An excise tax on short-term rentals is one step closer to appearing on the April ballot. The Frisco City Council approved the tax ordinance on first reading on Tuesday, January 11.
After discussing the excise tax – which is a tax imposed on goods, services or activities – in November, the originally proposed 7.5% tax was lowered to 5%. It is estimated that it will generate between $1.2 and $1.5 million in additional revenue each year that would be used for workforce housing programs, supplementing 5A revenue.
“I want to assure you that we are not just looking for short-term rentals to fund workforce housing,” council member Melissa Sherburne said. “What we’re looking to do is help offset the problem that short-term rentals have created in our local housing landscape. … Labor housing has been an age-old problem in mountain towns – for decades.
Adding a new 5% excise tax to the current 10.725% taxes applied to short-term rentals brings the total tax to 15.725%. To compare, Crested Butte has the highest short-term rental tax among mountain towns at 20.9%. Avon has a 14.4% tax, Vail is 10.3%, Breckenridge is 12.275%, Dillon is 10.875% and Silverthorne is 10.375%. Breckenridge’s figure does not include room license fees, and Silverthorne is proposing a 4% incremental increase in lodging tax.
Council member Dan Fallon was the only person present who voted against the ordinance. One of the reasons being that he felt the tax was too high. While he acknowledged that the increase in short-term rentals has had an impact on local housing, he reiterated that he would be more comfortable with a 2.5% tax.
Summit Alliance of Vacation Rental Managers Executive Director Julia Koster said in the public comment portion of the meeting that they too would like to see a 2.5% tax or similar, but on all accommodations in Frisco, that would end after five years or be renewed by voters if necessary. She said the organization welcomes continued conversation and would prefer open dialogue rather than rushing to put the tax on the ballot.
“This issue affects everyone, including our (Summit Alliance of Vacation Rental Managers) members and their employees,” Koster said. “We want to be a collaborative force in every discussion that seeks to impact our common community issues.”
Mary Waldman of Summit Mountain Rentals was also concerned about the percentage and would prefer a 0.5% tax. She said it will hurt landlords more than renters as they try to keep prices competitive.
“Yes, the money comes from the tenants, but because I have to lower the rent to stay competitive, the money comes out of my pocket, not the tenants’,” Waldman said. “You don’t tax the guests: you tax me, the property managers and all second home owners.”
Councilman Andy Held said the city isn’t against short-term rentals, but added how he’s seen them affect the ability to live in Frisco over the 30 years he’s lived there.
He also reminded the public that they still have to go to the polls before it becomes official.
“We will not pass this. We put it to the people,” Held said. “It’s not just a handful of people making a decision on this stuff. That’s who should make the decision.
Fallon said he wanted to explore tax exemptions and incentives for owners of short-term rentals rather than penalizing them. One example, he said, is waiving the tax if a rental is rented to a local worker for 90 days.
Other board members agreed that exemptions and incentives are a good idea. However, they said they didn’t want to complicate the language of the ballot by explaining additional programs and rules. The city council can pass exemptions after the tax is passed, giving city staff time to craft the appropriate exemption language.
“I think that’s a good start, and I also don’t want to not do it, or lower it to a point where it’s not happening and we’re back to draconian petitions circulating in the community to really affect what we need, which is short-term rentals in our city,” Mortensen said, referring to James Hayes Walsh’s petition to ban rentals. “Our economy is built on them, we depend on them, and I think if we don’t make that language available to voters, we risk having a much worse outcome where we may not have one. (short term rentals). And I don’t think it will serve us at all to achieve any of our goals.
If passed, the tax would come into effect on June 1. A second reading is scheduled for January 25.