On June 10, 2022, a group of vacation rental owners and their attorney filed a lawsuit in District Court, challenging the right of the Pagosa Springs voters to amend their home rule charter.
Last December, a group of town voters — myself included — submitted a petition to the Town of Pagosa Springs, requesting that the voters within the town limits be allowed to decide on an amendment to the Town Home Rule Charter. The charter was adopted by the voters in August 2003, and specifically allows the voters to make amendments to the charter.
To wit:
This Charter may be amended at any time in the manner provided in the Colorado Constitution and in Title 31, Article 2 of the Colorado Revised Statutes, as said provisions may be amended from time to time. Proceedings to amend the Charter may be initiated by the filing of a petition meeting the requirements of the Colorado Revised Statutes, or by the adoption of an ordinance by the Council submitting the proposed amendment to a vote of the registered electors of the Town. Nothing herein contained shall be construed as preventing the submission to the people of more than one Charter amendment at any one election, provided that each ballot issue is limited to a single subject…
The voters approved Ballot Question A on April 5, 2022, and added the following requirements to the Home Rule Charter:
Commencing June 1, 2022, the Town of Pagosa Springs shall collect a Workforce Housing Fee from Short-Term Rentals (STRs) located within Town limits, amounting to at least $150 per month for each permitted bedroom, except no Workforce Housing Fee shall be due when an STR owner resides full-time on the STR property at least nine (9) months of the year. All Workforce Housing Fees shall be dedicated to the creation and sustainability of workforce housing aimed at households earning no more than 100% of Area Median Income.
The STR owners who are now suing the Town, asking the courts to invalidate the April 5 vote, include a mix of local and out-of-town investors.
Clinton and Monica Alley, Pagosa Springs, CO
Blackhead Properties LLC, Pagosa Springs, CO
Melissa Buckley, San Clemente, CA
Escapa LLC, Texas City, TX
Gregg Fitts Trustee, Lantana, TX
John and Kristin Grey, Round Rock, TX
JLSFUN LLC, Belton, TX
Peter Macomber and Nicole Buckley, Pagosa Springs, CO
Olivia Modern, Pagosa Springs, CO
Aaron Steven Moore, Austin, TX
During the election campaign, leading up to the April 5 vote, a group called ‘Pagosa Neighbors’ sent out a four-page booklet to Pagosa families, noting the tremendous increase in home prices and rental rates in Pagosa over the past 10 years, with a corresponding increase in the number of vacation rentals in the community, and also, a corresponding increase in collected Lodgers Tax.
The booklet also noted:
This STR fee is about $5 per day per bedroom, which is less than the “cleaning and service” fees typically charged by STRs — and a fraction of the massive property tax loophole STR investors enjoy.
That ‘massive property tax loophole’ refers to the ongoing failure, by the Colorado General Assembly, to recognize vacation rentals — Short-Term Rentals; STRs — as commercial operations. Because the state of Colorado currently classifies STRs as a ‘residential use’, STR owners pay property tax at a 7% rate rather than at the 29% rate paid by hotels, motels, B&Bs, and all other commercial properties in Colorado.
According to the ‘Pagosa Neighbors’ booklet, a commercial motel valued at $750,000 pays an annual property tax of about $15,225.
A ‘residential’ operation (that is, a vacation rental) that offers essentially the same commercial services as a motel, also valued at $750,000, will contribute only about $3,750 per year in property tax to support our community services.
The court filing submitted on June 10 by Durango attorney Paul Kosnick, on behalf of the above-named plaintiffs, does not mention this property tax loophole.
But it does make certain arguments about whether Pagosa voters have the right to establish regulations regarding vacation rentals.
The Town government apparently felt the voters had every right to amend their own Home Rule Charter.
During the summer of 2021, Pagosa Springs was enjoying — or not enjoying, as the case may be — a record number of tourist visits, with visitors splashing in the hot springs, hiking in the forest, eating in the COVID-delimited restaurants.
The local real estate market was hot to the point of ‘overheated’, largely as a result of out-of-town investors buying up residential homes and converting them into STRs. Short-Term Rentals.
The budget of the Pagosa Springs Area Tourism Board — the joint Town/County committee tasked with encouraging the tourist economy — appeared headed for another record year of Lodgers Tax revenue. Twice the revenue amount collected in 2015… and three times the amount of revenue collected in 2010…
But Pagosa Springs was not enjoying its ongoing housing crisis. Working families and individuals with rented accommodations were being evicted as their homes were purchased by STR investors, with little chance of finding a rental they could afford.
Businesses were cutting back on hours of service, due to lack of employees.
Although the shocking growth of Lodgers Tax indicated that certain segments of the economy were thriving… including STRs owned by out-of-town investors… local working families increasingly found themselves struggling to make ends meet.
The curve of skyrocketing home prices in Archuleta County was disturbingly similar to the curve of increased tourism taxes, showing a tripling of the median home price since 2011.
The data for the above graph came from CREN (Colorado Real Estate Network), courtesy one of our local realtors.
Also during the summer of 2021: the Town Planning Commission was carrying on an intense discussion about STRs, and on July 13, the Commission recommended that the Town’s annual fee charged to STRs within the town limits be significantly increased — from $200 per year to $6,000 per year.
This Planning Commission recommendation was forwarded to the Town Council, and was championed over the next few months by a volunteer community group, Pagosa Housing Partners. (Disclosure: I serve on the board of PHP.) Unfortunately, the Council could not agree on the best formula for increasing the STR fees… so an independent group of town residents proposed a solution to the town voters at the regular April 5 election.
A few Pagosa-based STR owners and several investors from Texas apparently didn’t appreciate the voters’ decision. Rather than make their case at the polls, however, they’ve decided to use the courts.
I am not complaining about people using the courts to try and address violations of Colorado law. I have myself filed lawsuits against both the Town of Pagosa Springs and Archuleta County for what I perceived as violations of Colorado law by their respective governing boards, the Town Council and the Board of County Commissioners.
I’ve never tried to sue the voters.
My question is: if you are going to sue the voters, how good are your arguments?