Chamber study shows proposed 9% tax would decrease demand for STRs by 3.6%

Group opposing STR tax has asserted measure would lead to 10% decline in occupancy

If Steamboat voters approve a proposed 9% tax on short-term rentals next month, the demand for these nightly rentals would decrease by 3.6% — or three to four room-nights per 100 — according to a study presented to the Steamboat Springs Chamber Board last week.

Slides from the presentation also show that the demand for Steamboat Springs as a destination for people looking to stay in a short-term rental would decline by 2%.

In a statement outlining policy positions on Monday, Oct. 17, the Steamboat Chamber did not explicitly say whether its board supports or opposes the proposed 9% tax on short-term rentals.

“The Steamboat Springs Chamber Board continues to strongly support affordable and attainable housing efforts in our region,” the statement reads. “Funding for these efforts should come from an equitable source shared across the business community that is more resilient in economic downturn.”

“The board stands behind the chamber’s proposals shared in May and June of this year, which included a 2.5% to 3% STR tax and a 0.5% to 0.75% general sales tax, excluding groceries and utilities, to fund affordable housing,” the statement continues.

The proposal referenced is slightly different than figures pitched to Steamboat Springs City Council in June, which included a 2% increase on the current lodging tax that impacts all lodging properties and a 0.75% sales tax increase, excluding groceries and utilities.

The proposal was brought up by Chair of the Steamboat Springs Lodging Association Andy Wallace in June as council was considering an ordinance to refer the 9% STR tax to voters. Council later approved that ordinance and referred the question to November’s ballot.

Asked if the chamber board saw the STR tax as an equitable funding source, Chamber CEO Kara Stoller replied: “The STR proposed tax is on one industry … The chamber board wants to see a more equitable funding solution.”

The study comes as Citizens for Responsible Housing Policies, the group opposing the proposed 9% STR tax, asserts that its passage would cause “at least a 10% decline in occupancy,” which the group says would cost local Steamboat businesses about $25 million in visitor spending every year. That assumes visitors spend $250 million annually in Steamboat.

But if the decline is the 3.6% as the study suggests, the impact of the tax on that $250 million would be closer to $9 million a year, which is less than the $14 million the 9% tax on short-term rentals is expected to generate in its first year. The group House Our Community has formed is support of the tax question.

Boulder-based RRC Associates, a firm that specializes in economic research in ski communities and has worked in Steamboat Springs before, is behind the study. 

The tax question in Steamboat is one of six ballot measures this cycle that could increase municipal taxes or fees on short-term rentals in Colorado, the study found. The only one higher than the 9% proposed in Steamboat is in Aspen, which is considering a 13.1% tax on short-term rentals.

Based on current tax rates, if the 9% tax were to pass, Steamboat would have an effective tax rate on short-term rentals of 20.4%, the third highest tax rate on short-term rentals out of 32 different Colorado communities reviewed. If Aspen voters pass their proposed measure, Steamboat’s tax would be the fourth highest.

The 20.4% tax rate on short-term rentals in Steamboat would be 51% higher than the 13.5% average across the 32 communities studied.

“There’s a lot of conversation throughout the past year of what it may look like, and it was helpful to have some data points pulled together by a third party to help analyze the proposed STR tax,” Stoller said.

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