EDITORIAL: Three Real Estate Issues, Under Consideration, Part Eight

Good morning, The Town of Pagosa Springs is seeking qualified individuals or firms to conduct an Impact Fee Study for the community…

— February 27 announcement from the Town of Pagosa Springs

When I started writing this editorial series last week, I thought I would touch lightly on three real estate issues facing us here in Pagosa Springs, and then quickly move on to other editorial topics. But I’m composing Part Eight this morning, and I feel like I’m only just starting to understand these three topics.

We began with a discussion of Chris Mountain Village 2, a subdivision created 40 years ago and successfully sold to (unwitting?) purchasers, but which still has no electrical service to the parcels. Listening to the government discussions of the problem, I have no confidence that the parcels will ever have electricity. But it’s clear that, despite the unbuildable (and thus worthless?) nature of the subdivision, the Archuleta County government and the Pagosa Lakes Property Owners Association would dearly like to collect their property taxes and fees from the property owners.

A lonely stop sign in the undeveloped Chris Mountain Village 2 subdivision.

Chris Mountain is not the only area of the community lacking modern utilities, but it’s perhaps the area most notable for the lack of taxes and fees coming from the property owners.

The second real estate issue I’ve been attempting to address is currently a hot topic with both the Town Council and the Board of County Commissioners: the vacation rental industry. This new industry — serviced by dozens of online vacation rental websites — is currently providing a surprisingly pleasant income to hundreds of home-owning investors, near and far, even as it provides a new type of lodging experience for visitors to Pagosa Springs. The industry is also changing the real estate landscape, by converting homes once used by local residents into “profit centers” for investors — thus driving up the cost of homes, and especially the cost of long-term rentals.

Where resort towns like Aspen, Vail and Telluride have become unaffordable for working class families due to the purchase of land and properties by millionaires, Pagosa Springs and other Colorado communities are becoming unaffordable due to a steady loss of once-affordable homes to vacation rental investors. Those once-affordable homes are not being replaced, as they get snapped up by this new and growing tourist industry.

The third real estate controversy I wanted to touch upon — since it’s had some limelight at Town Council and BOCC meetings lately — concerns “impact fees.”

I’ve been arguing about the inherent unfairness of impact fees ever since the Town and County began to study them in 2006, as a source of government income that could be imposed upon newcomers — without any need for voter approval, since it’s called a “fee” and not a “tax.”

The County does not collect impact fees on new development, while the Town does collect them. That situation appears likely to continue.

I’ve written at some length about the impact fee discussions — for example, here, and here — and can easily summarize where we’re at, as of March 1, 2018. The Town Council has authorized Town staff to solicit proposals from qualified consulting firms for a new impact fee study. Unlike the jointly-funded 2006 Impact Fee Study which analyzed the “impacts” of new development in both the Town and County, the new study would apparently analyze only the impacts on the Town. And the study would be funded only by the Town.

Once the study is completed, the Town Council would need to decide whether it makes sense to continue collecting impact fees… or whether the fees might be serving to discourage new development.

Some of us in the community are concerned about fees that discourage the construction of housing for full-time working residents, since there’s very little of that type of housing currently being built. A few of us are also concerned that the Town has been using impact fees improperly (and illegally) to fund deferred maintenance projects.

The Town government, however, has an understandable concern about keeping a steady flow of fees coming in. At the February 22 Town Council meeting, Town Manager Andrea Phillips was discussing the cost of finishing the construction of Hot Springs Boulevard — a project left half-completed 10 years ago.

“This is a really good example of why we need impact fees,” said Ms. Phillips with a laugh. “The estimates came in at $750,000, and it’s a reconstruction — not deferred maintenance. This would be the reconstruction of Hot Springs Boulevard, basically from the Post Office south to Apache. And if you recall, the reason this came up as a topic, there’s some planned development for the Springs Partners, here, north of the Community Center, and they were asking that the Town do the total reconstruction of that stretch of roadway.

“We don’t have this budgeted. It’s not in any of our future capital plans, due to so many other priorities. But one of the things we do is use ‘road impact fee’ to help offset the costs, since we don’t have $750,000 just sitting around in our budget…”

A true statement. In fact, even in the Road Impact Fees fund, the Town’s 2018 budget shows only $27,800.

But as we’ve noted in a previous discussion about impact fees, the Town’s overall tax and fee collections have been anything but modest, since the arrival of Walmart.

The Town’s Impact Fee RFP (which you can download here) offers this bit of background:

Located in Southwest Colorado within Archuleta County, the Town of Pagosa Springs (home-rule) is pressured by the burdens of growth and have created joint impact fees to offset the some of the costs associated with providing needed services and infrastructure to the greater community.

Here’s one possible way to look at the “burdens of growth” — one that I’ve shared before in a previous editorial, but which may be worth repeating:

We have, below, a section of the Town budget from 2007 — the year after Denver-based Economic and Planning Systems (EPS) was hired to create an impact fee study:

As we see from this clip, the incorporated Town expected to collect, in 2007, a total income of about $6.38 million from various taxes and fees.

That same year — 2007 — the U.S. Census estimated the population of the Town Pagosa Springs at about 1,690 people. (This is within the incorporated Town and doesn’t include the unincorporated county.)

This is the year after the Town instituted impact fees to deal with the “burdens of growth.”

Here is the U.S. Census population estimate from 2016:

These numbers are not 100 percent accurate, but basically, the incorporated Town population grew over the next decade by approximately 150 people… an increase of about 9 percent.

Here’s a clip from the Town budget for the same year: 2016.

If you add up the various revenues expected to accrue to the Town government in 2016, the amount totals approximately $20.6 million. During a decade that the population of the Town grew by 9 percent, the Town budget revenues grew by 323 percent.

As we’ve said before in these pages, the main “burden of growth” faced by the Town government — between the time the impact fees were established in 2006 and the present date — has been the burden of spending three times the amount of tax and fee revenues to serve basically the same number of people.

Would it help, at all, to take a broad view of the community and its real estate market?

Read Part Nine, tomorrow…

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