The city clerk’s rejection of a petition seeking a referendum on short-term rental tax being placed on November’s ballot in Steamboat Springs looks like it may be headed to court.

According to the Steamboat Springs Community Preservation Alliance, the group has filed a lawsuit seeking a temporary restraining order and preliminary injunction against the City of Steamboat Springs.

The alliance says it is suing on claims the city violated the group’s right to circulate a petition and gather signatures for the reconsideration or repeal of the recently passed short-term rental tax ballot initiative.

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City Council recently passed the ballot initiative, which would allow voters in November’s election to decide whether to impose a 9% tax on short-term rentals. The alliance then filed a petition seeking to put the short-term rental tax ballot question to a special election ballot. If the petition had been approved and the group collected enough signatures, a special election would then be held to decide whether the tax question would be included on a November ballot.

“With only a limited number of days to gather signatures, the city has done everything it can to delay due process and has hidden behind its legal team to obstruct the right of citizens to request a repeal of this ordinance by petition,” said Dan Merritts, president of the alliance, in a news release issued Friday, July 29.

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“If we don’t get enough signatures, we wouldn’t get reconsideration or repeal, and the ordinance moves forward to the November election,” Merritts continued. “We are struggling to understand what they are afraid of, other than having to rethink the tax based on public opposition.”

The city clerk cited three grounds for rejecting the petition, saying the referendum didn’t comply with the Steamboat Springs town charter. The clerk also said having a vote on whether to put a question on a general election ballot would unnecessarily confuse voters.  

The alliance reports having more than 500 community members including business leaders, property managers, hospitality professionals and residents who are concerned about the 9% tax harming local businesses and killing jobs tied to tourism in Steamboat Springs.

As the proposal is written, the tax would sunset after 20 years and City Council could lower the tax with a majority vote at any time.

The 9% tax on short-term rentals is meant to help fund affordable and attainable housing projects such as the Yampa Valley Housing Authority’s Brown Ranch development, which is estimated to cost about $400 million and add thousands of housing units to Steamboat’s inventory.

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Claiming that City Council has rejected data produced by the alliance and refused to do its own research, the alliance also filed petitions seeking to recall three City Council members including Dakotah McGinlay, Heather Sloop and Joella West.

On Tuesday, July 26, the trio pushed back against the recall effort, saying in a joint statement that the tax ballot question is merely an opportunity for the community to decide if they want to tax short-term rentals and the petition is a means to disrupt the democratic process by delaying the short-term rental ballot question to next year’s general election.

“A referendum against something that is already going to voters was kind of bewildering,” said McGinlay.

Overall, City Council members have characterized the alliance’s efforts as an attempt to circumvent the will of voters, who elected four City Council members on promises they would work to ease the city’s housing crisis by regulating short-term rentals.

“I ran my campaign on affordable housing for locals,” said McGinlay. “We set out to accomplish a lot of that, and I’m really proud of the work we’re doing.”

The alliance also alleges the newly passed overlay zones capping short-term rentals in some neighborhoods and restricting them in others is an affront to many homeowners’ property rights. Furthermore, the alliance says the three council members have driven “a false narrative” blaming short-term rentals for Steamboat’s housing crisis.

In the news release, the alliance said McGinlay, Sloop, and West have claimed they have a mandate to “fix vacation rentals” despite winning their council seats by only “narrow election margins.”

“This message was used as the basis for the restrictive overlay zones and the STR tax,” the alliance wrote in the release. “Now the community is pushing back and asking for a new approach that doesn’t risk the local economy that is heavily tied to tourism.”

However, that’s not how the Sloop described the situation.

“I do believe that this is a tactic that they are using to impose chaos,” Sloop said. “I am confident that our voters will decide on a short-term rental tax, and I hope they will be doing that this November.”