Colorado ski towns are promising high returns from tourism to fund just about everything from roads to affordable housing and everything in between. The theory is that increasing tourism will essentially solve every budget desire in each ski town. What does this have to do with a Pyramid scheme and how is this impacting every Colorado ski town? Why are man Colorado ski town budgets now running a deficit even with increasing tourism?
What is the Definition of a Ponzi/ Pyramid scheme?
A Ponzi scheme is an investment scam that pays returns to earlier investors using capital from newer investors, rather than from actual profits. These schemes promise high, consistent returns with little risk, but they ultimately fail when a sufficient number of new investors can’t be found or when many investors try to withdraw their money at once. The schemes are named after Charles Ponzi, a swindler who defrauded thousands of investors in the 1920s
How does a Ponzi scheme factor into Colorado ski towns?
In many cities like Steamboat 70% of the general fund budget comes from sales tax. The majority of the sales tax revenue comes from visitation. In every ski town, the theory has been to increase visitation and you get higher sales tax revenue and then a bigger general fund budget. Unfortunately this does not work. Even with rising sales tax revenue costs are far exceeding any increases in revenue. Essentially the increased tourism is leading to more costs for the cities that are leading to budget shortfalls.
This is where the concept of the Ponzi scheme comes in. The theory is to use new increased tourism to fund existing tourism that is not fully paying for itself creating the “Ponzi” effect where new tourists are required to keep the scheme going. Even though every city council in every ski town should recognize the theory above, none of them do. The answer to the budget shortfall is almost always to just increase tourism
A good example is in Breckenridge. Budget shortfalls have council members “wondering if more events could help solve the problem.” In essence increase a money losing proposition in order to help sustain the status quo.
Although nobody has technically been defrauded, by using the next guy to pay for the first guy that is not profitable is in essence the same as a more traditional ponzi scheme except in politics it is perfectly legal as we as taxpayers continue to allow it and pay for it!
Here is what has happened with Steamboat’s sales tax revenue this year
Let’s use Steamboat as an example. The Theory is that tourism and the benefits it brings funds the majority of the city budget coupled with property taxes. Ski towns rely much more heavily on sales tax than for example Castle Rock, CO.
In Steamboat and many ski towns, the primary generator of revenue is sales taxes (including lodging taxes) due to visitation.
Steamboat Springs experienced positive sales tax revenue growth in the first half of 2025, with collections up 2.28% year-to-date as of June 2025, driven by strong performances in categories like the Mountain and Out of Town areas, and accommodation and short-term rental taxes. The city budgeted for a 3% increase in sales tax revenues for the year, reflecting a trend of steady growth after a period of higher-than-expected returns post-pandemic
On the flip side, there is an impending budget shortfall of around 5% annually that will require cuts. The shortfall is due to higher costs for materials, labor, maintenance, etc…
Long and short, even with tourism revenue via sales tax up 3%, the city does not have the funds available to fully balance the budget creating a crazy feedback loop of wanting more visitation even though the numbers do not lie and that will only further increase the budget deficit.
Silverthorne tried to break the cycle, but it failed
One way to try and break the cycle of increased costs vs tourism is to create impact fees so that new demand for services actually pays for itself and doesn’t set cities up for the current Ponzi scheme. Silverthorne fire attempted to introduce impact fees:
Examples of the maximum fees proposed include: a $1,084 fee for homes sized between 1,001 square feet to 2,000 square feet; a $3,961 fee per 1,000 square feet for new retail developments; a $2,198 fee per 1,000 square feet for office space development; and a $7,507 fee per 1,000 square feet for institutional developments.
Some council members felt the fees could also deter new businesses from wanting to set up shop in Silverthorne. Council member Tim Applegate noted how Silverthorne has two hotels slated to come to town, and how the proposed fee of $1,493 per 1,000 square feet for hotels could have dissuaded them from choosing Silverthorne.
Unfortunately, as we can see time and time again, the new hotel will in the long run actually cause Silverthorne to have a larger budget deficit as the revenue generated does not nearly cover the costs for the community.
Regarding the hotel referenced above, let’s assume they will need to hire 14 new people to work there. Not one of the workers would be able to afford a home in town as the median home price is 1.1m. Who pays for the housing for the workers? Unfortunately the taxpayer is then forced to fund affordable housing in the area which further strains the city’s budget. This is why I mentioned above that most Colorado ski towns are operating a “ponzi” scheme meaning that they will always need the next tourist to continue paying in order to fund the current model.
How can Colorado cities break the Ponzi scheme?
City councils throughout Colorado need to break the cycle of the tourism ponzi scheme
- Right size county/city budgets: Just like cities/counties throughout Colorado, most ski towns gorged on the Covid boom and had huge increases in their city budgets including new city halls, increased staffing, etc.. These budgets need to be rightsized for the current economic conditions.
- Quantify the costs of different tourism: Every city needs to stop complaining about too much tourism or not enough tourism and actually do something about it. There should be a number put by different types of tourism and at the end of the day, use this information to guide decisions to encourage and/or discourage profitable vs unprofitable tourism. For example, if day tripping from Denver is not profitable for Summit county, build less parking for people who visit for the day and any parking where they are not staying overnight and they aren’t a resident of the county they pay a larger parking fee. Each city/county will have to determine what works for them, but the status quo is not working.
- Impact fees: New hotels and other businesses that are catered to the tourism industry and new development other than affordable housing should have impact fees. There are huge costs to the community for a new hotel and the costs to the community for affordable housing, police, etc… are currently not even coming close to being paid for by sales tax revenue so one time fees up front need to be paid in order to balance the impacts.
Ponzi scheme alive and well in Colorado ski towns
Breckenridge should be a warning with tourism beginning to fall, much of this is due, in my opinion, to a degradation of the user experience due to the theory of town councils to just add more tourism. At some point this ruins the experience, and people will choose substitutes whether that is another ski town or an alternative activity like a cruise.
Unfortunately, even though the numbers do not lie and tourism is not paying its way, the answer continues to be to increase tourism thereby perpetuating the current situation and creating the impact we are seeing in Breckenridge.
Until ski town councils and their constituents are ready to make some hard choices, the budget issues facing almost every ski town will continue to grow until there is some breaking point. Although the three suggestions above are not rocket science, I have yet to see a single city council have the political will to address the current situation.
Additional Reading/Resources
- https://steamboatsprings.net/CivicAlerts.aspx#:~:text=June%202025%20Final%20Sales%20Tax%20Report%20STEAMBOAT,2024%20collections%20or%20an%20increase%20of%20$133%2C485.
- https://www.steamboatpilot.com/news/city-faces-service-cuts-as-2026-sales-tax-projections-point-downward/
- https://www.summitdaily.com/news/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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Glen Weinberg personally writes these weekly real estate blogs based on his real estate experience as a lender and property owner. He is the owner of Fairview Commercial Lending. Glen has been published as an expert in hard money lending, real estate valuation, financing, and various other real estate topics in Bloomberg, Businessweek ,the Colorado Real Estate Journal, National Association of Realtors Magazine, The Real Deal real estate news, the CO Biz Magazine, The Denver Post, The Scotsman mortgage broker guide, Mortgage Professional America and various other national publications.
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