Mammoth Real Estate Q&A — The Gorilla In The Room

This column appeared in this weekend’s edition of The Sheet. Mammoth experienced warm sunny weather, superb ski conditions and a BIG crowd.

Q: As the candidates line up for the upcoming Mammoth Lakes Town Council election, what questions are on your mind that you would like to see addressed, especially items that pertain to local real estate?

A: The competency of our locally elected officials can affect real estate in many ways including the willingness of buyers to buy and the motivation for sellers to sell. Mammoth is also one of those unique places where many of the people who have substantial dollars invested in the community don’t get to vote for the local decision makers. Talk about taxation without representation! Planning decisions and development agreements, the execution of the public works, the building department and code compliance, etc. all have a reflection on local real estate values.

Right now, the really big gorilla in the room is the ongoing nightly rentals in the single-family neighborhoods. The issue is contentious and has many facets. It is the quintessential kind of issue that quality leadership can tackle. It has been talked about off-and-on at the Council level with special looks by commissions, committees, analysts and others, with suggestions of referendums and potential litigation and on and on. This hot potato has been tossed around plenty, but the end result is an ongoing and substantial rental industry in the single-family neighborhoods that does not comply with the Town ordinances. Ignoring the problem has become the solution. (They’re so spineless they’ll probably respond by asking me to chair a committee on the subject.)

Nobody seems to think it’s a big deal, but I have some real problems with it. First, my company represents buyers and sellers in these neighborhoods. Some buyers want to purchase homes and generate transient rental income, income that can be substantial. Substantial enough that many potential buyers are looking at the program as an attractive investment package. When you disclose the Town ordinances precluding nightly rentals, those buyers just give you the wink-wink, and mention “just a few friends” (like all of those on VRBO.com). Conversely, other buyers don’t want anything to do with rentals and certainly don’t want to own a home next to one. And that buyer is relying on the Town’s ordinances, and the enforcement of them, to protect his quiet enjoyment. And what’s a potential seller to do if there is a heavily rented house next-door? He may be better off if there’s a clandestine marijuana garden in the house next door instead because at least he “didn’t know about it.” (A potential buyer just might be the owner of the rental next door.) I could go on endlessly about potential scenarios and liabilities, but property owners and local business owners don’t need all of that liability because the Council can’t make a decision.

There is another serious issue and it is only going to get worse. It has to do with dollars. The Mammoth Lakes Town Council, whether they like it or not, has to recognize that ultimately a resort town government is stuck in the position of being in business. It must become deft at generating local revenues through bed tax and managing the budget effectively so that the local residents, local property owners, and the visitors (who pay the bed tax) are all served. Bed tax is simply precious, and becoming more precious all the time. Our next Council better understand this. And anybody who believes there is “no net loss” of bed tax revenues has obviously never owned or run a profitable business. This economy may have made “less worse” an acceptable standard, but reality is there is bed tax revenue escaping everywhere. The Town could take some lessons from our County Tax Assessor on how not to lose revenue.

Here are some of the other dynamics; the online renter is now very tuned-in to the rentals that don’t collect bed tax and will even negotiate non-payment of bed tax to save money (let’s hope they spend the money saved with local merchants). Many higher-end renters love single-family homes and will pay substantially more per night for the experience, especially if it has a (private) spa. More $$ per night should equate to more bed tax? Also, the majority of mountain resort communities allow nightly rentals in single-family neighborhoods, and those include resorts far more prestigious than Mammoth. Can we learn something from them?

I’m not advocating one position or the other (although I have my preference, and I live in a single-family neighborhood). But this town needs to grow up and decide one way or the other, and the decision making process begins with the Council. Whatever the decision, we can then take a proactive position and end the loss and displacement of bed tax dollars. This needs to happen before the Town is “more broke.”

My next question/challenge is for a comprehensive construction stimulus package. Anybody who has a clue knows this town is a constant maintenance and redevelopment project. We had our chance at “the big new” and that opportunity is gone. So we need to improve and work with what we have. Is the Town promoting or helping to facilitate the tax credits for window replacement, furnace and woodstove replacement, etc. granted us under the Federal stimulus? Anyone at the Town realize that many of our affluent second homeowners like tax credits? And our local contractors benefit from helping them get those tax credits? And does it help that we have the highest building permit fees in the world? No wonder lots have become so cheap. With some pro-activity from our government leadership we can keep local people employed and keep the improvement cycle going. The next four years will be critical, and an opportunity too. Do any of the candidates have any ideas?

One other concern is over the Measure R tax dollars designated to the Trail system. One of the true value-added aspects of Mammoth real estate is all of the publicly owned, accessible open space that surrounds us. Local residents, second homeowners and visitors alike are paying into this Measure’s sales tax. Is the new Council going to pay attention to this so it doesn’t become another boondoggle? Or will they be tempted to secretly divert the money to somewhere else? This is really such a great opportunity to accomplish something worthwhile that we can all benefit from. Do they realize that most of the work and trails already exist? Is the new Council committed to paying attention?

I reiterate that ultimately a resort town government, especially now, has to think more and more like a business. I’m looking for Council members who grasp that. The Town can’t print money like the Feds and doesn’t need to provide social services like the County. They need to protect the golden goose of bed tax and insure that the services and amenities they provide make property owners and visitors wanting to come back for more pursuit of happiness.

Happy President’s Weekend!