After failing to bring a property tax to voters in 2020, Steamboat Springs City Council is reconsidering a list of potential taxes to help the city maintain better fiscal sustainability.
Council discussed several options Tuesday, Feb. 8, including a lift ticket tax on Steamboat Resort and Howelsen Hill, repurposing the accommodations tax, a lodging tax on all forms of lodging, a short-term rental tax on nightly rentals excluding hotels, and a vacancy tax on units not occupied for less than a certain number of days per year.
Tuesday was the first time the new council discussed the topic, but members initially agreed on looking into a short-term rental tax and repurposing the accommodations tax, also known as the “2A” tax because of its ballot placement in 1986, the year it was passed.
Any tax that receives two votes in support from council will have to go to voters for final approval. An impact fee, which is similar to a tax, does not require voter approval but requires a study showing the taxable item has some sort of negative impact on the city and the damage can be offset with a fee.
City Finance Director Kim Weber said about 30% of the housing stock in the city is used for short-term rentals, with 3,020 units currently being rented nightly, according to data gathered by Granicus, the short-term rental licensing and enforcement group the city has contracted with.
How much of that 30% could be used for affordable housing or long-term rentals is difficult to measure, but council members were in favor of exploring the idea and going for an impact fee over a new tax.
City Attorney Dan Foote said no other community in the United States has put an affordable housing impact fee on short-term rentals, though the town of Frisco is exploring the concept. Because Steamboat could be blazing the trail, Foote expected a potential court battle if the city chooses to go forward.
“The fact that it’s uncharted territory makes it so that if someone were unhappy about his, they could find a reason or a legal theory that they believed in and take us to court,” Foote said.
“If we decide to go forward with that, there is a substantial portion of our full and part-time residents and people who make their living in this business who are going to be very unhappy with it,” council member Joella West said. “If we go forward with this, I think we need to immediately figure out how we present this in a favorable light.”
Short-term rental units currently pay property, sales and lodging taxes. Council could choose to increase the sales or lodging taxes, impose an entirely new tax or add an impact fee.
The lodging industry currently pays the 1% accommodation tax, which has gone to trails and improvements on Yampa Street. The lodging and accommodation taxes are currently the same, but council could choose to separate them.
“I don’t want to say anything is popular, but these would be the most advantageous for us to go through,” Council President Robin Crossan said of the short-term rental and lodging taxes.
The previous City Council began discussions about another tax several years ago, as council and city staff felt the city’s heavy reliance on sales tax was not sustainable. Though the city is able to fund itself primarily through the sales tax, city staff felt sales tax collections were too unpredictable and dependent on external factors, such as the pandemic, wildfires, low snow and economic recessions.
Though council members did not rank a lift ticket tax as their first priority, Steamboat Ski & Resort Corp. has previously said the resort would support a lift tax if it went straight to funding transportation, which the resort relies on.
If the city were to impose a tax on lift tickets, Weber said Ski Corp. would likely stop paying its voluntary assessment – about $ 350,000 the resort currently pays to the city for its restaurants outside of city limits. The resort pays sales taxes on its retail, restaurants and lodging within city limits.
To reach Alison Berg, call 970-871-4229 or email aberg@SteamboatPilot.com.