Steamboat’s 2017 airline program budget last to include .25 percent sales tax in foreseeable future
New era in airline program funding
Steamboat Springs — The board of directors of the Local Marketing District approved a 2017 operating plan and budget Aug. 19 that marks the beginning of the end of an era in the way Steamboat Springs secures more robust commercial air service at Yampa Valley Regional Airport.
The 2017 budget is the last time, for the foreseeable future, that funding for the airline program will rely in part on a .25 percent general city sales tax to help attract winter flights.
City voters approved the tax by a 61 percent margin in 2011 for a period of five years. But the LMD board, anticipating that its reserve fund will soon exceed $7 million, opted not to seek renewal of the tax in the November election.
The tax sunsets on Dec. 31, and the 2017 budget still contains $1.55 million in revenues collected in 2016 from the .25 percent sales tax, as well as $1.95 million in sales tax reserves. But a year from now, when the LMD takes the 2018 budget to the Steamboat Springs City Council, there is likely to be a line item for sales tax reserves in the budget, but no new sales tax revenues will be available.
LMD Board Chairman Bob Milne acknowledged Friday that just how long the airline program can fly without the sales tax is an open question. As cities across the nation compete to attract a finite fleet of commercial aircraft to their market, the asking prices demanded by the airlines aren’t likely to go down, and the money to back revenue guarantees will have to come from reserves and other sources, Milne said.
City Finance Director Kim Weber, who attends most LMD board meetings, will present the 2017 budget, including potential expenditures capped at a little more than $5.77 million to City Council at its regular Sept. 6 meeting. The first $1.11 million committed to the air service bill annually is provided by the Steamboat Ski and Resort Corp., with the balance coming from a mix of sales and accommodation taxes and associated reserve funds.
The $5.77 million proposed “budget caps” document for 2017 is potentially misleading until one understands that it represents a worse case scenario; the program rarely comes close to paying the airlines’ maximum revenue caps committed in individual contracts with the airlines.
That’s because the passenger numbers and the yields from those passengers — reflecting ticket prices — typically cover more than half of the amount of the overall program costs.
The 2016 budget is a case in point. This year the budget cap was $4.76 million but the actual amount the LMD had to remit was $2.01 million, again with the Ski Corp. contributing the first $1.11 million of that number. And if the LMD was ever unable to pay the balance, Ski Corp. is committed to making up the shortfall.
And board member Rod Hanna suggested the LMD board send a signal that it hasn’t ruled out seeking renewal of the sales tax in the future.
The board has plans, beginning this autumn, to publish an annual community report on the operations of the airline program.
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