Vail sues Vail, town of Vail  has resounding win; what does this mean for real estate?

First, I had to share the joke above.  For anyone that lives or spends time in the mountains it is unfortunately very relatable😊 It is a bit ironic (and confusing) as the company Vail resorts sues the city that its name originated from.  The suit highlights a not so happy marriage or relationship or breakup of the two Vails.  In a nutshell Vail resorts and Vail are having a legal tango over the development of a site within the city of vail.  To be honest, the lawsuit is just noise, there is a much deeper relationship issue between the two that could get very messy and ultimately impact both Vail resorts and the city of Vail.  Who won in the lawsuit?

What is the current dispute between Vail resorts and the City of Vail over?

The ski-resort company, Vail resorts,  has proposed building units for 165 workers on a property in East Vail as the town faces an affordable-housing crisis, but town officials have voted to condemn the property to preserve it for a bighorn sheep herd.

The City of Vail passed an ordinance (16) with community support to condemn the parcel in order to protect it as open space.  The City subsequently offered Vail resorts 12 million for the parcel along with alternative sites for building affordable housing which Vail resorts rejected.

The case is now in the hands of an Eagle county court to decide who ultimately will succeed in this dispute.

Town of Vail’s resounding win in the lawsuit:

On Friday, June 30, Eagle County District Court Chief Judge Paul Dunkelman issued an order, ruling in favor of the town of Vail in the immediate possession hearing against Vail Resorts.

The judge’s order grants the town’s motion for immediate possession, determining that the town had the authority to condemn the East Vail site, that the town is taking the site for a public use and purpose and that there is a necessity for the town to acquire the property.

The Judge was not happy about the case and wrote: “the Town and Vail Resorts have been unable to work together to jointly focus on addressing these needs and meeting these obligations, at least as to the Subject Property.  Instead of meeting their responsibilities and addressing workforce housing and protection of wildlife habitat in a responsible fashion, the Town and Vail Resorts have chosen to defer this decision to the Court. While this is their right, it is also a failure on the part of the Town and Vail Resorts.”

The case is just noise: much bigger issues

The case regarding the parcel for affordable housing is very surprising as Vail resorts is heavily dependent on the city for the functioning of its Vail ski resort.  Vail resorts employees live in the community of Vail, the resort requires city services from water, sewer, police, fire, etc…

On the flip side, Vail resorts is a huge generator of revenue for the City of Vail from both property taxes along with sales tax revenue.  Both Vail and Vail resorts are in a relationship/marriage.  Regardless of how unhappy either party is, they are dependent on each other, but this is not a marriage of equals.

City of Vail will ultimately prevail in the relationship

The relationship between Vail and Vail resorts is not a marriage of equals.  The city of Vail has a much stronger hand over the long term.  A good example is the recent proposal by Vail resorts to upgrade some lifts in Park City.  This should have been a rubber stamp to spend 30 million on lift upgrades, but Park City blocked this proposal due to residents’ concerns about overcrowding.

Vail Resorts’ issues have spilled from crowding at under-staffed resorts into conflicts with communities where it operates. Which has happened before but not to this scale. Park City locals in 2016 forced Vail Resorts to abandon its plan to trademark “Park City.”

Lawsuit highlights a bigger issue in Vail and other Colorado resort towns

The issue between Vail resorts and the city of Vail is just the tip of the iceberg and highlights the bubbling conflict between residents and resort operators.  These issues were here before Covid, but have since become exacerbated with many full time residents feeling overwhelmed from the record tourism that is impacting quality of life.  The full time residents are now voting for like minded city councilors, mayors, etc.. that will only escalate the tension between the town and the resort.

What does this conflict mean for Colorado ski town real estate

1. More balance between tourism and residents: We are already seeing this with the implementation of short term rental regulations to try to balance the amount of visitors.  Look for these proposals to continue to accelerate in the coming years and some property owners will likely get caught in the cross hairs by not be able to rent a property that they intended to.
2. Higher taxes/prices: Cities will also use higher taxes to help balance residents concerns.  Almost every ski town has or is in the process of increasing taxes on tourism from lift taxes to nightly rental taxes, etc…  The taxation side is likely just getting started as I see more communities opting for a lift tax or other tax to offset the growing cities expenses for affordable housing and other services.

Summary

I am a bit surprised at the tact that Vail resorts took in Park city during the lift upgrades and now in Vail regarding a parcel. It clearly did not work in Park City and didn’t work in Vail either.

In the long run, the city of Vail will ultimately prevail as residents concerns will continue to be a thorn for Vail.  Ultimately, someone is going to pay and the burden will increasing fall on tourists.  In the end, costs are going to also rise for Vail resorts as the cost of doing business in each of these cities rises and will ultimately lead to lower profits.

 

Additional Reading/Resources

 

1. https://www.vaildaily.com/news/judge-grants-vail-immediate-possession-of-vail-resorts-owned-site-in-east-vail/

 

2. https://www.bizjournals.com/denver/news/2022/09/02/colorado-vail-resorts-lawsuit-affordable-housing.html
3. https://www.vaildaily.com/news/vail-resorts-rejects-vails-12-million-offer-for-east-vail-land/
4. https://www.vaildaily.com/news/vail-resorts-files-complaint-against-vail-in-district-court-alleging-misuse-of-emergency-ordinance/
5. https://coloradosun.com/2022/06/17/park-city-planning-vail-resorts-chairlifts/

 

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Written by Glen Weinberg, Owner 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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