The Town Council is scheduled to consider the fate of the proposed Vail
Conference Center during the next several weeks, and a final decision is
planned for May. The Homeowners Association believes it is appropriate to
state a recommendation and explain the reasons for its position on this
matter. Its position is taken after spending the past two years monitoring
the deliberations of the Council and of its appointed advisory committee.
Recommendation: The Homeowners Association recommends that the Town
Council not proceed with the Conference Center Project now, but
submit the issue of whether to proceed to a second public referendum as soon
as possible.
The need for and benefit to the community of the proposed Vail Conference
Center have not been established. After nearly two years of transparent and
collegial consideration of professional documentation, skepticism remains as
to the value to the community and the financial viability of this project.
Also, changing circumstances since the voters approved funding for the
project, indicate that the community is recovering from its economic
malaise, and need not take the risk of a potential ongoing public subsidy
for a conference center. There are better development opportunities emerging
for Vail which build upon the community’s well-established attributes,
rather than striking out in a new speculative direction with the Conference
Center. These opportunities can spread benefits broadly throughout the
community. The Conference Center will not. Its financial benefits will flow
to a relatively narrow segment of the business community, at substantial
cost to other businesses and taxpayers.
Additionally, industry professionals have advised that a community must
have unanimity of purpose to support a major conference center. In Vail, on
the study committee and among the Town Council, this unanimity of purpose
does not exist. Much has changed from the time when the proposal was brought
to the voters. Today, there is much better information available about the
risks and benefits of the project. This is critical information that the
voters should have had, but did not have to make a reasoned decision on this
critical question at the time of the original vote.
Finally, the Town of Vail’s bond counsel in recent months has
determined that the funding approved by the voters does not require
the Town Council to build the project. The counsel has also recommended
procedures for terminating the Conference Center taxes and the disbursement
of residual revenues, should the Town Council not proceed with the project.
Examination of Issues and Detailed Support for Recommendations: The
following review amplifies the recommendation and rational. It describes
issues involved with the proposed Vail Conference Center which raised
serious and sufficient questions that the proposition should be returned to
the voters for a decision as to whether to proceed. The following changing
conditions head the list of reasons to reconsider the project.
Voters approved the Center for a specific site that would not adversely
affect adjacent property owners and was adjacent to a proposed hotel to be
privately developed on private property. Changing to another site will
result in serious impositions upon adjacent property owners and could
require the investment of additional public resources to build a hotel on
public property.
Voters may not have been aware that as taxpayers they would be liable
to finance any unanticipated ongoing operational deficit from Town funds
that could cause other public services to be curtailed or require
additional tax increases.
Voters were unaware of industry wide conditions that could cause the
Center to be caught in the crossfire of a nationwide war for conference
business, and to be severely underutilized.
Voters were not informed that the conference center would benefit
relatively few businesses and that it could compete with skiing and
cultural tourism and perhaps cheapen the quality of the Vail experience.
Voters were also not told that there are more promising tourism markets to
develop.
The Town of Vail, at this time, given the demand for competing public
improvements, cannot afford going into a new, highly competitive business.
Many other aspects of the Conference Center proposal which are
interlinked with these were considered. The following is a discussion of
elements of these which contributed to the Homeowners Association’s
recommendations.
The Need For An Informed Electorate: In 2002, when the Vail Center
fund was approved by the electorate, information about the experiences of
other municipalities with conference centers, the risks of the project and
likely costs and consequences to the community were not fully developed;
only a brief period of review and public discussion was possible. The voting
electorate was not well informed. Vail can vote now, in 2005, on a
well-informed basis, and the decision can truly reflect the wishes of Vail
residents.
Economic Conditions Are Changing for the Better: The Vail Center was
conceived at a time when a path for the community’s economic
revitalization was not clearly charted. Again, two years later, it is. The
center is now out of step and could become more of a hindrance than an asset
in the community’s economic resurgence. Public subsidies to prime the pump
of economic reinvestment are no longer necessary. Several large privately
financed hotels and commercial and residential projects have begun or are
beginning construction this spring. The pre-sales success of the Vail Square
Arrabelle project will serve as an even larger incentive to redevelop
surrounding properties.
Estimated Construction Costs are Increasing: Project managers are
confronting a difficult job developing an acceptable construction budget for
the project as the architectural design process proceeds. If, the schedule
is delayed, it is speculated by project managers that anticipated increases
in interest rates and other factors, could cause costs to exceed the budget.
Furthermore, the change in location from its original site could result in
unacceptable traffic circulation and related costs. There appears
to be insufficient funds to do the project right. Although the intent is to
guarantee construction costs by means of a contracted Guaranteed Maximum
Price (GMP), there is no totally secure means to prevent cost overruns.
The Business Plan Appears Unrealistic: The consultant’s booking
plan assumes that the Center can meet it financial projections by hosting
conferences throughout the non-ski season. Testimony received from
independent industry sources indicates that nationwide, summer is the low
season for the conference business, with spring and fall being the high
seasons, and winter being in the middle. Vail’s spring, with it
unpredictable weather and the near universal truancy of its local residents
and business owners away on mud season vacations, will all but eliminate it
from consideration by meeting planners. The growth prospect for expanding
summer tourism, independent of the Center, will lessen its ability to rely
upon the long-term availability of low cost hotel rooms. These more
persuasive realities leave Fall, as the only open season for the Center to
maximize its productivity. Alone, it appears this season is insufficient to
attain the fiscal requirements of the Center. Independent operators advise
that the Vail project should add $1 million to its pre-opening marketing
budget. Additionally, it was advised that personnel salaries and benefits
were below current market rates. These sums have not been budgeted and funds
are not available under the Center’s current financing arrangement. There
is concern that marketing funds will have to be redirected to the Center and
away from promoting the larger business community.
The Financial Plan Implies Risk to the Taxpayers: There has been no
scenario provided which does not obligate the Town of Vail and its taxpayers
to underwrite the Center’s financial debt should its business plan fail to
attain its projections. The financial plan does not show that the facility
will be self-sustaining, let alone profitable without material public
subsidy. What has been shown is a plan to privatize the Center’s profits,
while passing the building costs and shortfall in operational revenues on to
the taxpayers. There has been no way found to create a "firewall"
that shelters taxpayer exposure to future tax increases should the
operational deficit exceed the cash flow projections upon which the Center’s
business plan is predicated.
There is Exposure to Higher Taxes: Vail taxpayers appear to be
exposed to tax increases resulting from un-projected increases in costs.
Underlying any tax increase, all commercial and non-improved residential
property taxpayers will pay a disproportional higher tax levy than
residential property owners. These increases will place an even heavier load
upon an already burdened business community. In all likelihood, revenues
generated from convention business will not be distributed widely throughout
the business community. A few large nationally connected hotels with food
and beverage operations will most likely be the prime beneficiaries.
Conferees will be a captive market spending most of their time in the
Center, eating their meals there and staying in hotels that can provide the
largest block of rooms at the lowest price. Residential interests have
little or no incentive to support a property tax increase, as there is no
evidence they will receive a tangible benefit from the Center.
Should a tax increase be required to increase tax revenues, as a
yardstick to raise $1 million from each type of Town of Vail tax that could
be used to pay for the un-projected expenses of the Conference Center, the
increase in tax rate would be: property tax 1.9 mils, sales tax .46%,
lodging tax .28%. Currently the level of Town of Vail tax rates are as
follows: property tax 4.69 mils, sales tax 4.5%, lodging tax 1.5%. The tax
rate for property tax rate for commercial and non-improved residential
property is assessed at nearly 3 ½ times the rate paid by residential
property owners. Commercial and non-improved residential property account
for 34% of all property tax revenues collected with residential property
accounting for 66%. Any increase in taxes would require a vote of the
electorate.
Is there a Bailout Strategy: There is now ample evidence nationwide
that there is a commonly used bailout strategy being applied throughout the
industry, whereby the construction of a conference or convention center is
only a precursor to other speculative development, i.e. flagship hotel,
often requiring further public subsidies. The master plan for the proposed
Vail Center already contemplates such an investment. Public land would be
converted to private ownership, thereby underwriting the profitability of a
hotel development that would provide a dedicated bed base to support the
conference facility. The success of these types of bailouts has received
less than unanimous endorsements. The obligation of the taxpayer is only
deepened if the bailout proves unsuccessful. By several accounts, many
centers nationwide are in this no-other-way-out predicament.
A Better Use For Funds - Emerging Skiing and Tourism Markets: Vail’s
winter and summer marketing efforts have yet to tap into the emerging global
market potential in Europe and elsewhere. The strength of the European
currency (euro) over the dollar is already positively influencing other
Colorado ski resorts and Vail’s economy this ski season. Financial experts
believe that the buying power of the euro in America will be sustained over
the long-term. The depth of the European skiing and tourism market that
would come to Vail, based upon outward appearances, could be considerable.
Redirecting a portion of the community’s marketing effort to Europe could
bring immediate response by next ski season and can build every year
thereafter. It will be three years, at a minimum, before any revenues begin
to flow from the conference center, and then it is still a loosing
proposition for taxpayers. One of the most essential (and expensive)
components of the marketing equation is already in place, direct
international airline service from Europe to Denver/Eagle.
Limited Group Marketing Options: The proposed Vail Conference Center
falls into the "premium niche market" category because of Vail’s
stature as a premier destination resort. The Vail Center must expect to
compete in the highly competitive and demanding market of corporate and
professional associations. Many of these groups can be accommodated in
existing and planned hotel facilities. Vail’s stature is considered by
some industry authorities to be a deterrent to attracting one of the largest
segments of the conference market, SMERF (Social, Military, Educators,
Religious, Fraternal). It is reported that SMERF’s are spendthrifts and
shy away from potential political criticism that results from hosting their
meeting in a premiere resort, which is perceived as an extravagant
expenditure. Nationally, SMERF’s dominate the summer non-prime conference
season, which if promoted locally could stifle the growth of Vail’s summer
cultural tourism efforts. Should the Center have to rely on the SMERF
market, there is the potential it will downgrade the quality of the Vail
product and experience. It is reported that the national conference and
convention industry remains in disarray due to national and international
political circumstances. As these circumstances appear to be long lived,
stability in the industry should not be expected in the near term, even
though conditions are improving in some segments of the market.
Troublesome Competitive Experience: It is noted that a new center
similar in size to Vail’s proposal has recently been opened at the
Broadmoor Resort in Colorado Springs. Conference facilities in some
metropolitan regions similar to that proposed for Vail are reported to be
doing well in the corporate and professional association markets. However,
Vail is not located in a major metropolitan region and the nearby Keystone
Conference Center has its own challenges. According to Town of Vail
consultant studies that have been presented to the public, the Keystone,
Colorado Conference Center had an annual net loss of $3.637 million last
year. The Vail taxpayer cannot afford the potential for losses at this
scale.
Site Planning Questions: The relationship of the proposed structure
to the surrounding neighborhood and streets raises questions. The sheer size
of the structure dominates its adjacent residential neighbors. There could
perhaps be a more sympathetic relationship that accounts for the potential
expansion and redevelopment of the adjacent sites. The Center’s exterior
floor overreach onto an adjacent street right-of-way, presuming a right that
would be denied to private property owners. Link to Vail Conference Center
architectural concept plan by Fentress Bradburn Architects’ on the
Homeowners Association’s web site.
Stress on Traffic Circulation: The complex and competing demands upon
traffic circulation surrounding the combined Lionshead parking structure and
conference center site are extreme to a fault. The interests of the mountain
operator, the Town of Vail, and the Colorado Department of Highways (CDOT)
are at cross-purposes. The design and budget for traffic circulation and
aesthetics of the South Frontage Road is limited. It could be more
imaginative and efficient, if the accommodation for
on-street parking were removed and redundant through or turn lanes reduced,
making provision for high capacity rotary circulation (roundabouts) feasible
where space permits. Other, less onerous traffic circulation issues exist
and remain unresolved for East Lionshead Circle. CDOT has yet to approve the
master plan for the South Frontage Road. It is not likely that CDOT will
concede any right-of-way to the Town for its circulation, because it will
want to insure ample space to add additional lanes to the Interstate in the
future.
Limited Ease of Community Access: The committee’s consultants
report that meeting planners believe that the logistical challenge of
getting to and from Vail is a potential detriment to the success of the
conference center. Congestion by ground or air transportation from Denver
and elsewhere is a growing challenge both on Interstate 70 and at the Eagle
County Airport. Long-term construction projects associated with the
contemplated expansion of I-70 will only exacerbate the frustration of
accessing Vail during those seasons that the center is to be in peak
operation. There has been no analysis presented of the impacts of this to
the viability of the Vail Center. Likewise, no information has been
presented that analyzes the capacity of the Eagle County Airport to provide
regularly scheduled flights that would be able to serve the needs of the
conference center. No analysis has been made of the demand or methods to
finance collateral improvements at the airport. There have been no publicly
known negotiations between Vail, the Eagle County Airport Authority, and
County officials as to expectation of improved air service and systems
necessary to support the Center. Corporate executives, a target market for
the center, require dependable and efficient access. An informed source
reports that these requirements are sometimes not attained at the Eagle
County Airport. Currently, summer service to the Eagle Airport is very
limited.
Vail is now experiencing investment, growth and in many ways true
renewal. The Town Council has an opportunity to allow the voter to relieve
the Town of a risky and perhaps very costly legacy. It should do so.
Contact Vail Town Council: Email: towncouncil@vailgov.com; Voicemail:
970-479-1860; Fax: 970-479-2157; US mail: 75 South Frontage Road West, Vail,
CO 81657. Additional Information is available on
the Association’s website. Please forward to appropriate parties.