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01-06-14 BBC & Research Consulting- Aspen Skiing Company BBC N)0, ► RESEARCH& J //iii CONSULTING November 14,2013 Mr.Don Schuster Vice President Hospitality Development Aspen Skiing Company PO Box 1248 Aspen,Co 81612 Re: Snowmass Hotel Fiscal Effects Dear Mr.Schuster: At your request,BBC Research&Consulting has examined the fiscal consequences for Snowmass Village of a change in use related to the conversion of certain existing development rights in the Snowmass Base Village from private condominium to a hotel use Background In 2007,Related Company and partners acquired the Snowmass Base Village property with entitlements for development of a mixed-use village Each building site had specific size and use entitlements.Recently,the Aspen Skiing Company(ASC)entered into a letter of intent with Related Company for the acquisition of Snowmass Village Lot 2,which includes Buildings 4,5, 9A,9B and 9C in the approved Snowmass Base Village plan ASC is seeking a change of entitlements for this parcel allowing a conversion from condominium to hotel use. Under the existing village master plan this lot would be developed with a small amount of ski related facilities(2,745 sq ft.),three employee housing units;6,433 square feet of retail space and 57 private condominium units(1,152 sq ft per unit) Under the proposed revision,these allowances would be converted into 3,952 square feet of ski related facilities(Snowmass Mountain Club);a 1,400 square foot restaurant;a 102 room hotel (48,651 sq.ft.);and 18 condominium units(1,162 sq.ft. Per unit), Net Changes The modest differential in space devoted to ski related facilities services and the net reduction in retail/restaurant space(5,033 sq.ft.)are not considered material changes in terms of local government revenues.The proposed Snowmass Mountain Club,which will fill the ski related facilities allocation,will provide convenience and service to members,but it will not directly 1999 Broadway 2200Suite Denver co 80202 Tel 303 3212547 Fax 303 399 0448 bbcresearch.com PAGE 2 produce significant tax revenue The proposed Snowmass Club may increase skier and visitor activity,which will have some indirect benefits to the community.The retail sales associated with reduced allocations to retail/restaurant space (5,030 sq.ft)will be readily absorbed,and welcomed,by other retail outlets in the Village.There is no current pressing market need for additional retail space The overall scale of the new building,its height and its mass will remain nearly identical to the original proportions. The net change between the original use and the requested use is the addition of 102 new hotel rooms and the loss of 39(net)new condominiums. This analysis examines how this development change will affect town property,sales,lodging and real estate transfer taxes Property Taxes Assessed valuation is based on the market value (termed"Actual Value"by the Assessor) of real property. Figure 1 shows process and assumptions used to determine the assessed value for the original use and the requested use Figure 1. Factor Original Use Requested Use Calculation of Assessed Value Units 39 Condos 102 Hotel Rooms Size(Average) 2 Bedrooms 1 0 Bedrooms Source Market Value/Cost $1.3 Million $275,000/Room BBC Research&Consulting,Aspen Skiing Total Market Value $50.7 Million $28.05 Million Company,Nov 2013 Assessment Ratio 7 8% 29 0% Assessed Value $3.95 Million $8 13 Million The original use would develop more initial market value but the condominiums would be assessed as residential property at a low(7.8%)assessment ratio.The hotel will be assessed as commercial property,which dictates a much higher assessment ratio (28%) and results in over twice the condominium associated assessed value. As shown in Figure 2,a variety of service provision entities in the Snowmass Valley will benefit from the project's higher property tax generation under the commercial assessment. PAGE 3 Figure 2. Assessed Value, Mill Levies and Annual Property Tax Revenue Entity Mill Levy Original Use Requested Use Assessed Value (From Figure 1) $3.95 Million $8.13 Million Prop. Tax Rev. Prop. Tax Rev. Snowmass Village 9.019 35,667 73,365 Aspen REI 9.201 36,386 74,846 Snowmass Village GID 6.317 24,981 51,386 Snowmass/Wildcat Fire 5.351 21,161 43,528 Snowmass Water & San. 1.575 6,228 12,812 Snowmass Villiage Road Fund 5.000 19,773 40,673 Base Village Metro 1 & 2 43.500 172,025 353,851 Source: Pitkin County Assessor& BBC. The Base Village Metropolitan District, which provides maintenance services for the Base Village project and has struggled financially with delayed development of the village, will be a notable beneficiary. Sales Taxes The amount of sales taxes generated by both the original and the proposed project reflects the anticipated occupancy rate, number of guests and guest expenditure characteristics of each configuration. Ownership and use. Figure 3 shows expectations for unit ownership and then occupancy by owners and renters. Figure 3. Annual Ownership and Category Condominium Hotel Occupancy Annual Use Expectations (#of Units) Source: BBC Research &Consulting Owner Use Only Units (40%of units) 16 - Owner and/or Rental Use Units (60%) 23 102 Annual Occupancy (%of Nights) Owner Use Only Units 20% 55% Owner and/or Rental Use Units Owner 15% - Renter 20% - Average Annual Occupancy 29% 5S% We have assumed that at this location most condominiums (60%) would be used by owners and renters and that 40 percent of units would be held for use only by owners, family and their guests. Generally, private condominiums held for non-rental use have lower occupancy rates than condominium units that combine owner and rental uses. Based on the weightings of owner only and mixed owner/renter use, Figure 3 also presents average annual use by all units (29%). PAGE 4 The hotel is expected to achieve a 55 percent annual occupancy rate similar to other hotels in the area and would only induce commercial rental use. Visitor nights, spending and sales tax. Figure 4 shows the calculations used to determine visitor nights by guests and resultant retail spending within the town of Snowmass Village. Retail spending associated with the original condominium allowance is generated by both owners and renters. Figure 4. Visitor Nights and Retail Spending Condominiums Hotel Rooms Annual Annual Category Occupancy Nights Occupancy Nights a. Average Annual Use(per Unit) 29% 106 55% 201 Condominium Amounts Hotel Amounts b. Persons per Unit 3.5 2 c. Retail Spending per Person/Day $450 $600 d. Number of Units 39 102 Total Annual Retail Spending $6,511,050 $24,602,400 (axbxcxd) Snowmass Village Retail Sales Tax(3.5%) $227,887 $861,084 Source:BBC Research&Consulting.Note:Retail spending does not include accommodations The condominiums (averaging about 2.0 bedrooms/unit)will produce more guest nights per unit,but condominium use,typically with family occupancy and meal preparation in the unit, tends to produce lower per person retail sales. Hotels on the other hand,typically with two adults per unit,and a tendency for guests to eat all meals in local restaurants,are\the most retail sales productive form of resort accommodations. Lodging Taxes and Sales Taxes on Accommodations Snowmass Village applies lodging and sales taxes to the commercial sale of overnight accommodations. Figure 5 shows applicable rates applied to commercial room sales based on estimates of condominium and hotel room rental use and rates. PAGE S Figure 5. Sales and Accommodation Taxes on Lodging Category Condominium Hotel Nightly Rental Rates $700/Night $475/Night Average 9 of Commercial Rental Nights per Unit 73 201 Annual Value of Total Rentals $1,175,300 $9,738,450 Lodging Tax Revenue(2 4%) $28,207 $233,722 Annual Sales Tax Revenue(3.5%) $41,135 $340,846 Source BBC Research&Consulting Rental rates recognize both premium winter periods and less expensive off season charges.The commercial hotel is a very productive source of tax revenue on accommodations,producing over eight times as much commercial unit rental revenue Real Estate Transfer Taxes The town of Snowmass levies a one percent tax on the sale of real property.The condominium units will sell after development and resell every seven or eight years The hotel will produce no real estate transfer taxes unless the entire project sells to a new owner at some future date. Thirty-nine units selling at$1.3 million per unit would produce$50.7 million in initial sales, most likely over a three year period,and thus$507,000 in real estate transfer receipts Assuming units resell every eight years,real estate transfer revenues should continue to produce about$63,000 per year as resales are initiated Revenue from real estate transfer taxes cannot be used in the general fund and can only be spent on certain capital needs dictated by the fund allocations designated by the voters of Snowmass Village Summary of Fiscal Effects Virtually all local governments and resorts covet the economic benefit of hotels.This analysis demonstrates why. Figure 6 summarizes the net fiscal impact of the proposed changes to Lot gland uses.The town of Snowmass Village will collect an additional$1.0 million per year in general fund revenues under the proposed new hotel configuration.In addition lodging tax revenues will rise by over $200,000 and the Snowmass Village Road Fund receipts will more than double The only negative effect of the proposed development changes are the initial loss of RETT funds and the annual loss of RETT receipts as units resell over time. PAGE 6 Figure 6. Snowmass Village Summary Net Fiscal Impacts Original Entitlements Proposed Hotel Net Benefits Category (One-Time) (Annual) (Annual) (Annual) Property Tax $124,443 $255,937 $131,494 Retail Sales Tax $227,887 $861,084 $633,197 Sales Tax on Accommodation Rental $41,135 $340,846 $299,711 Total Town General Fund Revenue $393,465 $1,457,867 $1,064,402 Lodging Taxes $28,207 $233,722 $205,515 Real Estate Transfer Taxes One-Time $507,000 Annual $63,000 <$63,000 > Road Fund Receipts $19,773 $40,673 $20,900 Base Village Metro Revenue $172,025 $353,851 $181,826 Source BBC Research&Consulting It should be noted that the calculations presented here are for the net changes between allowed and proposed uses Decision makers should also consider that the allowed uses are unlikely to occur in the immediate future,thus they are truly hypothetical.It should also be noted that the full benefits of the new proposal would include 15 additional condominium units adding approximately$150,000 of additional general fund receipts. I hope this information Sincerely, Ford Frick, Managing Director