Édition #4

The transition of the mountains’economic model seen through theprism of local finances and taxation:new paths to be opened?

Nicolas SAVELLI Senior Consultant, Head of the Management Methods division at Stratorial
In the mountains, the approach to the transition of the economic model focuses globally on territorial attractiveness thanks to the diversification of skiing v. non-skiing activities and the extension of winter tourism to several seasons, as well as a re)adaptation of the mountain territories to daily life, whereas they had become areas dedicated almost exclusively to leisure activities (the phenomenon of “leisure migration”). Beyond the environmental, sociological, economic, geographical or marketing approaches, the aim is to understand the conditions that allow local authorities, the authorities that organize public services, to carry out this transition. They are certainly political, but first and foremost financial: wanting to do something does not always mean it can be done.


How can we calculate the cost-benefit ratio of tourism? The prevailing logic until now has been to look at the turnover generated by tourist consumption. However, this largely escapes local finances since Value Added Tax (VAT) is a national rather than a local tax.

Our vision is more focused on the cost of tourist attractiveness for the community and its distribution between the public and private sectors. The only direct return for the community is in terms of economic
added value, which constitutes a major part of the “local GDP”, and on which the CVAE (Companies’ Value Added Contribution) is calculated, which is shared between the municipalities or inter-municipalities (depending on the type of tax chosen) and the departments (the regions were also beneficiaries until 2021). Companies with turnover of over €152,500 excluding tax, which is the minimum amount subject to this tax (thereby excluding many small and medium-sized companies of which there are many in the tourism sector) must pay the Cotisation Foncière des Entreprises (CFE – business property tax), which is calculated on the rental value of business premises.

The first conclusion that can be drawn is that without premises and therefore without any land holding, a business is not subject to the aptly named Contribution Economique Territoriale (CET, the total of the CVAE and CFE which replaced the former Taxe Professionnelle in 2011): This therefore excludes many socio-professionals in outdoor activities, who by definition do not have an economic production tool based on built premises and are only subject to income tax, which is national and not local.

The second is in the other main resource of local authorities: the tax on built property. Here again, the stock of built surface area determines the tax base (a percentage of 50% of the rental value giving an amount which then constitutes the ‘base’ for taxation) to which the tax rates are applied, thereby determining the tax revenue. Each local authority votes on its own rate and can change it annually.

The last one is the residents’ tax, abolished for permanent residents (compensated by the State according to a complex mechanism), but not for secondary residents at the time of the 2021 reform, it is now called the Housing Tax on Secondary Homes (THRS). Finally, another resource for local authorities is the transfer tax (DMTO), which is an integral part of the notary’s fees for all property transactions. It is collected directly by tourist resorts and municipalities with populations of over 5,000 and redistributed through a departmental equalization for the others.


To conclude, in France, all local authority taxation is based on land use and in resorts, the dynamics of the property market and the value of transactions are added to this. From a financial point of view, the first effect is obvious: the larger the stock, the larger the resource in terms of the base x rate calculation. The second effect is just as important: the tax bases are revalued each year according to inflation, this is the fixed revaluation (coefficient calculated using the consumer price index, known as CPI).

So, the earlier the stock increases, the greater the gain in the long term thanks to the mechanics of capitalisation: if we take a 2% increase over 20 years on 1 M€ of bases and the same for 2 M€ of bases, the result of the first is about 1.5 M€ and the second about 3 M€ for the last year, but a cumulative flow of 4.7 times the initial amount of the bases (to be multiplied by the same tax rate every year). In fact, if we double the initial stock, in this hypothesis, we have also doubled the mechanical effect of the revaluation in 20 years, at a constant rate… hence the challenge of maximising stock in the short term, particularly when we reach a period when it becomes finite in the Local Urban Area Development Plans, especially with regard to the implementation of Zero Net Artificialisation (ZAN). In other words, land use is a necessity from the point of view of local finances and the taxation structure totally encourages it; worse still, the announced end of the continuous increase in new construction and therefore of the stock of
land feeding the finances of local authorities is accelerating projects.

Overall, it is the growth in taxes generated by the growth in real estate that has made it possible to finance the tourist infrastructures required for territorial attractiveness, with the exception of the  nvestment, which is not borne by a company managing a public service concession.


Often forgotten, this French specificity of ski lifts as a public service nevertheless leads to a vast issue regarding their management and the financial model. But skiing cannot be disconnected from the other powers of local authorities: the promotion of tourism and leisure facilities, management of the hiking trails, protection against natural hazards, water, sanitation and waste management, transport… All
these areas of competence have a cost that is proportional to the size of the resort.

It is therefore necessary to separate the competences that must, in principle, be paid for by the users (industrial and commercial public services) and those that are paid for by the communities’ other resources (administrative public services) via government grants and the taxes paid by taxpayers, both locals and companies. The first constitute less than 15% of the operating revenue of a municipality with a large resort and are constantly decreasing: the heart of the matter therefore lies in the local taxation of the municipal block (municipalities and inter-municipalities) in order to find a balance for the present and the future.

Yes, the taxes of inhabitants of mountain territories are used to finance the living environment that makes them attractive for tourism and even many facilities that do not directly generate income: Alpine skiing (in the absence of a major economic equilibrium), Nordic skiing, hiking and mountain biking trails, outdoor activity sites, aquatic centres, tourist offices, convention centres, ice rinks, cinemas…
the list is (very) long. In the absence of seasonal rates, they also bear the cost of the water and sanitation infrastructures designed for tourism.

By definition, most public services are not intended to be economically profitable and, mechanically, it is not possible to charge the user the real cost of these infrastructures: the gap is therefore compensated by public finances… which must therefore be maintained, otherwise the entire economy of the mountain areas will collapse.


The financing of public services is threatened by the context of strong inflation of charges and the foreseeable limitation of local authority revenues. Achieving an overall balance means that the local  authority’s finances will not pay for either the operation of the ski area or investment in it. In the absence of an overall balance, it generally means taking on the entire investment, to which the compensation for operating losses on many facilities is added: aquatic centres, convention centres, ice rinks, outdoor activity areas/sites/routes, small and medium-sized ski areas, almost all Nordic areas, tourist mobility, theatres and cinemas, etc. Whether it is a village resort or an international area, any local economic system is directly dependent on public finance; generally speaking, the larger the resort, the greater the operating deficit of the non-ski facilities proportional to the size of the facilities, a phenomenon further accentuated by inflation that cannot be compensated for by the tariffs.

« In France, all local authority taxation is based on land consumption.»

This is the case for almost all small and medium-sized  resorts, which are essential to the local economy and to year-round life through employment in the mountain areas. It should be noted that the  development of working from home and the deployment of fiber optic connections strengthen the need for public services. As regards the related facilities contributing to territorial attractiveness (cited above), it depends on the community’s strategy. Indeed, two situations currently exist in public service concession contracts:

» “Ski lift” contracts , with winter operation (and summer operation more often than not, but still not systematically), to which other revenue-producing facilities such as car parks, toboggans on rails and zip lines, as well as mountain restaurants, for example, are gradually being added.
» So-called “multiservice” contracts , with the management of one or more structurally loss-making tourism services or facilities (sports centres, tourist transport, aquatic centres, etc.) backed by the  beneficiary facilities, with the former being financed directly by the latter.

In the first case, which is in the majority, financial balance is achieved by mobilising direct ski-linked resources (Mountain Law tax, concession fees), to which a greater or lesser share of the local tax is
generally added according to the type of facilities to be financed and how many; even in the international resorts, they never make a profit and do not reach a balance in their operating costs.

« The theme of the transition of the economic model of mountain resorts seen through the prism of public finance is a cost-benefit analysis: is it possible to maintain and then invest in a renewed model without visibility and therefore with no guarantee of its means in the short, medium and long term, knowing that the necessary investments do not produce income but costs for the person who makes them?” »

In the second case, skiing pays directly for a part of the non-ski activities, to the detriment of the annual result of the public service concession and therefore, in the end, either the self-financing of new investments or the financial returns to the shareholders.

Finally, it appears that many leisure areas, sites and itineraries require investments to implement the diversification of tourism in the territories, without there being any paying access rights: many territories
would do much more for the economic transition… if they had the means.

How is it possible to pay fixed and growing costs (interest  on debt, depreciation, energy, maintenance, staff, etc., reinforced by the inflation of the cost of the initial investments and then maintenance) and invest in a diversification that does not yield financial resources, even indirectly through taxes, to those who generally have to pay for them? Because if the initial investment is co-financed (Plan Avenir Montagnes, Espaces Valléens and other subsidy programmes), the issue lies in the prospective financial approach, with regard to the foreseeable end of the growth of the stock of land
consumed (gradual and programmed cessation of new construction, for various reasons), coupled with the continuing decline in resources given by the government, known as the Global Operating Grant (Dotations Globales de Fonctionnement) and the mobilisation of the communities considered to be the richest to finance the poorest through equalisation (via the national fund for the equalisation of inter-municipal and municipal resources – FPIC – set up in 2012).



To date, it is indeed the fiscal resources resulting from skiing which finance the diversification directly and/ or indirectly, and more particularly real estate (tourist accommodation and economic real estate). If the ski model has its limits, it is the whole value chain that is now being re-examined, as the Covid 19 crisis has shown; what is more, companies’ financial losses were compensated, whilst those of the  ountain local authorities were compensated very little, if at all. Moreover, the added value created by accommodation is greater than that created by ski lifts in the international resorts.

If the end of the model that has prevailed since the Plan Neige, i.e. continuous property growth, is now a reality (forced or desired, depending on the territory, but it is a reality), the end of the financial model  of mountain local authorities will go hand in hand with it.

Of course, the strong growth in expenses linked to inflation and a decline in the growth of income, which becomes lower than that of expenses, leads any elected official or entrepreneur to the same situation… except that a local authority does not go bankrupt! It is the Prefect who then puts it under supervision and increases taxes as much as necessary.

What is the point of investing without being able to maintain? Innovation and the renewal of the tourism offer therefore also depend on maintaining the financial capacities of the local authorities, the authorities that organise public services. But how can we not slow down investment in diversification today with the legitimate fear of not being able to finance it tomorrow?

The decorrelation of tax resources from dependence on the consumption of new land areas is becoming an absolute priority. To this end, the territorialisation of taxes linked to economic activity and the creation of wealth by the population or companies (such as VAT, income tax and corporation tax), as is currently the case with the CVAE, is an avenue to be explored in order to open up new possibilities and ensure the diversification of the overall financing of the main investor in tourism offers in terms of diversification, which do not directly generate financial resources for them in the current tax system.

So, in order to speed up the economic transition and for dependence on the consumption of undeveloped land to be reduced, one condition appears: the resources drawn by the territorial authorities, with their impetus as organising authorities of public services, must no longer depend on the consumption of new land areas. The challenge would then no longer be to produce new buildings to finance the missions of the municipalities and inter-municipalities, but only income derived directly from all economic activities, whether resident-based (linked to daily life in the region) or visitor-based, such
as tourism.

Head of the Management Methods division at Stratorial, a local authority finance consultancy (based in Grenoble). A former Chief Executive for tourist municipalities (mountain resorts and outdoor activities), he works on economic, fiscal and development models for tourist areas, with a dual approach to public and private
finance and taxation