Thursday, May 28, 2020

Mt. CB takes a step toward tax to fund housing

Working toward a vote this fall

by Mark Reaman

The Mt. Crested Butte Town Council decided last week to go on the path to let voters decide whether to implement a new lodging tax to fund future affordable housing projects.

The council instructed staff at the Tuesday, April 16 council meeting to let the Gunnison County clerk know that the town intends to put a ballot issue on the upcoming November ballot.

What exact form that tax and accompanying ballot language will take—how much of a tax, what lodging properties will be impacted, how much they want to raise, what the money will be used for—has yet to be determined.

Town manager Joe Fitzpatrick asked the council at the work session to first focus on what they want to do with money raised from any tax. “Before raising money, you should know what we would do with it. How much money do we need and how much do we want? Do we want to be a developer?” he asked. “Or do you want to give the money to the Gunnison Valley Regional Housing Authority? Do you want to buy units, say, out of foreclosure? We need to set a direction before putting a tax before the voters.”

The council didn’t definitively answer any of those questions but they all agreed with the concept of fleshing out a lodging tax to put before the voters. Fitzpatrick said a 1 percent lodging tax on rentals within town would raise about $230,000 per year. “A lodging tax comes out of the pocket of the renter. It doesn’t directly tax the owner,” Fitzpatrick said.

Currently the town collects a 5 percent sales tax on lodging. Overall, a person renting a room in Mt. Crested Butte pays 13.9 percent in sales tax. Fitzpatrick said there were 847 rental properties in the town but that includes the fact the only two conventional hotels in town—the Elevation Hotel and Nordic Inn—are considered one rental property each despite the additional rental rooms. The Nordic has about 28 rooms while the Elevation has 262 rooms.

“I think it will be hard to get the hotels on board with this idea since they pay commercial taxes and fees,” said councilwoman Lauren Daniel. She voiced some hesitation with taxing hotels when the theory behind the new tax is that the increase in VRBO-type properties was eliminating workforce housing and as such, that particular area of lodging should be targeted.

“I embrace the philosophy that progress should pay its own way,” said councilman Dwayne Lehnertz. “So if more people come, then more people should pay more to deal with the ramifications of more people coming here.”

Councilman Roman Kolodziej said by phone that he would prefer to not impose the tax on hotels and instead focus on the rental-by-owner units.

Coucilman Nicholas Kempin said that seemed more fair to him as well, given the higher fees and taxes hotels normally pay as opposed to rental units owned by individual residents.

Fitzpatrick made the case that taxing all rentals in town would result in more revenue. He again emphasized that the hotel owners would not be paying the tax; rather, the renters of the rooms would directly foot the bill. He noted, “Mt Crested Butte lives and dies financially off rentals. We’ve always been the bedroom at this end of the valley. In terms of regulating rentals, in my opinion it is not a good idea to limit short-term rentals in any way.”

“If 1 percent raises $230,000, is it worth our while doing that?” asked Daniel. “Is one  percent enough? It almost doesn’t seem worth it.”

“It’s not a ton of money but it is some money,” said Kempin. “We may not be able to build something with that but we could purchase something out of foreclosure. It could make a difference in the long run.”

Lehnertz said the new tax could be more than 1 percent. “We were told that the tax increase downtown has had zero negative impact with stays in Crested Butte,” he said.

“Getting back to the reason we want to do this … the purpose is primarily to increase affordable housing,” said Daniel.

“And that could go forward in a broad spectrum of affordable housing,” added Kempin, listing a number of potential opportunities.

Town attorney Kathy Fogo said the ballot language should be general. “It could say that the money would go to fund affordable housing. You don’t need to include a list of projects. Keep it broad. Broader language gives you more leeway as things come up. You have to give a lot of thought to wording in the ballot language as it gets closer.”

Kolodziej argued that the council should have a clear public goal or benchmark of what the money would be used for after it is collected.

“That can be part of our strategic plan on what to do with the money,” suggested mayor Janet Farmer.

“Remember this will go to the voters so the council isn’t making any final decision,” said Daniel.

“It seems pretty cohesive that we want to do a tax on this,” said Farmer. “We are just not yet sure on who or for how much.”

But the council agreed during the regular meeting to ask for a placeholder on the county ballot this November. They will continue to work out the details of how best to raise money through a new tax earmarked for affordable housing. No date has been set for the next such meeting.

Before the November vote, the Town Council hopes to have also decided on appropriate license fees and regulations governing short-term-rental units in town. All of the efforts would be timed to go into effect in January 2020.

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