The flurry of commercial real estate sales in the city of Aspen late last year padded the coffers of both the local affordable housing fund and the Wheeler Opera House, blowing original budget projections out of the water.
Commercial real estate sales in 2012 alone brought in a little over $1.3 million in Real Estate Transfer Tax (RETT) revenue for both the city’s housing fund and the Wheeler. Since the 1970s, the municipal government has collected a 1 percent tax on all real estate sales in the city that goes toward the housing program, and 0.5 percent for the Wheeler’s operations.
In 2012, commercial real estate sales totaled $90,460,250; $62,220,600 of that occurred in December with seven downtown buildings changing hands, according to city documents.
And while that is more than any other year in the past decade in terms of commercial sales, the bulk of the city’s RETT collections come from residential real estate transactions, which accounted for 87 percent of the total activity; 13 percent of last year’s revenue came from downtown building sales.
All real estate sales within the city limits totaled nearly $700 million last year. The total RETT revenue collected by the city last year on all those transactions was $10.05 million — 25 percent more than 2011. The housing fund, known as the 150 fund, received $6.59 million. The Wheeler brought in $3.46 million.
The money funneling into the housing RETT fund already has been dedicated. The boost will help the city’s effort in building the second phase of the Burlingame Ranch affordable housing project this year. Aspen City Council is poised to sign off tonight on a $16.78 million contract with Haselden Construction to build four buildings that include 48 units. The total amount budgeted for this year in the 150 fund for Burlingame is $17,814,980, which includes some site work that didn’t get finished last year, Assistant City Manager Barry Crook said.
The fund’s balance as of Friday was $14 million; at the beginning of 2012 it was $15.5 million, according to Alice Hackney, the city’s accounting manager and controller. The projected balance at the end of this year is $2 million. In 2008 and 2009, that fund had a negative balance due to the city’s land-banking activity when four properties were purchased for $31 million for future affordable housing projects.
Crook said it remains to be seen if the city will have to borrow money in order to finish Burlingame II.
“Really, it depends on if the developers can deliver the buildings this year or next year,” he said. “The borrowing is more dependent on the timing of the sales. ... If the timing of the building delivery doesn’t work, we definitely will have to borrow.”
Two of the buildings are expected to be complete in December and the remaining two are scheduled to be done in 2014. The city is projecting that the revenue brought in from the sale of the units will be almost $4.7 million, so if borrowing is necessary it will amount to a few hundred thousand dollars, Crook said.
The city projected lower RETT revenue than what actually was collected last year, which provides more of a cushion in the financing of Burlingame.
“We made plans based on a lower dollar amount in RETT revenue,” Crook said. “Having more cash in the fund will certainly help.”
RETT collections for December 2012 were up more than 200 percent from the same month in 2011. RETT collections ended the year with four months of sizable increases versus 2011. For the year, collections were up about 25 percent over 2011, and 14 percent ahead of budget projections.
Commercial RETTs in 2012 were seven times higher than in 2011.
“[The funds] did come in higher than projected so this is an extra bonus,” Hackney said.
Crook and real estate brokers attribute the flurry of commercial sales in December to property owners wanting to sell before the capital gains tax increased this year.
Last year’s RETT revenue was the highest since 2007, when the city brought in north of $15 million, or 49 percent more than 2012. The biggest year for RETT collections, however, was in 2006, when the city brought in over $17.365 million.
The lowest haul in recent years was in 2011 with just a little over $8 million in RETT revenue — 98 percent of which was from residential sales and 2 percent commercial.
“This shows the volatility of this revenue,” Hackney said. “It’s very dependent on the market.”