HomeMy WebLinkAboutBBC Response to EPS Final Report 012711
3773 Cherry Creek North Drive Suite 850 Denver, Colorado 80209-3868 303.321.2547 fax 303.399.0448 www.bbcresearch.com bbc@bbcresearch.com MEMORANDUM To: Ever Vail, LLC an affiliate of
Vail Resorts Development Company From: Ford Frick, BBC Research & Consulting Re: EPS Study and Ever Vail Fiscal Effects Date: January 27, 2011 The Town of Vail retained Economic and
Planning Services (EPS) to document the economic and fiscal impacts of the proposed Ever Vail project on the Vail community.1 The Developer requested a summary of key consultant conclusions,
as well as reactions to the EPS report based on our knowledge of Ever Vail and our past experience with similar fiscal analyses. Market Considerations Ever Vail is a proposed new core
village neighborhood with lift connections to Vail Mountain located at the west edge of the present Vail Village. It will have a mix of hotel rooms, condominiums, second homes, offices
and employee housing. EPS has accurately incorporated the quantitative measures of the Ever Vail Vail development program. The consultants’ analysis assumes construction of the project
as currently proposed, acknowledging that the town has not formally approved the Ever Vail concept or the proposed development program. EPS confirms Ever Vail’s potential to diversify
and expand the Vail market, suggesting that 60 to 70 percent of Ever Vail’s visitors will be new visitors to Vail. EPS’s underlying market assumptions include: Ever Vail will provide
lift-adjacent accommodations, which are typically highly valued properties with strong demand for overnight rental use. Ever Vail will have its own character and thus diversify and
expand the Vail Village experience. Ever Vail is accurately perceived to be more active than Cascade Village, but considerably smaller and less commercially-oriented than Vail Village
or Lionshead. The new village is designed to complement and diversify the present visitor experience in the established Vail core. Market acceptance (e.g., unit occupancy rates, visitor
1 EPS, Ever Vail Fiscal Impact Analysis, January 13, 2011
______________________________________________________________________________________________________________________ Page 2 spending) is tested within the EPS study by incorporating
high and low performance scenarios. Ever Vail will add community parking, affordable housing and new office space in amounts considerably in excess of its own needs. EPS estimates
that 60 to 70 percent of Ever Vail lodged visitors will be new guests drawn to the community by new accommodations, the attractions of Vail and the unique character of Ever Vail. Ever
Vail is a relatively small project, representing a 6 percent addition to the current Vail bed base. EPS acknowledges an uncertain build out period that is ultimately dependent on market
conditions. Retail As proposed, Ever Vail will include about 53,000 square feet of new retail space, which includes a 14,000 square foot grocery along with retail and restaurant space
within the hotel. The project’s small scale and physical separation from the core of Vail Village limits the retail development opportunity. The scale of the project’s commercial
component reflects its removed location and relatively small bed base. In order to ensure convenient guest services, retailing and restaurants are necessary elements of the Ever
Vail Village plan. The small retail component of this project is designed to provide immediate services and complement, but not aggressively compete with, existing Vail Village retailers.
According to the EPS study, the majority of Ever Vail lodged guest spending will occur elsewhere within the core Vail Village. The EPS study accurately describes a consensus opinion
(VRDC, consultants, local retailers) regarding the size, character and performance of Ever Vail’s retail component. The EPS study demonstrates that Ever Vail will benefit all retailers
in the community, producing net new retail sales for other Vail retail centers. Fiscal ImpactOverview EPS provides a detailed analysis of Ever Vail’s fiscal impact. Economic and fiscal
effects on the community are beneficial and positive at each stage of development. The project’s remarkable fiscal benefits are the result of very straightforward factors:
______________________________________________________________________________________________________________________ Page 3 Ever Vail’s high tax revenue production occurs because
the new village presents a pronounced concentration of high value, tax-generating land use (sales, property, use, and lodging taxes). Town service costs are low because an internally
funded special district will supplement town service delivery, and because the town of Vail has a taxing system that generates a large share of town revenues from new development (RETT,
use tax, building fees, impact fees). Cost-efficient delivery of public services is further ensured the village’s compact site (12.5-acre) with onsite parking and employee housing.
EPS uses two scenarios to test Ever Vail’s fiscal performance. The project is overwhelmingly positive under both scenarios. It should be noted that a very large share of tax revenues,
(property tax, RETT, impact fees and use tax) occur independent of project occupancy, greatly reducing the town’s exposure to market risk. Construction Period Revenues The Vail community
will be fiscal beneficiaries at all stages of this proposed development. The project’s construction period is very tax productive because of high levels of construction associated use
tax, impact fees and building permit revenues. Real estate transfer tax (RETT) revenues also occur upon the initial sale of each unit. The project is situated somewhat apart from
the core village and will not present significant noise, traffic or disruption issues during construction. It is currently estimated that Ever Vail will generate over $22.0 million
in use tax and developer RETT charges during project construction and initial unit sales. These funds are dedicated to open space acquisition and town capital projects. This represents
the equivalent of a $2,600 subsidy for every existing residence and hotel room in Vail (8,450 units). The urban renewal authority and various special funds will collect substantial
property tax revenues throughout the development period without significant offsetting expenses. Town service costs to this site during construction will be minor and the site’s
removed location will diminish conflicts with other town functions or impacts on other property owners. As a rule, the above construction associated tax receipts occur in advance of
any significant town service delivery costs associated with the project.
______________________________________________________________________________________________________________________ Page 4 Fiscal Effects at Buildout At buildout, the Ever Vail Project
produces annual revenues that are far in excess of service delivery costs. Assuming a midpoint between the high and low scenarios2: Ever Vail will produce a $630,0003 annual subsidy
to the town’s general fund. Ever Vail will produce over $1.0 million in annual RETT revenues and sales tax receipts for the Vail capital fund. There are no offsetting capital costs
associated with this project. This annual revenue stream is available for all allowed community purposes. Ever Vail will produce $3.5 million in annual property tax revenue to the
town’s urban renewal authority. Ever Vail will generate $500,000 per year in marketing funds for the Vail Marketing District. Upon completion, the Ever Vail project will generate
over $5.5 million of net revenues (revenues in excess of costs) per year to the town’s various funds. This represents a subsidy of approximately $600 per household per year for every
existing residence and hotel unit in Vail. The EPS report would benefit from additional context to their analysis and findings. The level of benefits predicted in the EPS report is outside
the range of my experience, but these benefits are simply described as “positive.” This is much like saying Lance Armstrong is a good cyclist –hard to disagree with, but arguably understated.
In fact, the annual net cash flow return predicted here—rising to $5.5 million per year—will provide the community assurance of future investment flexibility, competitive advantage,
and community financial stability that is unparalleled in the mountain resorts. Ever Vail is the next generation of development for a resort that is just beginning to realize the benefits
of a new generation of projects completed over the past few years. The majority of other mountain resort competition has seen little recent development and has nothing in the planning
pipeline. It is most noteworthy that these fiscal results are achieved with no substantial community risk. Parking and employee housing will be completed as the project is developed.
If market conditions are challenging and the project isn’t completed, the town will still receive fiscal benefits in proportion to project’s completion. If the project under performs
with fewer visitors than anticipated, the community will still collect all use tax, RETT funds, impact fees and property taxes. Fewer visitors will mean less operating revenue but also
a proportional reduction in service costs. 2 Dollar figures are a mid point between high and low scenarios