Legislators expressed concern about how the bill could impact economies that have come to rely on short-term rentals as a significant portion of tourist lodging.
Routt County’s representatives in Denver say they are hearing a lot from constituents about the short-term rental reclassification bill being discussed in the legislature and are waiting for amendments to come forward before taking a position.
As currently written, a short-term rental that rents 90 or more days per year would pay commercial property taxes instead of residential, a move that roughly quadruples the tax rate for the property. If classified as commercial lodging properties, these STRs would be taxed at the commercial rate of 27.9% instead of the residential rate of 6.7%.
The bill has received sharp pushback from STR owners and has become the most talked about piece of legislation so far this session. In a town hall meeting in Steamboat Springs on Sunday, Rep. Meghan Lukens said the bill has spurred more comments and emails than any bill since she was elected in 2022.
“We have indicated a lot of concerns about enforceability and the seemingly arbitrary number of 90 days to the bill sponsors,” Lukens said, noting that the bill sponsors are currently working on amendments. “We also want to make sure that it’s something that our local governments can work with.”
Estimates from non-partisan legislative staff say Senate Bill 33 would increase property taxes for more than 24,000 STRs across Colorado. For some business owners like Steamboat’s Tony Dickson, who owns Gondola Pub & Grill near Steamboat Resort, the legislation is about leveling the playing field.
“I think it’s fair,” Dickson told the legislators on Sunday. “There’s a loophole that needs to be closed.”
But Lukens and Sen. Dylan Roberts said they were also concerned about unintended consequences the bill could have on the mountain town economies that have come to rely on STRs for a significant amount of their lodging. One potential outcome that STR owners have telegraphed is that they would simply rent less than 90 nights a year, ensuring they avoid the higher tax rate.
“The decision was made 15, 20 years ago that short-term rentals were going to be a significant part of our tourism economy and they were going to essentially become a large percentage of our bed base,” Roberts said. “Not a lot of hotels are being built anymore. … The criticism of the bill is that if you were to take too many of these short-term rentals offline because of such a significant tax increase, that we will lose the tourism that keeps all the other businesses afloat.”
Both legislators also expressed concern about how the bill could impact local efforts regarding short-term rentals, especially after cities in their districts like Steamboat Springs have taken significant steps to regulate and tax STRs. In addition to the voter-approved 9% sales tax assessed on STRs in Steamboat, the city has also installed a series of overlay zones limiting their location.
One intricacy the legislators said they would want to understand is how it could impact revenue generated from Steamboat’s STR Tax. Voters allocated 75% of this tax revenue to the Yampa Valley Housing Authority’s 2,264-unit Brown Ranch development in November. Brown Ranch will be considered for annexation by voters on March 26.
Lukens said the STR bill also revives a common debate in Denver over local control.
“We know that a lot of our local governments are already working in this space,” Lukens said. “This is a category that comes up a lot at the state capitol of local control versus state preemption and that’s kind of a regular tension that we’re seeing.”
The bill is starting in the Colorado Senate and has been assigned to the Senate Finance Committee, of which Roberts is not a member.
“Politically, I think the bill faces a challenging vote in that committee specifically,” Roberts said. “We’ll see if anything comes out of that committee, but this is a really important conversation.”
Top Photo Caption: Rep. Meghan Lukens, left, and Sen. Dylan Roberts talk during a town hall meeting at Bud Werner Memorial Library in Steamboat Springs on Sunday, Feb. 11. (Dylan Anderson/The Yampa Valley Bugle)