Aspen Sales Tax Revenue: Some Sectors Up, Some Down

The city of Aspen’s tax revenues for 2024 are mixed so far, according to the latest data.

Taxable sales through April are up 6% overall compared to 2023, according to data presented during Monday’s Aspen City Council work session. That was helped by significant gains in the luxury goods and apparel sectors, which saw gains of 101% and 24%, respectively.

However, tax revenues from sporting goods and construction fell by 5% and 13%, respectively, compared to last year.

A closer look at projected sales for 2024 shows cautious optimism, with an expected 3% increase this year, slightly above budget expectations. That translates to an additional $400,000 in tax revenue, for a total of $30 million that benefits various community projects.

Sales tax projections for 2025 also show continued growth, with an expected 2% increase, for an annual total of $30.8 million. Funding for parks, transportation, affordable housing and education is set to increase.

Meanwhile, the short-term rental tax (STR) for the first 12 months has been completed. Aspen CFO Pete Strecker said it was a new source that was launched in May 2023.

Since then, the City has imposed a 5% STR tax on owner-occupied or exempt properties, and a 10% STF tax on investment/“classic” permit-approved properties.

“After the first 12 months, we’ve raised basically $6.8 million,” he said. “Most of that goes to the social housing program, which is about $4.8 million. The other two projects, capital infrastructure and environmental initiatives, got the other $2 million.”

Strecker said investment in short-term rentals is down 10% this year compared with last year.

“The reason for the reduction was a slight decline in permits after the tax was introduced,” he said. “The larger impact was due to a significant increase in long-term rental activity at these properties.”

City Council member Ward Hauenstein asked how the city can tell from the STR report whether it is achieving any housing benefits for residents. Strecker said the STR community is not required to share its data with the city.

Mayor Torre said he was not particularly enthusiastic about the numbers.

“I don’t think we’re going to have an impact on long-term housing for residents,” he said. “Talking to anyone who rents, long-term rental rates are designed, in terms of residents, not vacationers who stay longer, for a very small niche of residents.”

Torre said he wanted to talk to the City Council about reconsidering the STR permit program.

“I want to make sure the STR permit program is effective in other areas,” Torre said. “I want to make sure it’s effective in other areas. I just don’t think we’re getting those long-term local rentals in that sense, and certainly not in the affordable category.”

He added: “This data is only for one year, so I would like to know more. I don’t need to go into that now, but I think as we get more information, this council or future council should revisit the STR permits to see if our quotas and limits are in place.”

Lodging taxes paint a more nuanced picture. While the average daily rate rose 1%, occupancy fell 7%. Traditional lodging fared well, with a 9% increase in taxable sales, while short-term rentals saw a 5% drop.

Strecker said some of that data is inconsistent because of the end of the ski season and the increased availability of lodging in the off-season. He said that, like the STR tax, most of the lodging tax goes toward affordable housing, with the rest going toward capital infrastructure and environmental initiatives.

The Real Estate Transfer Tax (RETT) market saw a 40% increase in transactions but a small decline in total cash value, reflecting a 29% drop in the average transaction value. Despite this, actual tax receipts remained stable, suggesting a potential revision to RETT expectations is warranted.

Investment portfolios performed well, with $375 million invested and an average annual return of about 4%, generating $5.7 million in income. Corporate bonds and municipal bonds make up a significant portion of these investments, indicating a cautious but strategic approach.

Hauenstein expressed concern that so much of the money was going to investments, but Strecker said the profits covered 25% of funding for some programs in a given year.

Looking ahead to 2025, the city plans to implement a total compensation philosophy to maintain a competitive edge in the labor market. Health insurance premiums will be adjusted, maintaining $0 premiums for employee-only plans while increasing co-pays at other levels. Merit increases are recommended to be up to 5%, consistent with local and regional competitive benchmarks.

Westley Crouch covers Aspen and general reporting for The Aspen Times. He can be reached at 970-384-9124 or [email protected].