A bipartisan bill to raise the lodging tax cap for Colorado counties cleared the statehouse and is on its way to Gov. Jared Polis’s desk. 

Currently, counties cannot ask voters to approve more than a 2% lodging tax in unincorporated areas, while towns and cities can ask for as much as 6%. Under House Bill 1247, counties would be able to seek up to 6% and be given more latitude for how to spend that revenue.

Lawmakers say the measure is intended to help counties diversify their revenue streams, particularly in rural resort areas trying to fulfill a host of community needs like improving local roads and providing more affordable housing. 

“Which is going to benefit both the people who live in the community and help power the tourism workforce,” said Sen. Dylan Roberts, D-Frisco, a lead bill sponsor, “but also ensure that visitors have a good experience when they come and will want to come back.”

Roberts championed a bill in 2022 that allowed local governments to use lodging tax revenue to fund not just tourism-related initiatives but also affordable housing and child care. House Bill 1247 further expands how those dollars can be used to include infrastructure and public safety

“I hope that it helps communities double-down on things that have already been working, whether it’s child care provider stipends in Eagle County or more affordable housing development in several Western Slope counties,” Roberts said. 

Roberts stressed that any lodging tax hike will need to be approved by voters and that the bill respects local community control rather than imposing a top-down approach from the state. 

Still, the measure faced pushback from the vacation rental industry, which has been battling policies at the statehouse in recent years that would increase the costs of owning a short-term rental. 

While opponents ultimately failed to secure a lower lodging tax cap — House lawmakers had lowered the cap to 5% before agreeing to a Senate amendment that brought it back to 6% — bill sponsors did work to appease some concerns, including narrowing how revenue could be used. 

The vacation industry has argued that if tax dollars are being used to fund broad community needs, they shouldn’t come from the tourism industry alone. 

“The lodging community is always supportive of our local infrastructure, child care (and) workforce housing,” said Julie Koster, executive director for the Colorado Lodging and Resort Alliance. “While we think the broader community should also be engaged and also be involved in helping shoulder that economic burden, we’re happy to help.”

Koster said the industry was able to foster open dialogue with lawmakers as they considered the bill. 

“I feel like we were heard, and I feel like that speaks volumes to the relationships we’ve been able to build with the legislative community,” Koster said.

While the measure did face rebuke from short-term rental owners who testified during committee hearings, the discussions were less heated than last year’s highly contentious debate on tax policy changes that would have significantly impacted vacation rentals and second homes. 

A bill seeking to quadruple short-term rental owners’ property taxes was the subject of hours of fiery testimony last session, with hundreds of property owners descending on the Capitol to present a united front against the measure. The bill was ultimately killed before it could make it out of a Senate committee. 

Koster said short-term rental advocates have only increased their outreach and communication with lawmakers during this year’s session. 

“Just having that open dialogue, it’s been really, really pivotal in our ability to impact change,” Koster said. 

Koster said she still has concerns that the lodging tax bill will make it less affordable for families to vacation in the mountains at a time when heightened costs, from lift tickets to gas prices, continue to strain budgets. 

While new lodging tax rates passed in counties wouldn’t be added to a municipality’s lodging tax, it would be stacked on top of the other taxes and special fees that districts in unincorporated areas already charge. 

“4% does not sound like a massive number, but (visitors are) not seeing all of the other excise taxes, municipal district taxes that are compounded with this,” Koster said. “We are concerned about the traveller who maybe is new to this community, who doesn’t understand the justification for these increased fees.”

Koster is also bracing for the possibility of future bills that could target short-term rentals and second homes. Ahead of this year’s legislative session, local government groups proposed other ideas for bills that would have allowed communities to implement a vacancy tax on empty homes and targeted taxes on specific industries, like ski resorts, though neither of those proposals were introduced this year. 

“We know that there’s an appetite for these other types of taxation, so we’re keeping an eye out,” Koster said. “We’re just trying to prepare ourselves by continuing to build relationships (and) continuing to engage with lawmakers.”