The Silver Lining
by Seth Cagin
Jul 04, 2009 | 1852 views | 13 13 comments | 28 28 recommendations | email to a friend | print

For most of the last twenty years, if you wanted to live and make money in Telluride, your best option was real estate or real estate development, or a closely related field like banking, architecture, or home furnishings.

Or you could be comfortably middle class by working for a local government or the school district, especially if you could get into affordable housing. There were really very few other professional options that paid enough to support a Telluride lifestyle.

There have been a couple of obvious reasons for this.

First, the entire country and much of the world have been living through an epoch where speculative investment was far more lucrative than owning or running an operating business. (This is one reason metropolitan daily newspapers are in trouble, because they leveraged themselves to the max rather than attending to their core businesses.)

The smart move in Telluride, given our natural assets (unsurpassed beauty, recreational opportunity) and liabilities (remoteness, high cost of living), was to develop and sell properties that were fundamentally not homes but were equity investments that happened to look like homes. Like other equity investments these past few decades, the basis for valuing these properties became divorced from underlying economic realities, and because of lax regulation, banks were all-too-eager to lend against those exaggerated values. But as long as the bubble lasted, individuals could and did make good money in the local real estate market.

The second reason the Telluride region became so heavily over-invested in real estate is because our zoning and political culture strongly encouraged it. Developers could create residential properties within existing zoning and without facing the enormous mitigations required of tourist-related construction, not to mention the headaches and risks of operating a hotel once it was built. There weren’t all that many investors for tourist-related development in the first place, but there were some, and they faced nothing but discouragement. The local political culture has been passionately anti-growth, and understandably so, given the consequences of overdevelopment on exhibit elsewhere in the Rockies. All of the political pressure has been for lower densities, which again favored sprawling residential development.

Combine a macroeconomic climate fueled by speculation with local politics that were militantly anti-growth and the outcome was all-but-inevitable. Despite our best intentions to build a sustainable community, we built instead a community for the gilded age, with gargantuan private homes and far too few tourist accommodations to support a vibrant economy with a middle class.

This might have worked indefinitely if the bubble had lasted indefinitely. But the gilded age has come to a crashing close, as we all knew it had to, and the question for Telluride and Mountain Village now and for the next decade is where do we go from here.

Wrenching, painful change us upon us, whether we like it or not. Our real estate community, which has created our prosperity over the last several decades, will not vanish, and people will still want to live and invest in Telluride. But even our most bullish real estate brokers recognize that the market is not going to be what it was anytime soon, and maybe never.

The silver lining in this crash is that finally, politically, the Telluride region may be forced to strive for balance. Can we possibly have both a real estate sector that is not unsustainably overheated and a tourism sector that is not unsustainably comatose? Is this too much to hope for? Perhaps the portion of the community that has been most leery of growth, and has fought it at every turn, will understand that all growth is not equally objectionable, that some forms of growth are more sustainable than others, and that no growth, ultimately, is not a viable option.

Having been deeply wounded by growth fueled by leverage, hopefully some of the people who wish to remain in Telluride and make a living here will step back from the get-rich-quick mentality of the late, unlamented gilded era and dedicate themselves instead to the one sustainable enterprise that can really work here: hosting visitors.

We may not get obscenely rich being the tourist town we were always meant to be, and certainly not as rich as we did when the houses we bought one year were worth twice as much just a few years later. But we can have a sustainable community.

From the bottom of the Great Recession, where we find ourselves now, that doesn’t look so bad, does it?

Comments-icon Post a Comment
July 08, 2009
calling someone a total tool be considered a problem on this little comments thingy?
July 07, 2009
'We' is everyone i agree with.
July 07, 2009
Have you been appointed to speak for a group, or is that the royal "we?"
Eggs Actly
July 06, 2009
it's not as though we have 100% occupancy, or even close to it.

some folks tried to make this area something that it isn't.

OK you gave it a go. fair enough. but you couldn't do it.

don't blame others.

we got here first and we didn't want what you wanted. that's our right.

if we prevailed then man-up and admit you weren't up to the task. stop whining and either enjoy a simpler life here or go find what you want.

we will prevail again. the world sees things our way: it's about the seventh generation.

ta ta
where's the evidence
July 06, 2009
Where's the evidence that higher density would provide a more vibrant tourist economy. Last I heard tourists stay away from trashy places.
July 06, 2009
Can T3elluride only succeed as a planned economy? Won't market forces do better or is it just that market forces aren't saying what some people want to hear?
July 06, 2009
Telluride has been down-zoning since the days of TREPAC and it is just too small to host a successful tourist economy or much of a diversified economy.

The down-zoning and condemnation of the Valley Floor was a form of mass-suicide that only a narrow minded and elitist community could dream up.

We knew that Telluride has always had a "boom-bust" economy, yet even after years of planning for a sustainable economy the "NO poople" who know everything led us to a world where they were the "big fish" in the pond or a mud puddle I once knew.

I always thought Douglas Adams wrote this after visiting Telluride from Santa Fe where he was living.

. . . imagine a puddle waking up one morning and thinking, 'This is an interesting world I find myself in, an interesting hole I find myself in, fits me rather neatly, doesn't it? In fact it fits me staggeringly well, must have been made to have me in it!' This is such a powerful idea that as the sun rises in the sky and the air heats up and as, gradually, the puddle gets smaller and smaller, it's still frantically hanging on to the notion that everything's going to be alright, because this world was meant to have him in it, was built to have him in it; so the moment he disappears catches him rather by surprise. I think this may be something we need to be on the watch out for....

Seth's right
July 05, 2009
What a relief. Instead of choosing "gargantuan private homes," we have a true tourist amenity: the Valley Floor.
Spirit of 76
July 05, 2009
Truer words were never spoken FOM
July 05, 2009
Truer words were never spoken FOM
July 05, 2009
Seth, you wrote: "far too few tourist accommodations to support a vibrant economy with a middle class".

If our average annual occupancy rate for lodging is about at 50% capacity, most systems analysts would tell you there's PLENTY of headroom to scale up from where we're at. Why not push the envelope of our current setup and see how things unfold? In my opinion, I believe this to be a much more sound approach in so far as learning about unintended consequences before they're magnified & more difficult to reverse or steer.

We've heard plenty of talk from individuals with special interests that our bedbase isn't comprised of the "right kind" of properties such as 4 star branded hotels to enable a critical mass of a particular target market (i.e. affluent).

Why should any one individual or group DICTATE the marketing trajectory of an entire community (which happens to be surrounded by National Forest Service lands) which has a multitude of varying interests? There's clearly a marketing position which we could embrace which entails high density low cost lodging (i.e. hostels, increased camping, RV, 3 star hotels) and ultimately affect the community in a positive manner.

Maybe the big whigs won't get as rich as they would've without the Town of Telluride subsidizing the presence of a Hyatt at lift 7, but you know what ... there wouldn't be a proportional distribution of wealth anyway when a visitor shells out $245 per night vs. $79. Does anyone believe that extra $170 will automatically be thrown into a glass jar to be split up among the working class?

Of course there will be the retort of the false choice of 4 star visitors who will throw money in your face vs. those who will only brown bag PB&J ... leaving all of our restaurants out in the cold. Sorry, it is hardly a one or the other proposition & there are no hurries. An argument could be made there is a "sweet spot" in the market which affords middle class Americans an opportunity to stay overnight in Telluride and have enough funds to "live it up" a little. This is possibly a much larger & sustainable market in an age of diminishing wealth.

Again, the question here is why should any one person or entity be "charged" with deciding which direction Telluride ought to pursue? Community steering committees placed in a sandbox from the get go are not truly "community input mechanisms" nor are so-called work sessions put together by private entities. The unstated & underlying follow-up question is whether or not government ought to play an active role in shaping the free market to any end? If so, the former question becomes that much more critical in so far as who's calling the shots with taxpayer funds and whether there exists an equitable situation?
July 05, 2009
"But the gilded age has come to a crashing close, as we all knew it had to . . . "

Um, Seth, do you mean that you knew but decided to play 'booster journalism'(aka urinalism) instead?

i don't recall you being the warning light. i recall you fanning the pro-development lemming-itis.

so, why should we listen to you?

but, ok you're article is pretty much correct.

i'm thinking its time to expose the incompetents that have been in government too long. can you find it in your new found vision to expose elaine?

can you open the public's eyes to the error in allowing the Town to dictate the economic development of the region ie: where the commercial development is 'permitted'?

how about the monopoly that commercial real estate owners have in Town and the effect on the region of such Telluride-centric economic hegemony?

welcome to clarity Seth. now go get them.
enquiring mnd
July 05, 2009
When you refer to painful, am i correct in assuming that you mean lots of folks currently living in the area are going to have to leave for lack of anything for them to do?

i don't see how our economy can contract so radically without said emigration.

how about a story on this trend? food stamp statistics as well as unemployment numbers may be illustrative.

are real estate types actually pushing waiters out of their chosen field to leave us with inexperienced waiters etc or are the real estate types leaving?