This Mammoth Real Estate Q & A appears in the Fourth of July issue of The Sheet.
Q: We own a Mammoth condo that we use and rent. We have been following the “Mammoth wish list” saga for new amenities and know that one or two are likely to not happen because of the lack of money. But we wonder why the town doesn’t just raise the bed tax to pay for these things? Nobody seems to be balking at the bed tax or the new TBID tax. People pay plenty to go to concerts, amusement parks, etc. and we believe that they will pay a little more bed tax if Mammoth has more amenities for them. We want to know what you think?
A: This may be the next step in all discussion, especially when the fiscal shortfall to fund the wish list becomes reality. Right now it is just projection. And I’m not sure about “nobody seems to be balking.”
The recent town council candidates were repeatedly asked to prioritize the wish list and the police station was the top priority based simply on the public safety factor. That project has now been approved by the Council and is considerably over the original budget. The permanent events venue is probably recognized as the potential for the most return on investment.
Events like Bluesapalooza have proven to be economic juggernauts. A permanent venue could attract similar events and economic benefit. And we know the Ski Area will push for the new Airport terminal contribution dollars. And the ice rink/MUF has plenty of emotional attachment and support.
Many true resort communities, especially many mountain resort communities like Mammoth, have dealt with the whole “taxation without representation” quandary for decades (this is an appropriate discussion for Independence Day). This emanated long before escalating Transient Occupancy Taxes (bed tax or TOT) and the hybrid cousin TBID (Tourism Business Improvement District).
The resort taxation without representation notion was founded in the volume of property taxes paid by second homeowners who never had the right to vote on any of the local issues (heck, the ballot screw-ups prohibited me from voting in the last election). Many of these local issues are bonds increasing the property tax rate. Many included schools bonds that the second homeowners were never going to directly benefit from.
The issue has been taken to court and some resort areas have dabbled in giving second homeowners some voting rights. But here in Mammoth only registered local residents get to vote. By-and-large the Mammoth second homeowners haven’t complained. And Proposition 13 keeps those extra bonds and taxes within reason.
But Mammoth taxes the visitors with TOT and the Town has been increasingly aggressive about making sure it is collected. The TOT is currently 13% of the total room rate. This year’s budget estimates it will generate almost $12 million for the Town. Those monies pay for police and public safety, the snow removal and maintenance of the public roads, the public transit system, etc.
In the past couple of years Mammoth Lakes also has a hybrid tax known as TBID (Tourism Business Improvement District). Everybody including local residents pay into this in various forms. This tax is on everything from lodging to lift tickets to restaurants to retail. The rate varies by a somewhat complicated formula but it runs 1-2% in most cases. At some establishments the tax is clearly added to the receipt and others it is calculated in total. At VONS it is identified as “Tourism Assessment.”
TBIDs are becoming more and more common in cities in California. The Mammoth TBID was proposed to the Town Council and ultimately passed. There was initial opposition by some local residents and if-and-when the subject comes up again there will likely be more opposition. Some residents protest by purchasing taxed items in other places. But the visitors pay and mostly don’t even seem to notice. Maybe they are just numb to this minutia.
The TBID helps fund the marketing of the community as a popular tourism destination. The entire marketing budget is large and is also coming under increasing scrutiny by the local watchdogs. But the dirty little secret is the TBID is also essentially paying for the Mammoth Airport settlement that almost bankrupted the Town. (And I will remind everyone; the settlement we are paying is due to the Town’s incompetent attorneys who failed to adequately cross-examine the plaintiff’s expert witness. But so be it.)
So the Town of Mammoth Lakes generates substantial visitor related tax revenue. Most pure resort towns have to, especially mountain resort towns dealing with snow and other costs related to the intense weather. But tourism ebbs-and-flows with the weather and the economy. And tax revenue is tricky to predict; California missed estimated tax revenues by $1B for the first 4 months of 2016.
The Town even has a special surplus Reserve for Economic Uncertainty (which was recently tapped for the police station overrun). It is the municipal version of the “rainy day fund.” The Town fathers of the past created it for a reason.
While the Town generates adequate revenues and nobody “seems” to be complaining, the real question is how much more can the Town tax the visitors and local residents before there is push back. That is a difficult question to answer. Right now Mammoth has survived the recent drought winters. The popularity of summer and the shoulder seasons and the financial health of Southern California have kept the Town sustainable. But there are enough local business closures to indicate that things aren’t perfect. Recessions and droughts have always culled the herd in Mammoth. And of course the fortunate trust funders almost always survive.
The tax and revenue situation looks balanced at this point. The financial conservatives will say build the Reserve for Economic Uncertainty; in other words, save some money. Others (including many people who haven’t been around very long) will say borrow and increase taxes and build more amenities. It has become an almost universal debate. In a resort town it is a dicey balancing act.
One of the “selling points” for increasing these taxes is educating people about what they pay for and where the value is (and that hopefully the money is managed well). One thing I see is that there are different sides to the story and most people don’t appreciate what it is all about.
For instance, snow removal is a big issue. It is a substantial cost to the Town. It is completely unpredictable and the clearing is a real “health and safety” issue. But by the time many of the visitors get here the work is done and they have a free path to get where they are going. Or they wake up in the morning and the work is done. Their bed taxes are paying for it but they likely don’t appreciate all the effort and expense .
Conversely, all those Measure Z lovers who adamantly don’t want nightly rentals in their neighborhood wake up to the same great snow removal on their street. But who paid for it? Most think their property taxes did. But the guy staying at Motel 6 and Seasons Four did. Have they come to appreciate that?
Mammoth residents benefit in untold ways from the revenue generated by TOT and TBID. Without it Mammoth would just be Podunk. And these tax revenues are precious. I remember sitting in public meetings some 25 years ago listening to projections that the Town could someday have the revenue and budget that it has today. It was like a dream. But with the revenue comes responsibility. And the money never goes as far as we think it should. Everything seems to cost more, especially in Mammoth. Does anyone appreciate that?
Mammoth has grown to offer their guests increasing services and amenities. It didn’t happen overnight. And some would prefer it to be the sleepy town it was 30 years ago. But most like all the new amenities and services even if we don’t have the world class ice rink and the peak-spanning gondolas. There is certainly plenty to do and more than enough space to do it in.
The Town also needs to consider what services and amenities will be important to the next generations. Since the Town’s incorporation the community has been catering to baby boomers as the majority. But that is changing rapidly. And the younger generations have different ideas. The “experiences” concept changes the game. And will they care to appreciate any of it? And in 10 years when everyone owns a virtual reality headset will any of this be important?
So raising any of the visitor paid taxes to pay for more amenities becomes a precarious proposition. The tax revenues look good right now and we should appreciate it. But they can be fleeting. Like a “dumper” storm that splits and leaves us nothing. Anyone who has lived through enough cycles in this community knows it.
And I’m not so confident about the ability of the current Town staff to make sound projections on proposals like this. We’ve seen before that they can be down the road while we’re left holding the bag. The economic viability of the Town is more important than the recent accomplishments on their resume.
Ultimately the Town is in a sweet spot right now. Despite the Airport and bankruptcy fiasco and the drought winters, the local government and the community are on relatively sound footing. Is it time to roll the dice or just appreciate the recent good fortune? We have some new faces on the Town Council and we are hoping for true leadership in the coming months and years. I guess we’ll soon find out.