Steamboat moves forward on short-term rental tax, fees

Kari Harden
For the Steamboat Pilot & Today

The Steamboat Springs City Council agreed on Tuesday, March 8, to move forward with asking voters in November to support a tax on short-term rentals in the city — defined as any unit rented for less than 30 days.

While council will determine the tax’s exact amount in future meetings, Finance Director Kim Weber used a 1% tax for the sake of discussion. She said the tax could bring in about $1 million annually.

Council must also decide on how to restrict the revenue spending. City Manager Gary Suiter advised relatively broad language within the scope of workforce housing.

Several council members stressed the importance of communicating to voters the specific intent of the tax and that it would not simply be money added to the general fund.

“It will be earmarked,” Suiter said.

Data from the Colorado Municipal League showed six mountain communities that proposed between 0.5% and 15% additional short-term rental taxes, according to Weber’s presentation.

“All six of these were passed. Three of them were passed with more than 70% of voters supporting the tax,” she said.

In an effort to diversify the city’s funding sources, council members spent about a year discussing a new 2-mill property tax before ultimately deciding to kill the measure in July 2021.

However, the new tax would only apply to short-term rental property owners.

In September 2021, the city began to work with the short-term licensing firm Granicus, which was tasked to help local officials bring all unlicensed units into compliance and provide enforcement against complaints.

The firm tracked 3,020 short-term rental units — the best estimate to date on just how many are out there. Only about 225 have licenses under the old “vacation home rental” system, which did not have a strong mechanism for enforcement.

Previously only “vacation home rentals” — single-family units or duplexes (not condominiums) — were required to get a license and pay a fee.

The new tax would not apply to a room rented in an owner-occupied unit.

Council members also expressed unanimous support for a licensing fee for all short-term rentals, at an amount also yet to be determined.

Weber distinguished two parts of the fee — one that covers administrative and enforcement costs and another devoted to workforce housing policies and programs.

In order to use the fee to address the need for more long-term affordable housing, Weber said a study would need to be commissioned to provide evidence of one of two things: that short-term rentals are reducing the supply of long-term housing or that short-term rentals are increasing the demand for long-term housing.

In Breckenridge, Weber said, a comparable study found that more short-term rentals meant more visitors, which meant a greater need for long-term workforce housing to support the increase in visitors.

Council members unanimously expressed support for the fee — referred to by Suiter as what has been considered a “slam dunk” in terms of the initial efforts to better regulate short-term rentals.

A third approach discussed was to create some kind of program to incentivize owners to convert short-term rentals into long-term rentals.

The incentive program option brought more debate and skepticism from council, and was taken off the table for the moment.

Concerns included finding a sustainable funding source for the program, the potential for fraud, and whether it would accomplish the goal of creating more affordable housing.

Given the city would be venturing into uncharted territory, council member Dakotah McGinlay didn’t see any harm in at least studying options if a grant could fund further study.

“We could really be a part of finding the avenues that do work — one of communities that is testing the waters and trying to figure it out,” McGinlay said.

Council member Joella West was more skeptical.

“Are we really going to, in every instance, recreate a piece of affordable housing?” she asked.

West said she doubted it would, “solve the real problem — which is that people who have jobs here can’t live here.”

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