PHOTO: Downtown Estes Park, Colorado.
We discussed the City of Ouray on Friday, and their voter-approved 15% excise tax on Short Term Rentals (STRs, vacation rentals)…
… and their limit on the number of STRs they will allow: 120. By my rough estimate, that would be a density cap of about 25%.
Another community that has struggled to find the right mix of fees and density is Salida, Colorado, population about 5,700. Several years ago, the City of Salida established limits on the number of STRs allowed in residential neighborhoods — a total of 75 units — and more recently placed caps on commercial zoned properties — allowing about 232 units total.
In November, the Salida voters approved an annual fee of $1,000 per STR, plus a tax of $15 per bedroom per night. $15 per bedroom per night is roughly equivalent to a 10% tax.
The City expects to raise about $800,000 a year from these two revenue sources, and use the money for housing programs.
Housing being a serious crisis in Chaffee County, as in so many Colorado counties.
According to the 2022 Housing Needs Assessment recently adopted by the Chaffee Housing Authority, 1,105 new homes are needed over the next five years, to stabilize the Chaffee County workforce and keep up with future housing demands.
A rather different tax arrangement was established in Estes Park, Colorado, a popular summer resort and the location of the headquarters for Rocky Mountain National Park.
In 2009, the voters of Estes Park and surrounding Larimer County approved the Estes Park Local Marketing District — a special taxing district — for the purpose of advertising, marketing and promoting tourism in the Estes Park area.
Voters originally approved a 2% lodging tax tax for stays in lodging establishments and short-term rental properties. Since 2009, the tax has been used to market tourism.
But the voters were presented with an opportunity to spend money differently in 2023. Ballot Measure 6E appeared on the Larimer County ballot last November, proposing to add an additional 3.5% to the lodgers tax and to use that additional money to support housing. So, a total lodgers tax of 5.5%.
How did the tourism industry feel about this proposal? I can’t say for sure, but the ‘Visit Estes Park’ (Estes Park Local Marketing District) board of directors unanimously supported Ballot Measure 6E.
Here’s a two-minute video summary of the ‘Visit Estes Park’ board meeting vote on October 27, 2022. We get to hear CEO Kara Franker speak briefly about her experience, explaining 6E to other marketing professionals.
When placed before the voters, Ballot Measure 6E passed with 63% of the vote. The original 2% tax will continue to be used for marketing tourism.
This type of ballot measure could not be presented to the voters in Archuleta County presently, because we don’t have a Local Marketing District.
Instead, our two local governments pool two different lodgers taxes to support the Pagosa Springs Area Tourism Board, which is not a Local Marketing District. Our Town government collects a 4.5% Lodgers Tax from motels and STRs located within the town limits… and the Archuleta County government collects a 1.9% Lodgers Tax from motels and STRs located outside the town limits. In 2021, the total collected and spent by the Tourism Board amounted to over $1.3 million.
$1.3 million is considerably more than was spent by the Town and County on housing programs in 2021. That is to say, we spent heavily to accommodate tourists in 2021, but spent relatively little to accommodate the workers who service those tourists.
Theoretically, Archuleta County voters could create a Local Marketing District here, similar to what has been created in Estes Park, and theoretically, the voters could approve a 5.5% Lodgers Tax, district-wide.
If we did that, and spent the increased lodgers tax revenues on housing programs — as Estes Park is doing — we would have (according to my pocket calculator) about $1 million a year to spend on housing for our struggling workforce, based on a 5.5% district lodgers tax.
But why stop at 5.5%?
As mentioned in Part Four, on Friday, the voters in Ouray, Colorado recently approved a 15% excise tax on STRs. The voters in Salida recently approved a new per-bedroom STR tax, roughly equivalent to a 10% tax.
Have these increased taxes hurt the STR industry in those towns? Maybe not.
According to AirDNA, the average STR in Ouray is earning $4,239 per month. As mentioned, Ouray has capped the number of allowed STRs at 120.
The average STR in Salida is earning $3,865 per month. As noted, Salida has a rather severe density cap in residential zones, and even caps the number of STRs allowed in commercial zones.
The average STR in Archuleta County is earning $3,143. No density caps. No STR taxes. Basically, an unregulated industry, outside the town limits.
Both Ouray and Salida have higher occupancy rates than Archuleta County.
Anyone looking at these numbers might be tempted to suggest that density caps and higher lodging taxes have been beneficial to the tourism industry in Salida and Ouray. Or, at the very least, have not been harmful.
Personally, I would not be tempted to make such suggestions. But someone might.
Currently, Archuleta County has a moratorium in place, prohibiting the licensing of new STRs in the unincorporated county. The Archuleta Board of County Commissioners is reportedly planning to consider new policies between now and when the moratorium expires at the end of February.
Last week, a group of volunteer citizens met at the Sisson Library to discuss potential STR density caps that the Archuleta Board of County Commissioners might want to put in place. You can read a summary of the discussion here. No definite policy recommendations were decided upon. A subcommittee of the volunteer group will be meeting this week to continue the density cap discussion.
The same citizen group plans to make some recommendations to the BOCC about STR fees and taxes, in the near future.
Any citizens who’d like to participate in this ‘unofficial’ study group can contact me, Bill Hudson, at 970-903-2673.
But before we leave this discussion, I’d like to touch once more on ‘density caps’. Considering that the Archuleta commissioners have been avoiding a decision on density caps for at least the past four years.