COLORADO HAS BIG WEALTH DISPARITY IN ASSET INCOME

Study: Affluent enclaves create second largest U.S. gap in counties’ per capita asset income

When prospectors came to Colorado searching for gold and silver, a lucky few found their riches, while many others settled down and found jobs instead.

Old mining towns are again enclaves of wealth, not from their mines, but because they have the amenities and homes needed to attract rich outsiders. As a result, the Rocky Mountain region has the largest wealth gaps among its counties when measured in terms of the income earned from capital sources like stocks, bonds and property, according to a wealth distribution study by the Economic Innovation Group.

Colorado ranks second among

U.S. states after Wyoming for the size of the gap among its counties in per capita asset income. Unlike income from wages or government payments, asset income derives from dividends, interest, rents and royalties. It is basically when an asset is making money, not a person making money.

Right behind Wyoming and Colorado in terms of disparities are Utah and Idaho.

“The Mountain West is home to a number of extremely affluent enclaves,” said Kenan Fikri, research director at EIG and a coauthor of the study. “As asset prices have ballooned in the U.S. economy over the last two economic cycles, that is driving some of these numbers in the most favored second home-destinations of the most affluent classes.”

U.S. wealth is being primarily generated in technology and finance, and in places like Manhattan and northern California, Fikri said. Increasingly, that wealth is finding its way into desirable mountain resorts as second-home residents and retirees put those addresses down on their tax re

turns.

In Pitkin County, home to Aspen, residents reported $98,500 in income from asset sources on a per capita basis in 2019. That ranked second highest in the country after Teton County in Wyoming, which came in at $161,400. Other Colorado counties high up there, out of the more than 3,000 counties in the U.S., are San Miguel, 14th nationally; Routt, 19th; Eagle at 25th; Mineral at 35th, Summit at 47th and Ouray at 48th.

But Colorado is also home to some counties that rank near the bottom for asset income nationally, contributing to the big gaps captured in the EIG study.

About 360 miles separate Aspen from Ordway in Crowley County, where the per capita asset-income amount was $4,200 in 2019, the lowest in the state and ranked 2,942 nationally. The county’s prison population is likely suppressing that number, but Crowley has faced a long steady decline in its economic fortunes. In 1984, county residents reported $7,600 in per capita asset income, based on 2019 dollars.

Other Colorado counties in the bottom half of the rankings nationally for asset income per resident include Otero, Costilla, Lincoln, Pueblo, Fremont, Weld, Alamosa, Moffat, Morgan, Conejos and Adams.

“The increasing distance between the wealthy and least wealthy is getting more and more dramatic,” said Megan Lawson, an economist at Headwaters Economics in Bozeman, Mont.

Counties with low assetincome totals aren’t necessarily impoverished. Their residents may be gainfully employed and earning a good wage. But those wages often aren’t high enough after living expenses to allow for the accumulation of capital, one reason Lawson said encouraging things like homeownership and retirement savings are so important.

High-ranking mountain enclaves have things going for them like beautiful views, public lands nearby for recreation, airport access and more refined cultural, retail and dining amenities. They are places people visit on vacation and decide to live. And they also have land and a construction workforce for high-end homes to be built.

But it isn’t necessarily a case that the high-ranking mountain counties have figured out the secret to generating wealth on their own. Increasingly, the residents who staff the amenities that make those enclaves so attractive find themselves priced out of the housing market. Many of them face long commutes from other counties or even other states, in the case of Jackson Hole, where workers come in from Idaho over a steep mountain pass, Lawson said.

Asset income growing, so is the gap

In 1969, about 15% of U.S. personal income came from asset sources — dividends, interest payments and rents. Those sources now account for 20%. But those earnings are becoming increasingly concentrated geographically. The top one-tenth of counties on the asset-income measure have seen their per capita amounts nearly double since 1990 in inflation-adjusted terms, while the bottom nine-tenths have risen by modest amounts and in some cases stagnated, according to EIG.

That trend of concentration is playing out in Colorado. Along the northern Front Range, the counties with the highest asset income amounts per capita are Boulder, which ranks 55th nationally; Denver, which ranks 105th; and Arapahoe at 224th.

But in Weld County, which has a diverse economy, and where the oil industry pays high wages, asset income ranks 1,663 and has only gone from $5,900 in 1990 to $7,200 in 2019 despite a drilling boom that made the county a top area for job gains last decade.

In Adams County, which ranked second lowest for per capita asset-income after Crowley, residents reported $4,600 in income from assets in 1990, $4,400 in 2009 and $5,800 in 2019. It ranks 2,339th nationally on that measure, but it is also a strong county when it comes to job gains and population growth.

In Kiowa, Lincoln, Washington, Phillips and Crowley counties — all in eastern Colorado — per capita asset income has actually fallen since 1990, meaning those areas became poorer despite the wealth gains made nationally. Counties that gained under $1,000 in asset income per resident over the past three decades, adjusting for inflation, include Pueblo, Morgan, Fremont, Sedgwick, Bent and Kit Carson.

Contrast that with the mountain resort counties. In Pitkin County, the per capita amount went from $22,200 in 1990 to $98,500 in 2019. In San Miguel, home to Telluride, it went from $11,200 to $43,600 over the same period. In Routt County, home to Steamboat Springs, it rose from $10,500 to $38,000. And in Eagle County, home to Vail, it went from $9,500 to $32,600.

Again, all of those amounts are set in 2019 dollars, so inflation isn’t distorting the comparison. It could be that even wealthier residents are replacing those who moved into mountain communities in earlier decades. Another reason are the big gains in the stock market, which has boosted wealth overall. County per capita numbers could also be rising as service workers move further out from resort areas to communities where they can afford housing, Lawson said.

Sharing the wealth

San Miguel County stands out among the region’s mountain enclaves for its efforts to encourage wealthier residents to support the local community, and for trying to find a way to tap their expertise and capital to make the local economy more self-sustaining.

“The short answer is that in my experience ‘income inequity’ only matters if the wealthy don’t participate and support the greater good. What matters is if wealthy people pay their fair share and help to create a fair system. That is the case here,” said Paul Major, president and CEO of the Telluride Foundation since its inception 21 years ago.

Telluride is always in the top 10 in the country in per capita giving, he said, and its wealthy residents regularly contribute to community needs, such as emergency COVID assistance, food insecurity and affordable housing. That is different from some other mountain communities where the money flows more toward arts groups, local land trusts and pet nonprofits.

“If you are interested in that place and call it your second home, you should really be engaged in it, supporting the social fabric, the nonprofits,” Major said.

But the foundation’s mission goes beyond helping those who find themselves struggling. It has also placed an emphasis on tapping into the money and know-how of its wealthier residents to support the next generation of entrepreneurs, both local and from other places.

“You can only hike and golf so much,” Major said, noting that mentoring provides residents an intellectual challenge and helps tie them more closely to the community. It also sets the groundwork for the region’s good fortune carrying into the future.

“Telluride is a beautiful place. We are predisposed to be lucky. A lot of places have to work at it,” he said.