City council seeking to balance two separate short-term rental taxes
During a work session on Tuesday, April 12, the Steamboat Springs City Council weighed the implications of two taxes on short-term rentals that may go through separate voting processes.
The short-term rental tax could be on November’s ballot, and parallel to that effort is the Tourism Business Improvement District, or TBID. The Steamboat Chamber has been working on the TBID since 2018, but the pandemic delayed progress.
The TBID would pool funds from businesses and property owners who provide lodging accommodations. The newly defined district would be limited to hotels, short-term rental properties and possibly time-shares operating inside Steamboat Springs city limits.
Timeshares would have to be handled differently because they don’t rely on cash transactions. However, it is still uncertain if timeshares will be included in the district.
The goal of the TBID would be to secure consistent funding so the Chamber won’t have to make requests to city council each year. Each year, the Steamboat Chamber requests funding from the general fund. Typically, the chamber receives between $700,000 and $900,000.
“It’s challenging for city council to navigate their multitude of fiscal needs that need to be addressed, and it’s also challenging from our standpoint to, you know, have uncertainty year to year and not be able to really plan long term,” said Kara Stoller, chief executive officer of the Steamboat Chamber.
The funds would be used for projects that increase tourism in Steamboat Springs and for destination management, or in other words “explaining to those visiting our area what our expectations are of them,” according to Stoller.
The TBID would be in addition to the city’s 1% accommodations tax, a tax voted in by the public in 1986 on any business providing lodging for less than 30 days.
Alongside the Chamber’s efforts to pass the TBID is the Steamboat Springs City Council’s initiative to put a new short-term rental tax on the ballot. Unlike the accommodations tax and TBID, the short-term rental tax would be limited to residential properties that provide lodging services.
Council members expressed concerns the short-term rental tax could prevent the TBID from getting a majority vote by the lodging community.
The fear is the lodging community will vote down the TBID because they don’t want two new taxes, according to Kim Weber, finance director for the city of Steamboat Springs.
If both taxes were to pass, short-term rental properties in the newly defined Tourism Business Improvement District would contribute to both.
As a result, council directed city staff to investigate the possibility of putting the short-term rental tax on the ballot in a two-tiered structure.
Under a two-tiered structure, voters would have the option to vote for the short-term rental tax at a base amount and then vote for an additional percentage if the TBID vote fails in the Chamber. Concerns were raised, however, that a two-tiered ballot question would be confusing.
The short-term rental tax is still in the early stages of being readied for November but remains on schedule.
Because the voting process on the TBID is separate from any public elections, there is no timetable for a vote on the TBID.
In its third discussion of the proposed short-term rental tax, city council focused on the potential percentage of the new tax.
City council discussed percentages within the range of 1% to 5%, but now has to consider the possibility of swaying TBID votes if the tax is too high.
The projected revenue from a 1% tax on short-term rentals in Steamboat Springs was tentatively projected at $1 million a year, but because the city is still determining how many short-term rental licenses would be issued in future years, that $1 million number is perceived as a placeholder.
“I would hate to see us prevent the chamber from getting (the TBID) launched,” Council member Joella West said. “And we’re on a really unfortunate parallel track timeline. So, they can’t really sit back and see what we do, and we don’t want to really sit back and see what they do. I think everything points to 1%.”
Council Member Heather Sloop discussed the idea of setting the short-term rental tax at a 4% rate and using the additional revenue to offset the money given to the chamber if the TBID fails to pass.
City Council President Robin Crossan countered Sloop’s argument, saying revenue from the short-term rental tax, conceptually, was meant to fund special projects and developments, not for bolstering the general fund.
Revenue projections were made based on other towns where short-term rental taxes have been implemented such as Avon, Crested Butte and Telluride, though none had more than 1,000 short-term rental listings.
Telluride had the highest number of listings with 723. Of those five other communities, Avon has the lowest tax at 2%, while Ouray has the highest at 15%.
There are an estimated 3,000 short-term rental units in Steamboat Springs, according to Granicus, a short-term licensing firm that worked with the city to track unlicensed short-term rental units.
The $1 million per-year projection of revenue for Steamboat Springs is based on an estimate of $364 per-year per-listing with 3,000 listings.
“If we’re only taxing people $364 a year, we’re getting a million bucks, so to speak,” Sloop said. “Is that enough to pay for infrastructure, for electricity, for child care for future housing? In my opinion, I think that the community is going to say, ‘Why didn’t you ask us for more?’”
To reach Spencer Powell, call 970-871-4229 or email him at spowell@SteamboatPilot.com
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