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Pulling us out of the mainstream

IN GRAND COUNTY, DUCKS DON'T QUACK

grandcountyuncensored.com

August 25th, 2011 || Volume 1, Number 8 || Free

If it looks like a duck, quacks like a duck and waddles like a duck, it's NOT a duck. We said so.
Opinion and commentary by reggie.paulk@gmail.com

This week's meeting with the Commissioners was an exciting one, to say the least. On Tuesday afternoon, they held a public hearing on shortterm rental regulations and proposed amendments to the Grand County Zoning Regulations. Before you pass out in your coffee, understand this meeting provided valuable insight into how our county does business. Grand County has a wee bit of a conundrum on its hands. According to 2010 census data, we have approximately 15,500 private housing units and 5200 housholds. There are about 500 beds in commercial hotels and motels. Clearly, 500 beds is not enough to house all of the tourist traffic we might have on any given weekendespecially during peak season in the winter. The way we've accomodated these extra bodies is in the various unoccupied residential condominium and housing complexes sprinkled about the county. We've come to call these 'second homes.' For years, owners of second homes have been renting out their properties on an overnight and shortterm basis. The practice is so popular, businesses have sprouted up that do nothing but support these owners by providing management services to help facilitate the business use of the various properties under their care. There's only one caveat it's illegal. These 'businesses' are essentially pushing illegal product, and not one of them has been penalized for the practice. Under current zoning regulations, the shortterm rental of a condo, house or mobile home with a residential designation constitutes a business use, and the county has no provision in their zoning regulations to allow for this use. We know the county doesn't really care about this little problem, because it has made no effort to enforce the regulation. That's called selective enforcement, and it violates the Fourteenth Amendement to the United States Constitution, which states, "...nor shall any State... deny to any person within its jurisdiction the equal protection of its laws." There's that pesky Constitution again. If only we could crumple it up and use it as toilet paper, but I digress... By turning a blind eye to enforcement of its own zoning regulations (which have the force of law), the county has financially impaired every legitimate business which provides overnight or shortterm rentals. They've also been party to a massive amount of mal investment in housing and real estate that holds no hope of ever reaching full occupancy. Amending the regulations to allow for this as recommended is akin to slapping a bandaid on a spurting jugular vein and calling the problem fixed. Aren't you getting tired of reactionary moves by our elected officials at all levels of government? Is there anyone out there who's just a bit of a visonarysomeone with the ability to see a bit further into the future than two years ago? Is it too much to ask our representatives to study the pieces of paper they swore an oath to uphold? The reason I ask is because the math behind the above discussion explicitly shows the screw job every hotel and motel owner in the county is getting because of overnight rentals. And now the county wants to make the screwing permanent with an official endorsement. It's amazing the county hasn't had its pants sued off already by a crowd of angry hotel proprietors. But I guess that's not possible when the money they would have used for litigation is now firmly in the pockets of people who don't even live here full time. The department of planning and zoning has recommended to the commissioners amendments which would allow shortterm rentals of residential properties. There are no fees and little oversight attached to this plan. In fact, according to the discussion on Tuesday, the county wants to plug its nose and run away as quickly as possible from this rotting carcass. So what's the problem, and more importantly, what's the solution?

Solve a problem at its source and you've fixed it for good. The overnight rental debacle has revealed problems that began back in 1982, with the passage of the Gallagher Amendment to the Colorado Constitution. The Gallagher Amendment came about as a redress for grievances citizens had regarding rising property taxes. Gallagher established that all state property taxes would be paid on a 55/45 split. In 1982, 55 percent of all assessed property was commercial and 45 percent was residential. This ratio was fixed permanently. Another aspect of Gallagher is that it placed a fixed property tax rate of 29 percent of the assessed value on commercial property. It also required a reassessment of property values every two years, so residential property tax rates could be adjusted to meet the 45 percent ratio required. Fast foward to 2011, and our property values are nowhere near those established in 1982. An excellent article in the Salida Citizen written by Trey Beck in September of 2009 eloquently explains the problem: "Residential property values have significantly outpaced commercial values since 1982 and today account for about 75% of the states total property value while being responsible for only 45% of the states total property tax burden. Conversely, commercial property, which now accounts for only about 25% of total property value in the state, is still responsible for 55% of the states total property tax burden. In order to maintain the 45/55 split, the residential property assessment rate has dropped from 21% in 1982 to the current (20072008) level of 7.96%." Are you beginning to see the problem? In Grand County, we have owners of roughly $100 million worth of commercial property paying the same amount of property tax as owners of over $400 million worth of residential property. That means the owner of a commercial hotel with an assessed value of $1 million pays nearly four times the property taxes of the owner of a $1 million trophy home. Do you think the trophy home owner could take advantage of that reduced tax burden in order to lure people away from the hotel in a shortterm rental scenario? Me too. Arbitrage is the practice of taking advantage of the price difference between two or more markets. If you're using your residential property for shortterm rental in Grand County, you're benefitting from the arbitrage of the difference in tax burden between commercial and residential property. I pointed out to the commissioners that they were effectively providing a 'tourism subsidy' at the expense of every hotel/motel property in the county. I might as well have thrown a hornets' nest on their table for the reaction that garnered. The houses and condos are here. We need the bodies and the revenues in the county, and we know that there aren't enough beds in hotels and motels to accommodate all those bodies. Shortterm rentals are still viable, but the commissioners are preparing to grant favored status to a certain class of business, and that cannot be allowed to happen. So how do we fix the problem? Luckily, the solution is stated clearly on page three of the certificate of recommendation given to the commissioners by the department of planning and zoning. Grand Lake provides a model with a degree of fairness for all parties, and Grand County needs to adopt this policy in some form as well. Grand Lake calculated the difference in property tax burden between a residential and commercial property at the town's median home value of $350,000, and made that amount the annual application fee. Grand County's planning department calculated that this would equate to about $1,200 per year for properties not in town limits and decided this was too high. Continued...

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They scrapped the idea of an annual fee altogether and that's unacceptable. Everyone offering shortterm rentals needs to have some skin in the game if that's what's required of the commercial operators. Equalizing the property tax burden through an annual permit fee is an equitable way to do it. If it looks like a duck, walks like a duck and quacks like a duck it's a duck. LOOKING AHEAD The audience at the meeting gave a clear indication of who benefits from the blind eye turned their way on shortterm rentals. Realtors have been peddling properties for years with the implication they could be used to generate income for their owners. In addition, we have management companies and vacation rental companies who have based their revenues off of a business that is, for all intents and purposes, illegal. That this has been allowed to continue unabated for as long as it has is really a testament to the tolerance of businesses who have been playing (and paying) by the rules. If the commissioners do the right thing and level the playing field by imposing a fee and oversight, the only people who will benefit immediately will be the hotels and motels. It will, by necessity, cause the arbitrage to cease. This will force second homeowners to evaluate prices and allow the hotels to charge more reasonable rates. It may also put a damper on some of the above mentioned 'businesses.' This pain is necessary to right the imbalances created by lack of enforcement. Some will be forced to walk away from their properties. This behavior will be the case over the next few years as home values continue to decline. More and more homeowners will come to realize that their property values are never going to return to the fantastic valuations of a few years ago. Prices will fall until they reach stability. No amount of zoning regulation changes will be able to prevent it. Public revenues will plummet. We're already looking at a big hit from the assessment this year, and there's no reason to believe it won't be as bad, or worse, by 2013. Our County Treasurer mentioned that she collected about 96 percent of the intended property tax revenue last year. That's a pretty significant drop when you consider the county has been collecting 99 percent of its taxes due for a very long time. Some of the tax lien sales to recoup those monies have gone bidlessan ominous sign. Squatters are already here and you're going to start to hear about it regularly. I know of a few properties relatively close to town that already have people squatting in them. With nearly two thirds of available housing sitting empty, again because of mal investment, squatting will become a familar part of our mountain lifestyle. WHAT CAN I DO? Our county's leadership believe people aren't concerned about the impact of overnight rentals on either residents or businesses. According to them, if people disagreed with the actions the county plans to take, they would show up and voice their concerns. If you are in the hotel/motel business, or just concerned about selective enforcement of the law, a show of force at next Tuesday's board meeting would go a long way toward protecting your interests and defending your right to equal protection. You may also make your voice heard through email or a phone call. Here are their contact details: Commissioner Bumgarner gbumgarner@co.grand.co.us Commissioner Newberry: jnewberry@co.grand.co.us Commissioner Stuart: nstuart@co.grand.co.us Commissioner's Office: (970)7253100 If you CC me on your email to the commissioners, you'll ensure your message gets heard, one way or another.

Colorado State Senator Rollie Heath has garnered enough signatures for his school funding initiative to get it on this November's ballot. Seeing as how our own superintendent passed around a petition during a recent board meeting, I'd imagine that's how they got their signatures (no, I didn't sign it). Initiative 25 seeks to take a half billion dollars out of Colorado citizens' wallets by raising state income taxes nearly a half percent and raising state sales taxes by a tenth of a percent. This is a clearly regressive taxing scheme that would place a higher financial burden upon those least able to afford it. Amendment 23 already requires school funding to increase by the rate of inflation plus one percent. This halfbrained amendment has the state spending nearly 80 percent of its general fund on education, and it will get much worse without reform. Initiative 25 is endorsed by alphabet soup organizations such as the Colorado Association of School Boards (CASB) and the Colorado Association of School Executives (CASE). Current polling luckily gives the initiative no chance of success at the ballot box this November.

INITIATIVE 25

Did anyone notice that Winter Park Resort eliminated both its Purple and Red routes through Meadow Ridge a few weeks ago? Of course they did! As a person who used one of those lines numerous times last winter, I can say I was sad, but not shocked, to see this development. I think people in East Grand should sit up and pay attention. When large corporations make decisions to cut services they've provided over a long period of time, that's an indication of major underpinnings of trouble behind the scenes. Cutting these lines should be a clear warning of corporate strategyespecially given today's economic climate. So what is Intrawest up to? With the removal of the Red and Purple lines, I think you've seen the first shot in a volley that will eventually see shuttle service to the towns of Winter Park and Fraser eliminated entirely. This is probably a push to keep tourists and their dollars at the base village and on the mountain at the resort. Every dollar counts, and it's a move that makes business sense. Free shuttles are a luxury we've enjoyed courtesy of the ski area for a very long time. The 100 percent subsidized model is most likely a thing of the past, and it's time to begin thinking about where we are headed. I've been in contact with a company that is trying very hard to fill the void left by our lost shuttle service, and I think they have a plan that will help soften the blow to people who've already booked trips with the expectation of a shuttle that will never be. We have a very narrow window of opportunity to pull a rabbit out of a hat. If the season begins with no shuttle, you can kiss Winter Park and Fraser's tourism dollars goodbye next year. Look for a review of the solution in next week's issue.

WRITING ON THE WALL

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Contact the editor: reggie.paulk@gmail.com (303)5527963