HomeMy WebLinkAboutagenda.council.worksession.202104201
AGENDA
CITY COUNCIL WORK SESSION
April 20, 2021
6:00 PM, City Council Chambers
130 S Galena Street, Aspen
WEBEX
www.webex.com
Enter Meeting Number 182 113 3568
Password provided 81611
Click "Join Meeting"
OR
Join by phone
Call: 1-408-418-9388
Meeting number (access code): 182 113 3568#
I.WORK SESSION
I.A.WRETT Part 1 – Financial Models
1
1
MEMORANDUM
TO:City Council
FROM:Pete Strecker, Finance Director
THROUGH:Sara Ott, City Manager
MEETING DATE:April 20, 2021
RE:Repurposing RETT Discussion – Session 1
REQUEST OF COUNCIL:Staff is looking for direction as it prepares draft ballot language
for consideration around public support for a repurposing of future real estate transfer tax
revenues generated by the 0.5% tax currently in place. As part 1 of this multi-session
discussion with Council, staff is looking for direction around the financial parameters
desired to be included in the ballot language.
SUMMARY AND BACKGROUND:The 0.5% real estate transfer tax was first adopted
by voters in 1979 and was uniquely pledged as financial support to the Wheeler Opera
House, plus an annual set aside of $100,000 for arts grants. Since this initial adoption,
the tax has been reaffirmed by voters twice, as the tax has a periodic sunset provision
every 20 years. The most recent extension provided approval of the tax through
December 2039. To date, these renewals have been focused on extending the tax, and
have not considered adjusting the allowable uses for the tax.
DISCUSSION:At a Council work session on February 23, 2021, staff was directed to
explore and present opportunities to expand the application of future tax collections for
other community benefits. This direction reflects today’s reality that the dedicated
Wheeler Opera House fund balance has grown to more than $32M and represent a level
that is essentially five times the average annual expenditure authority.
With Aspen having been in a period of significant real estate activity of late, with 2020
sales and dollar volume setting new records and early 2021 continuing at elevated levels,
fund balance continues to escalate. Bolstered further by a recent singular $68M
transaction as the Mountain Chalet transfers to new ownership, the current fund balance
can allow for a “holiday” from new collections funneling into the Wheeler Fund, and
therefore further emphasizes that the opportunity exists for future collections to be
redirected for Community benefit.
Expenditure Needs: With major renovations having now been performed on the lower
offices and leased spaces (2010-2011), the auditorium balcony rebuild (2012-2014),
HVAC replacement, roof replacement, second floor bar, restrooms and artist / dressing
rooms, and first floor lobby (2014-2016), freight elevator (2020) and most recently the
2
2
exterior façade restoration (2020-2021); the extent of necessary and significant capital
projects on the physical building are limited over the next number of years.
Including all annual expenses at the Wheeler, projected subsidy levels over the next ten
years averages roughly $4M annually. This is barring any changes to programming
levels, ticket subsidies and includes capital improvements totaling $9.5M, thereby not
neglecting necessary maintenance or large equipment purchases.
Using the base assumptions of current fund balance at $32M and a subsidy need of
roughly $4M after programming revenues and lease income is applied, a straight-line
reduction of the current fund balance would take 8 years:
Ending
Balance
Annual
Subsidy
2021 $32,000,000
2022 $28,000,000 ($4,000,000)
2023 $24,000,000 ($4,000,000)
2024 $20,000,000 ($4,000,000)
2025 $16,000,000 ($4,000,000)
2026 $12,000,000 ($4,000,000)
2027 $8,000,000 ($4,000,000)
2028 $4,000,000 ($4,000,000)
2029 $0 ($4,000,000)
FINANCIAL IMPACTS:To ensure that historical voter support for the preservation and
operation of the Wheeler Opera House is not placed in jeopardy, staff requires Council
input around the aspects of program duration and Wheeler reserves.
Currently, City Financial Policies require reserve levels equal to 12.5% of annual
expenditure authority be held in reserve for most City funds. However, for the two utilities
(water and electric) and for the General Fund and Wheeler Opera House Fund, reserve
requirements are twice this level, or 25% of annual budget authority. These higher levels
were established due to greater capital / maintenance needs (utilities and Wheeler
specifically) and as the General Fund is the only fund with discretionary resources.
Option A - Baseline: To place the 25% reserve requirement into context for the Wheeler
Opera House Fund, over the next 10-year period, the highest annual projected budget
need is roughly $7.6M which therefore demands a reserve of $1.9M be maintained. This
would be the most dramatic fund balance reduction option for the Council to consider –
maintaining the 25% reserve and allowing all of the revenue from the 0.5% RETT to be
redirected until fund balance was reduced to this level.
Option B – Increasing Reserve Requirement: Reflecting on the volatility of capital
improvements made to the building over the last decade, while there are not necessarily
major structural or building mechanical needs in the immediate future that staff is aware
3
3
of, other theater-related capital upgrades – both wants and needs – still exist and are
likewise expensive. As such, a more generous target could be applied to the reserve held
in this Fund, to create room for these items. This could be established as a flat amount
or as a percentage of annual spend - the below table outlines the status quo and three
alternative possibilities (using the highest projected annual spending authority need in the
10-year period):
Reserve as Percentage of
Annual Spend
Flat Reserve
Requirement Amount
Option A – Status Quo 25%$1.9M
Option B – 1 50%$3.8M
Option B – 2 75%$5.7M
Option B – 3 100%$7.6M
Note: Option B-1 at $3.8M is equal to approximately 75% of the annual subsidy that is
needed to supplement other production / box office revenue and lease income from the
restaurant and art gallery. Option B-3 is roughly equivalent to 150% of the annual subsidy
need.
Duration: Regardless of the option supported by the Council, staff would also request that
a sunset is considered for the expanded uses language for the 0.5% real estate transfer
tax. By establishing this duration as part of the ballot question, a pronounced commitment
shall be made to the Community, that the benefits of the program will be evaluated and
that the opportunity for pivoting to establish alternative outcomes will be required. Staff
recommends a term between 5 and 10 years for consideration – this is prior to the sunset
on December 31, 2039 for the tax itself, and allows for a check in with the public.
RECOMMENDATION:Council may select from the presented options around either a
percentage or flat amount, or recommend its own recommendation, for how significant a
reserve should be maintained for the Wheeler Opera House. With this decision, staff
would recommend a duration of somewhere between 5 and 10 years, as the annual
“consumption” of existing fund balance (if future collections are reallocated) will be
gradual and many years will be necessary to align to a new benchmark.
CITY MANAGER COMMENTS:
ATTACHMENTS:
4