At least a half-dozen Colorado counties are asking voters to double or triple their lodging taxes on the November ballot — requests allowed by a new state law that are spawning pushback from the tourism and business communities in some areas.
House Bill 1247, signed into law this spring, raises from 2% to 6% the cap on lodging taxes that counties can ask voters to impose on hotels, short-term rentals, RV parks and other visitor-housing spaces in their unincorporated areas. Municipalities do not have limits on the lodging taxes they can assess within their borders.
Bill sponsors said they were responding to calls from officials in destination areas who don’t have funds to provide the needed public-safety resources or to make road repairs caused in part by increasing tourism. The law expands ways counties can spend lodging taxes — now limited to tourism marketing and to housing and childcare for sector workers — to include infrastructure like roads and water systems and public-safety needs such as law enforcement, firefighting and emergency medical services.
Five counties — Chaffee, Gilpin, Ouray, Park and Routt — will ask voters to raise lodging taxes to the maximum 6%, while Eagle County will seek a jump to a 4% tax and Summit County will ask to keep its tax at 2% but expand allowable uses to include public safety and infrastructure. Several other counties discussed the idea of trying to hike lodging taxes but ultimately decided not to this year.
Why counties are seeking more in lodging taxes
Among those seeking boosts from voters, most said they plan to use the new funds for the newly permitted purposes, though state law requires that at least 10% of all revenues generated by county lodging taxes above 2% go to tourism marketing. For example, Routt County, which is the home of Steamboat Springs, plans to put 90% of new revenues to public safety and infrastructure, while Park County officials said they’ll put 58% to public works and another 25% to the sheriff’s office.
Leaders in several counties said at public meetings over the past month that they need to find new funding for core services at a time when the federal government is cutting its budget, which in turn cascades into state budget cuts that endanger local grants. But several also emphasized that visitors, particularly the influx of tourists in short-term rental lodging, should be made to pay more of the costs that local governments incur because of them, ranging from law-enforcement actions to needed infrastructure expansions.
Fish Creek Falls is a popular destination near Steamboat Springs, which draws a large number of tourists annually.
“I know that we’re all talking about two things. One: How do we make our budget sustainable for the future?” Routt County Commission Chairwoman Sonja Macys said at the Aug. 26 meeting where commissioners placed the tax-increase question on the ballot. “And the second piece … is how do we make sure this overtourism question does not negatively impact our residents, and how do we make sure tourism is paying its way?”
Will increases in lodging taxes hurt tourism?
For leaders in the tourism industry, however — particularly hotel and rental-property owners who will pass the cost increase along to potential guests — the proposed tax hikes are coming at a tough time. Economic uncertainty already is creating a slowdown in bookings, and the threat of raising taxes on an increasingly cost-conscious public, particularly as some neighboring destinations are not requiring the same, could reduce business more, some said.
In Chaffee County, officials several years ago redirected 60% of lodging taxes away from tourism marketing to housing and child-care needs, and hotel owner Anita Kudasik said more guests are staying now for one night and then moving onto other destinations. County commissioners have said they plan to put no more than 15% of the new revenues into marketing, and she and other sector leaders worry that the county will continue to lose visitors to other areas that are working harder to make themselves relevant.
“It seems unfair that road and bridge repair is on the shoulders of the lodging industry,” said Jason Chernofsky, co-owner of Creekside Chalets in the Salida area, pointing to the county plan to put $1 million in new revenue to roads and bridges, twice what tourism marketing will get. “Everyone benefits from road and bridge, but why does lodging have to pay that entire amount?”
Transportation, law enforcement need help
While each of the counties stands poised to expand use of lodging-tax revenues to the newly allowed areas of public safety and infrastructure, several counties — including Eagle and Gilpin — emphasized the funding will continue to go to childcare and housing too. At a Tuesday meeting, Eagle County commissioners predicated their “compromise” decision to send a 2% lodging-tax increase to the ballot as a response to continuing shortages of affordable housing and childcare that are pushing service-industry workers to move away.
Several county leaders emphasized that they would put 10% of the new revenues to tourism marketing only because HB 1247 mandated that as the minimum amount that must go to that purpose. Ouray County commissioners noted in their ballot language that the money would go to promotion of “sustainable” tourism, and Routt County leaders said they plan to take the same tact by funding campaigns emphasizing that visitors must respect the environment.
For some business leaders, the issue is not the decision by local officials to seek a tax hike so much as the timing of it, especially as many of the conversations about asking for voter approval did not begin until mid-summer.
Some business leaders urge caution
Buena Vista real estate agent John Magers suggested Chaffee County wait until next year to see how voters react to the first round of tax-hike proposals. Basalt Chamber of Commerce President/CEO Kris Mattera said she agreed with Eagle County leaders’ intent to raise new revenues but feels businesses and voters need more time to consider the impact of doubling lodging taxes.
Hikers climb the trail up Mount Shavano, a popular visitor destination in Chaffee County.
It remains unclear exactly how voters will react to the ballot questions. Lodging-tax hikes tend to fare better at the polls than sales- or property-tax hikes, as many voters feel it’s a way to shift the burden of government operations more to visitors who will pay and leave.
But voters can react in unexpected ways to any request to increase taxes. Ouray County Commissioner Lynn Padgett, for example, said she’s become worried that county’s issue will fail as she’s learned that voters incorrectly assume the county will award childcare grants from the tax revenue to people with “European nannies.”
And it’s unclear now whether business leaders who advocated for county commissioners to hold the ballot questions for one more year will reluctantly back them or actively fight them. Any organized opposition could imperil the initiatives’ success even in typically tax-friendly counties, as off-year elections draw smaller crowds and can be determined by which side of an initiative can energize its base more.
Will disputes lead to ballot battles?
At Tuesday’s Eagle County commission meeting, tempers flared when Beaver Creek Resort Co. Executive Director Jim Clancy noted that his company contributes $5.6 million annually in lodging-tax revenues to county childcare efforts and asked officials to “carefully consider pursuing any measure that would negatively impact the flow of those contributions.” Clancy said he is worried a tax hike on lodging could curb visitor spending on restaurants, retail and other amenities in the community.
Eagle County Commissioner Jeanne McQueeney speaks about a lodging-tax ballot initiative during the Sept. 2 meeting of the county board.
Commissioner Jeanne McQueeney called it “incredibly disingenuous” to characterize tax payments as contributions and noted that other assessments Beaver Creek adds onto its bills help with shuttle buses and visitor experiences but not worker housing or childcare. And Commissioner Matt Scherr followed up by questioning why the county shouldn’t just go for a larger 4% tax increase if it will face business-community opposition before relenting and backing the 2% hike on the November ballot.
Anticipated revenue from the proposed tax increases varies greatly by the level of visitation those areas see outside of the incorporated cities within the county. Ouray County, for example, expects to generate $182,000 annually by boosting its 2% lodging tax to 6%, while Eagle County expects to bring in $4.5 million by boosting its lodging tax from 2% to 4%.
A statewide election is set for Nov. 4. All Colorado voters will consider a legislatively referred measure to let the state government keep excess revenues collected for a program providing school meals for all students, while numerous cities and counties will have elections and will have issues decided on the ballot as well.