Debate continues: Would town of Olympic Valley be a financial failure?
Visit placer.ca.gov/departments/lafco to view the draft Comprehensive Fiscal Analysis for the proposed town of Olympic Valley.
OLYMPIC VALLEY, Calif. — The economic viability of the proposed town of Olympic Valley remains under debate, despite a firm’s findings last month suggesting the community would be a financial failure.
In response to comments received at Wednesday’s well-attended public workshop on the proposed town’s draft Comprehensive Fiscal Analysis, the Placer County Local Agency Formation Commission directed financial consultant RSG to reevaluate the document and return to the commission next month.
“Projecting the future can be very difficult to do,” said Jim Simon, principal of RSG. “We had to come up with some forecast of what we think is reasonably expected to occur within the community. We had to take that into account in the forecast.
“It doesn’t mean it will happen. It means it could happen, and to our best judgment that’s what we believe to be appropriate.”
After the document’s release, RSG found errors that over-projected the town’s predicted expenses by $171,000 for 2017, Simon said.
However, that does not change the firm’s finding that incorporating Olympic Valley appears financially infeasible, he said.
Yet, Tom Sinclair, with Municipal Resource Group, who is a consultant for Incorporate Olympic Valley, said other errors remain in the draft CFA that, if addressed, would show the proposed town fiscally viable. According to him, they include:
• Cities used to estimate town expenses were not comparable due to not having similar populations and level and range of services. As a result, the draft CFA overestimates several town expenses such as employee, attorney and insurance budgets.
• The recommendation that the reserve fund should be 30 percent of projected revenue is beyond Government Finance Officers Association’s best practice, and therefore should be lowered to 17 percent. In addition, the reserve fund should not be listed as an expense, since money isn’t being spent.
• The draft CFA should not factor in and assume the outcome of alimony-like discussions — referred as “revenue neutrality negotiations” — between incorporation proponents and Placer County that haven’t begun.
“This CFA is marred by incorrect assumptions, mathematical miscalculations and internal inconsistencies,” said Fred Ilfeld, chair of Incorporate OV Foundation, a financial arm of IOV. “The devil is in the details, and there are many details here.”
Meanwhile, consultants for Squaw Valley Ski Holdings and the group Save Olympic Valley — which have been vocal in their skepticism of incorporation — support findings of the RSG document.
“In spite of what you heard (Wednesday), my assessment is that the CFA is very well put together,” said Matthew Newman, co-founder of Blue Sky Consulting Group. “It used reasonable assumptions and sound methodology. … It’s not unusual to find some things you might want to disagree with if you’re going through to find some things that are maybe in your favor.”
Further, he pointed out the volatile nature of the proposed town’s revenue sources. They include:
• Transient occupancy tax — the town’s main source of revenue — is tourism-dependent, which can be impacted by weather, the economy and natural disasters.
• Projected TOT and sales tax revenue is also dependent upon the amount and timing of development that RSG factored into its analysis.
“This whole CFA tells me, or should tell you and me, is that incorporating a new town is inherently a risky venture,” Newman said. “You can’t see into the future.”
The draft CFA was released May 21 and is the basis for revenue neutrality negotiations.