Council finds happy medium at 2.9 percent
By Kendra Walker
After much discussion in several work sessions and meetings, the Mt. Crested Butte Town Council determined key elements for a proposed lodging tax to raise funds for affordable housing projects during last week’s June 18 meeting. The tax will come from guests staying in various short-term rentals (STRs) in town.
“The town of Mt. Crested Butte is proposing a ballot issue for November on an excise lodging tax of 2.9 percent applied to all short-term rentals, to be effective January 1, 2020,” concluded mayor Janet Farmer. “The proposed tax would be to raise funds to address workforce housing needs and necessary administration costs of these programs, including but not limited to providing necessary infrastructure, maintaining appropriate inventory of deed-restricted dues, creating new workforce housing opportunities, providing financial assistance for housing with first consideration being for town employees and partnering with other entities to build new workforce housing. We are requesting our town attorney, Kathleen Fogo, to craft appropriate language for ballot wording to be brought back to the council for approval.”
Council spent much time weighing the pros and cons of the tax incorporating the town’s two official hotels with the rest of the short-term rentals. There are 847 rental properties in the municipality, including the Elevation Hotel with 262 rooms and the Nordic Inn with about 28 rooms, and each hotel is considered one short-term rental property.
“My bigger concern is really the equality of it affecting any guest who comes here. My concern has to do with how much less we would be getting if we took out the two hotels,” said Farmer. “If I were an owner who leased my place and I was told that I had to pay a 5 percent tax (hypothetical) knowing that somebody was going to go rent a room in the Elevation that wouldn’t have to pay it, I would not vote for this.”
Councilmember Lauren Daniel added, “I started out feeling very strongly that it should not include those hotels, and the more I have thought about it and the more people I’ve talked to, I’ve changed my position on that. And so I would support a lodging tax on all lodging, not just VRBOs [vacation rentals by owner].”
After officially agreeing to include the hotels, council moved onto determining the rate for the tax. Some members were in favor of a tax as high as 5 percent, while others opted for a more conservative number, such as 2 percent.
“It’s just a matter of do we want to try to solve this problem in 10 years or 20 years?” said councilman Steve Morris, who was in favor of 5 percent.
“I would caution you again if you ask for too much there’s more of a chance that it doesn’t pass and you get nothing,” chimed in town community development coordinator Todd Carroll.
Community development director Carlos Velado also stressed to council, “We shouldn’t be looking at this STR tax as the one-all, be-all fix. We need to explore other tools that could potentially help this problem,” he said. “There are several other ways to attack this issue and I think to attack it you have to come at it on different fronts. You can’t just have one thing in one direction. There are other approaches that we are looking into.”
Morris agreed, “I definitely don’t see this as an end-all, be-all but I also think it needs to be able to make a dent. You need to deploy funds in 18 months from the time that, with the assumption, it passes.”
“I think 4 [percent] is scary to people when they read it, I think 3 [percent] is going to be scary,” said councilman Michael Bacani.
“Anything higher than 3 [percent], I have a problem with it,” added Farmer.
Councilmember Dwayne Lehnertz referenced the town of Crested Butte having passed a similar lodging tax in 2016. “I keep thinking of Crested Butte voters passing theirs at 81 percent (for a 5 percent lodging tax),” he said. Lehnertz also added that he would be impacted by the tax, as a short-term rental owner himself. “I am one of those people who you are talking about and I know that it has an impact on the bottom line but not my bottom line,” he said. “I’m still going to put the same amount of money in my pocket and my quality of life is not going to be affected one way or another because I am just going to pass it on. It will be built in.”
“If we’re going to come down to 3 [percent], then I’d go to 2.9 [percent] because of the psychology of nine and digits is real,” Morris suggested.
The council ultimately met in that middle with the psychology of one tenth of one point, and decided on proposing a 2.9 percent lodging tax to short-term rental guests in Mt. Crested Butte. If passed by voters, it would raise an estimated $670,000 annually toward affordable housing projects.
Council’s next steps will be to work with Fogo to write the ballot language and clarify the tax’s purpose, specifically what affordable housing projects will be supported by the funds raised if passed.
“I think this money should be used for anything that we can leverage workforce housing,” said councilmember Nicholas Kempin. “One of our priorities should be town staff, our police officers and people who work here in town. Joe, I assume, is not going to be in this job forever,” he joked. “Where is the new town manager gonna live?”
Council plans to have the final ballot language for November’s coordinated election to Gunnison County by the September 6 deadline.
“It feels like a start,” said Morris. “Good game, guys.”