Colorado ski cities are promising excessive returns from tourism to fund nearly every little thing from roads to inexpensive housing and every little thing in between. The idea is that growing tourism will primarily clear up each finances want in every ski city. What does this must do with a Pyramid scheme and the way is that this impacting each Colorado ski city? Why are man Colorado ski city budgets now working a deficit even with growing tourism?
What’s the Definition of a Ponzi/ Pyramid scheme?
A Ponzi scheme is an funding rip-off that pays returns to earlier traders utilizing capital from newer traders, reasonably than from precise income. These schemes promise excessive, constant returns with little threat, however they in the end fail when a adequate variety of new traders can’t be discovered or when many traders attempt to withdraw their cash directly. The schemes are named after Charles Ponzi, a swindler who defrauded hundreds of traders within the Nineteen Twenties
How does a Ponzi scheme issue into Colorado ski cities?
In lots of cities like Steamboat 70% of the final fund finances comes from gross sales tax. The vast majority of the gross sales tax income comes from visitation. In each ski city, the idea has been to extend visitation and also you get larger gross sales tax income after which an even bigger common fund finances. Sadly this doesn’t work. Even with rising gross sales tax income prices are far exceeding any will increase in income. Primarily the elevated tourism is resulting in extra prices for the cities which can be resulting in finances shortfalls.
That is the place the idea of the Ponzi scheme is available in. The idea is to make use of new elevated tourism to fund current tourism that isn’t absolutely paying for itself creating the “Ponzi” impact the place new vacationers are required to maintain the scheme going. Regardless that each metropolis council in each ski city ought to acknowledge the idea above, none of them do. The reply to the finances shortfall is nearly all the time to simply improve tourism
A superb instance is in Breckenridge. Price range shortfalls have council members “questioning if extra occasions might assist clear up the issue.” In essence improve a cash shedding proposition to be able to assist maintain the established order.
Though no person has technically been defrauded, by utilizing the subsequent man to pay for the primary man that isn’t worthwhile is in essence the identical as a extra conventional ponzi scheme besides in politics it’s completely authorized as we as taxpayers proceed to permit it and pay for it!
Here’s what has occurred with Steamboat’s gross sales tax income this 12 months
Let’s use Steamboat for instance. The Concept is that tourism and the advantages it brings funds the vast majority of the town finances coupled with property taxes. Ski cities rely way more closely on gross sales tax than for instance Fort Rock, CO.
In Steamboat and lots of ski cities, the first generator of income is gross sales taxes (together with lodging taxes) on account of visitation.
Steamboat Springs skilled optimistic gross sales tax income progress within the first half of 2025, with collections up 2.28% year-to-date as of June 2025, pushed by robust performances in classes just like the Mountain and Out of City areas, and lodging and short-term rental taxes. Town budgeted for a 3% improve in gross sales tax revenues for the 12 months, reflecting a development of regular progress after a interval of higher-than-expected returns post-pandemic
On the flip aspect, there’s an impending finances shortfall of round 5% yearly that may require cuts. The shortfall is because of larger prices for supplies, labor, upkeep, and so on…
Lengthy and quick, even with tourism income by way of gross sales tax up 3%, the town doesn’t have the funds obtainable to completely steadiness the finances making a loopy suggestions loop of wanting extra visitation although the numbers don’t lie and that may solely additional improve the finances deficit.
Silverthorne tried to interrupt the cycle, nevertheless it failed
One technique to attempt to break the cycle of elevated prices vs tourism is to create affect charges in order that new demand for providers really pays for itself and doesn’t set cities up for the present Ponzi scheme. Silverthorne hearth tried to introduce affect charges:
Examples of the utmost charges proposed embrace: a $1,084 charge for properties sized between 1,001 sq. toes to 2,000 sq. toes; a $3,961 charge per 1,000 sq. toes for brand new retail developments; a $2,198 charge per 1,000 sq. toes for workplace area growth; and a $7,507 charge per 1,000 sq. toes for institutional developments.
Some council members felt the charges might additionally deter new companies from eager to arrange store in Silverthorne. Council member Tim Applegate famous how Silverthorne has two motels slated to return to city, and the way the proposed charge of $1,493 per 1,000 sq. toes for motels might have dissuaded them from selecting Silverthorne.
Sadly, as we will see time and time once more, the brand new resort will in the long term really trigger Silverthorne to have a bigger finances deficit because the income generated doesn’t practically cowl the prices for the neighborhood.
Concerning the resort referenced above, let’s assume they might want to rent 14 new folks to work there. Not one of many staff would have the ability to afford a house on the town because the median residence worth is 1.1m. Who pays for the housing for the employees? Sadly the taxpayer is then compelled to fund inexpensive housing within the space which additional strains the town’s finances. This is the reason I discussed above that the majority Colorado ski cities are working a “ponzi” scheme which means that they may all the time want the subsequent vacationer to proceed paying to be able to fund the present mannequin.
How can Colorado cities break the Ponzi scheme?
Metropolis councils all through Colorado want to interrupt the cycle of the tourism ponzi scheme
- Proper measurement county/metropolis budgets: Identical to cities/counties all through Colorado, most ski cities gorged on the Covid increase and had big will increase of their metropolis budgets together with new metropolis halls, elevated staffing, and so on.. These budgets should be rightsized for the present financial circumstances.
- Quantify the prices of various tourism: Each metropolis must cease complaining about an excessive amount of tourism or not sufficient tourism and really do one thing about it. There ought to be a quantity put by several types of tourism and on the finish of the day, use this info to information choices to encourage and/or discourage worthwhile vs unprofitable tourism. For instance, if day tripping from Denver just isn’t worthwhile for Summit county, construct much less parking for individuals who go to for the day and any parking the place they aren’t staying in a single day and so they aren’t a resident of the county they pay a bigger parking charge. Every metropolis/county must decide what works for them, however the established order just isn’t working.
- Influence charges: New motels and different companies which can be catered to the tourism trade and new growth apart from inexpensive housing ought to have affect charges. There are big prices to the neighborhood for a brand new resort and the prices to the neighborhood for inexpensive housing, police, and so on… are at present not even coming near being paid for by gross sales tax income so one time charges up entrance should be paid to be able to steadiness the impacts.
Ponzi scheme alive and properly in Colorado ski cities
Breckenridge ought to be a warning with tourism starting to fall, a lot of that is due, in my view, to a degradation of the consumer expertise as a result of principle of city councils to simply add extra tourism. In some unspecified time in the future this ruins the expertise, and folks will select substitutes whether or not that’s one other ski city or another exercise like a cruise.
Sadly, although the numbers don’t lie and tourism just isn’t paying its manner, the reply continues to be to extend tourism thereby perpetuating the present scenario and creating the affect we’re seeing in Breckenridge.
Till ski city councils and their constituents are able to make some laborious selections, the finances points going through virtually each ski city will proceed to develop till there’s some breaking level. Though the three strategies above usually are not rocket science, I’ve but to see a single metropolis council have the political will to deal with the present scenario.
Further Studying/Assets
- https://steamboatsprings.internet/CivicAlerts.aspx#:~:textual content=Junepercent202025percent20Finalpercent20Salespercent20Taxpercent20Reportpercent20STEAMBOAT,2024percent20collectionspercent20orpercent20anpercent20increasepercent20ofpercent20$133percent2C485.
- https://www.steamboatpilot.com/information/city-faces-service-cuts-as-2026-sales-tax-projections-point-downward/
- https://www.summitdaily.com/information/the-reality-is-down-is-down-breckenridge-tourism-office-elected-officials-hone-in-on-drop-in-summer-tourism/
- https://coloradohardmoney.com/breckenridge-smarter-than-steamboat-and-winter-park/
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