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Economic White Paper Released

Economic Report Charts 
Ups and Downs Since 1970

October 29, 2008

ASPEN- The City of Aspen today released a "white paper," charting the up sand downs of the local economy since the 1970s - and documenting the shift from retail and lodging to an economy dominated by real estate and construction. The report also comments on the current economy and its implications for Aspen.

"The Aspen Economy" was written by Economics Research Associates (ERA), a resort industry analyst with six offices in the U.S. and one in London. The City of Aspen hired ERA,which sent two partners to town to speak directly with more than 20people while gathering a large amount of data.

A small handful of facts about real estate in the report include:

• The cost of a typical aspen home is enough to buy 25 average homes in the U.S.;
• The $6 million average home price in the Aspen area is a 15-time increase since the early 1980s;
• California is the state where real estate prices spiked the highest in recent decades, but prices there increased only 5.6 times during the same period;
•  From 1980 to 2001, the stock market outpaced Aspen real estate appreciation.

The 36-page white paper is part of the informational effort being conducted for the Aspen Area Community Plan (AACP) update.

"So many of the hot button issues that we'll be talking about in the AACP are driven by economic realities - and in Aspen, those economic realities are off-the-charts," said Ben Gagnon, special projects planner, who oversaw the report. "We are a unique place that is influenced by extremely powerful economic factors, and we ought to get a good handle on what it's all about."

Part of ERA's assignment was to write a report that could be understood by the general public. It is available at www.aspencommunityvision.com.One finding of the report was that during the late 1990s, the Aspen economy shifted from being dominated by retail, restaurant and lodging to real estate and construction.

"In 1985, taxable sales (for retail, restaurant and lodging) of $159 million were the dominate force in the Aspen economic, almost double the volume of real estate transactions," the report said. "Last year, real estate transactions approached $1.8 billion, generating far more economic activity than the508 million of taxable sales (for retail, restaurant and lodging)"

ERA drew on its knowledge of other resorts to compare Aspen to a dozen other major ski areas. The firm also generated some interesting statistics and observations on home prices.

It's often said that Aspen real estate prices might plateau at times, but they never go down. It's a common pitch for local Realtors. ERA found there have been some declines in value during recessions, but far less than experienced in the rest of the country. The explanation is rather simple: "The fact that Aspen real estate values haven't dropped substantially in past recessions reflects the ability of the affluent to hold on to their real estate through downturns," the report says.

In other words, if you don't have to sell in a down market, there's little evidence that the market is down.

The report also covers topics such as the global spike in the number of millionaires since 1980, and the influence of higher personal wealth on American resorts. The report estimates that the average Aspen room rate has jumped 40% in the last five years.

Another interesting trend is a 23% drop in the taxable sales of "specialty retail"(tourist-oriented stores) since 1998, adjusted for inflation. The report says some of this drop may be explained by more out-of-state shipping, which avoids local sales taxes.

"...local retail observers believe the practice has grown steadily, such that the reported taxable figures underestimate the growth in retail sales,"according to the report.

The white paper also discusses the current economic conditions, stating that the nearly 40% drop in the number of real estate transactions this year is an indicator of recession in the local economy. A similar phenomenon occurred at the outset of local and national recessions in the early 1980s and 1990s.

The massive amount of data gathering both to help generate The Aspen Economy white paper, and The State of the Aspen Area report was an accomplishment in itself, according to City staff.

"The effort made this year to gather data over the last several decades was unprecedented, and it will be relatively easy to build on this new database in the future," said Gagnon. "A wide variety of reliable information helps communities make good decisions."

The $60,000 report can be found at www.aspencommunityvision.com. The public is also invited to sign up for small group meetings at the website, which are being held through mid-November.

The small groups generate statements of values and forward-thinking visions for the community that will be further tested at large community meetings in February. An explanation of the public process for the AACP update is also available at the website.