Aspen council favors bringing STR tax question to voters |

Aspen council favors bringing STR tax question to voters

Members of Aspen City Council support having voters decide on a short-term rental tax, but when the question would be posed to the electorate is an undecided matter.

The five-member council reviewed a wide-sweeping set of regulatory framework up for consideration at a work session held Tuesday, as part of the city’s initiative to contain and regulate activity of the booming local industry of short-term rental (STR) stays, which are for no more than 30 days.

Among the considerations aimed at reforming the industry is an STR tax, similar to the city’s current 2% lodging tax. A new tax would require voter approval. The proposed tax rate for the STR question was not addressed.

A STR tax would be a “scaleable response in terms of impacts to something that is clearly having impacts on our community,” Community Development Director Phillip Supino told the council. “It could potentially generate revenue to not only mitigate those impacts but to deliver upon related policy objectives of the community.”

Proposing a STR tax to voters, issuing different types of STR permits to rental-unit owners and capping the number of permits in certain residential neighborhoods are all up for discussion on the council level. The city’s freeze on applications for new STR permits is scheduled to go through September, and its moratorium on residential development expires June 8 as the council works toward amending the municipal land-use code to make it more in line with the Aspen Area Community Plan.

Aspen’s STR industry generated attention from policymakers due to its apparent impact on residential neighborhoods and the rental market. In October 2020, City Council adopted legislation requiring all property owners who rent their condos or homes on a short-term basis to get a business license and a vacation rental permit filed with the city. The business licenses require the property owners to pay the city’s 2% lodging and 2.4% sales taxes. The rental permits are acquired after the property owners acknowledge an understanding of city laws pertaining to noise, nuisance and wildlife, for instance, as well as their own HOA rules as they pertain to renters.

For now, however, the city isn’t accepting new STR licenses. A memo Supino wrote to the council in advance of Monday’s work session said though the city doesn’t have accurate data on STR activity, there is still evidence showing the industry has grown exponentially.

“Council minutes from 2011 indicate there were 14 STRs in residential areas with businesses licenses,” Supino’s memo said. “In 2021, there were 1,319. … Looked at strictly as a land use matter, adding 100 new businesses of a certain type each year for 10 years to a community of our size is a massive shift in economic dynamics. It is also noteworthy that each of those businesses is located in a housing unit that may have been used previously as an owner-occupied home, vacant home or long-term rental. In a small community, these are significant changes in economics, lodging and housing in a relatively short amount of time.”

Both Supino and Finance Director Pete Strecker said the steering committee involved in the STR discussions favored both a tax and fee.

“We do think the fee issue is still something we have to do for the operational costs,” Strecker said. “And I think we had overwhelming support for that, as well, so it’s not that we think it’s only one or the other; I think we’ll have to do both. But again, that’s up to council if they want to go down the tax question.”

Councilman Ward Hauenstein threw his support behind both.

“We don’t have any fees, so if we are to institute fees, I think that should be for maintenance of the program, and I think that should also be scaled to the type of ownership and the impacts it has,” he said. “So what I see for taxes is for mitigation and impacts; so fees are for maintenance, and divide that up. But I think that we should look at taxes, because right now you pay $150 a year, and you’re home free aside from the sales tax and lodging tax portion of it.

“The impact on the community is not being mitigated, so I would favor a tax.“

Fellow officeholders agreed about bringing an STR tax question to the electorate, but whether to push for the mid-term election when there’s a robust ballot or hold off until the lighter city elections in March 2023 is something else they’ll need to figure out.

“A lot of things kinda get lost on the November ballot when you’re dealing with state issues and state policies and governor races and the (Rep. Lauren) Boebert race and all this stuff versus if it was in the March city election,” said Councilwoman Rachel Richards, noting that a tax question could be proposed during March because it is a regularly set municipal election.

She added, “On the one hand, yes, I’d love to get the fees in as soon as possible, if that’s really what is happening. But on the other hand, I know ballot questions take a little time to form, and I wouldn’t want to forget the potential of a March 23 election.”