the tax money would go into that parking and transit fund instead of the general fund. Gagen said the new fund could be used to support parking and transit capital improvements, like a parking garage or roundabout construction, as well as operations.
How much would an F-Lot garage and increased transit services cost?
An F-Lot parking garage, depending on its size, would likely cost between $30 million and $50 million, Gagen said, and those figures include a pedestrian bridge and roundabout to alleviate vehicle and foot traffic at Park Avenue and Village Road. Divided into 20 to 25 years of loan payments, that amounts to between $2 million and $3.5 million annually, he said. The town’s plan for increased bus services would cost $2 million a year, so the entire parking and transit plan would cost between $4 and $5.5 million annually. Plus, the town already spends roughly $3 million a year on parking and transit, he said.
How much extra money does the town have?
The town currently has about $70 million total in its reserve funds. The majority of that money could not be used for parking or transit, Gagen said, because they are voter-approved or mandated for specific purposes, like affordable housing and water utilities. The town council also set up a rainy-day fund in the case of an economic downturn, which would fund operations for four months and avoid a government shutdown. Of the town’s reserves, about $13 million is undesignated and could be used for capital projects like a parking structure.
Would the tax be legal?
Vail Resorts has questioned the legality of taxing people to use public lands and has threatened to tie the tax up in litigation. Rick Holman, assistant town manager, said the town believes it is standing on solid legal ground and cited a 1995 Colorado Supreme Court decision that upheld taxation on vendors operating in Mesa Verde National Park, which the court reaffirmed in 2001. The court ruled that for-profit businesses couldn’t avoid taxation because they operate on public land. In addition, Holman said, resort visitors typically pass through resort-owned land in town limits to access chairlifts and summer base area activities.
Would you pay the tax if you’ve already bought your season pass?
The town would use the admissions tax to tax the value of ski area events and activities that require a fee to participate in, he said. That means the tax would be assessed on season passes when the pass is used at Breckenridge Ski Resort. It doesn’t matter where, when or how the pass was purchased.
Without the tax, could ski-area visitors avoid paying anything to the town?
Yes. For example, someone could avoid paying the town taxes by parking in a free lot, using free transportation provided by the town or the ski area, eating at the ski area’s on-mountain restaurants on Peaks 8 or 9 (which are not in town limits) and then leaving town without buying any food, drinks or goods or lodging in town limits.
What happens next?
The Breckenridge Town Council will review the wording of the admissions tax ballot question at its next regular meeting on Tuesday, Aug. 25, and the council will vote on a resolution to put the question on the ballot. The town will submit the question to county officials by a deadline of Sept. 4, and then Breckenridge voters will vote on the tax question on Nov. 3. In the meantime, town staff will draft a law that defines how the tax would be collected, and, if the ballot question passes, the draft would be presented to the council at its Nov. 10 meeting for public input and discussion. The council would vote on approving the law at its next meeting Nov. 24, and the town plans to start collecting taxes on Jan. 1.
Courtesy of the Summit Daily News.