Avon voters will see a short-term rental tax on November ballot
Revenue from the tax would fund future community housing plans, projects and purchases
In November, Avon voters will be asked to determine whether or not the town implements a 2% short-term rental tax. If approved, revenue from the tax — which the town staff estimated at $1.5 million — will create a dedicated fund for community housing.
On Tuesday, the Avon Town Council voted 5-2 — with Council members Amy Phillips, Lindsay Hardy, Scott Prince, Chico Thuon and RJ Andrade voting for the measure and Mayor Sarah Smith Hymes and Council member Tamra Underwood voting against it — to place the question on the upcoming November ballot.
The 2% short-term rental tax would be applied to any rental property that is not assessed as a commercial property and that is rented for less than 30 days. According to Town Manager Eric Heil, this applies to all rental properties in Avon except the Comfort Inn.
According to the ballot language, this tax will help fund community housing including “the acquisition of land for housing, construction of housing, extension of public infrastructure to serve community housing development, purchase of deed restrictions, down payment assistance programs, partnerships with public and private entities to develop community housing, and related costs for administration, design, legal and consulting.”
“We’ve lost a major portion of our workforce and unless we figure out how we’re going to house them to hire them back, we really have some significant issues to work through, now — It’s go time,” Thuon said. “We gotta start somewhere.”
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Is the tax too much?
One of the concerns expressed by council when the tax was first discussed was impact an additional tax would have on the overall lodging rate in Avon.
“The concern was if we added the 2% and made it noticeably more expensive with the tax that people would choose not to book a lodging room in Avon and book somewhere else, that we would lose that business,” Heil said, adding that the impact would be to visitors, not property owners. “It’s the person renting the room, the visitor, that’s paying that tax.”
Currently, according to Scott Wright, the town’s finance manager, Avon rental properties are subject to a total tax of 12.4%. This includes a 4% local Avon sales tax, a 1.5% county sales tax, a 2.9% state sales tax and a 4% Avon accommodations tax.
Additionally, town staff presented a table of lodging tax and private fee assessments comparing Avon to its peer ski resort communities. However, Heil did note that these might not fully encapsulate all the fees — things like cleaning and parking fees — in each community.
“In the time frame, we may not have been able to do the full research we would like to do,” he said. “It may not be 100% accurate.”
With that caveat, staff estimated that Avon’s current tax rate places the town 1.8% above Beaver Creek and 2.6% above Vail and above many other communities. On the high-end of the spectrum are Crested Butte with an 18.4% tax rate and Telluride with a 15.15% tax rate.
With the addition of the short-term rental tax, applicable properties would be subject to an overall 14.4% tax.
Town Attorney Paul Wisor noted that in his experience working with other communities considering short-term rental taxes that short-term rental operators have not been concerned about a tax increase.
“From the owner’s perspective, they have yet to see the breakthrough point where people don’t actually use their unit. So as long as those funds are going to something that supports the community and continues to draw people in, it’s been my experience that those renters don’t care what that fee is,” Wisor said.
Prince expressed similar sentiment, stating that, “I don’t think that our 2% is ultimately going to lead someone to stay somewhere else.”
The Colorado Taxpayer Bill of Rights requires that you make an estimate of the revenue raised in the first year from the proposed tax for any tax-related ballot questions. Based on the 2019 Accommodation Tax revenues, Heil estimated in the meeting packet that a 2% tax would generate $455,000. However, Wright noted that this estimate was low. Wright recommended that, taking into consideration new developments and a likely increase in the economy and visitor traffic next year, the ballot question will estimate a revenue closer to $1.5 million.
The time is right
There was some trepidation from members of council as well as the town manager as to whether or not this was the right time to put the ballot out to voters.
Heil recommended waiting until a future election cycle to allow for hiring a consultant, conducting community polling, build a marketing campaign and having discussions with the lodging community. This was also something for which Underwood strongly advocated.
“I do not think this question is ripe to put in front of voters,” Underwood said, later adding, “I urge my fellow counselors to not approve this tonight. Please take a measured approach and put something in front of the voters that we all understand and we all agree with.”
Ultimately, however, the majority of council voted to put the question to the voters, adding that the time was now to do something.
“All of us have been hearing stories about it and the sentiment in the community is, we need to do something, we need to act boldly and I see no issue with going to the voters and let the voters decide,” Prince said. “The timing couldn’t be any better with the crisis that we have and we need to start somewhere.”