As revenue flowing into local governments ebbs, more communities are looking to visitors to pay bills.
At least seven counties will ask voters this November to double or triple the local lodging tax outside cities and towns to pay for roads, police, housing and early child care. These are the first counties to deploy a law passed this year – Senate Bill 1247 – that allows voters to raise county lodging taxes to 6%, up from 2%, to pay for infrastructure, conservation, emergency services and sustainable tourism policies.
Commissioners in Chaffee, Custer, Gilpin, Routt and Park counties have recently finalized plans for November ballot questions seeking voter approval to triple the local lodging tax to 6%. Eagle County voters will decide whether to double the lodging tax to 4% and Ouray County voters will weigh a first-ever lodging tax of 6%.
The diversity of the counties pursuing the lodging tax increases – with commissioners who are both Democratic and Republican – “reflects an urgent need to fund critical services that benefit both locals and visitors,” said Colorado Sen. Dylan Roberts, a Democrat from Frisco who sponsored Senate Bill 1247.
“Our bipartisan work at the legislature to give more flexibility to lodging tax revenue allows every county to focus on their individual needs from housing and child care for their workforce to supporting law enforcement and wildfire mitigation – all of which are necessary for thriving communities where working families can live and tourists can enjoy,” he said in an email to The Colorado Sun.
Another piece of Roberts’ legislation when he was a state representative in 2022 – House Bill 1117 – expanded uses for lodging taxes beyond tourism marketing, allowing voters to direct taxes collected from hotels and short-term rentals toward housing and child care. The law requires that at least 10% of lodging taxes continue to support tourism marketing. From 2002 to 2022, voters in 29 Colorado counties had directed lodging taxes toward luring more tourists.
In the last few years, more money in Colorado tourist towns is spent on mitigating the impacts of tourism versus marketing. House Bill 117 required that at least 10% of lodging taxes remain in tourism promotion.
Kelly Flenniken, executive director of Colorado Counties Inc., said revenue coming into counties from nearly every state and federal source is shrinking while demand for services is growing. Lodging tax is one of the few tools a county can use to make up for declining revenues, she said.
It’s important to note, Flenniken said, that these tax bumps mostly are for hotels and short-term rentals in unincorporated areas. Cities and towns, especially in resort communities, have spent decades fine-tuning lodging taxes to mitigate the impacts of visitors. Counties only started using lodging taxes for housing, child care and recreational infrastructure in 2022 and now can use funds for things like roads and public safety.
“This allows each county to address its unique needs,” she said. “Different counties have different electorates and different priorities and what works in one county might not work in another. But I think people will be watching these first counties and paying attention to how this goes.”
Eagle County voters in 2022 authorized a 2% lodging tax, with 10% of that revenue supporting tourism promotion and 90% for child care programs and attainable housing. The tax generates about $3 million a year and so far the child care portion has been spent on rental assistance for child care centers, $500 a month stipends for more than 230 child care workers and a full-time county employee working on child care.
A survey of 119 Eagle County child care workers this year showed the monthly stipends supporting more than 450 of the workers’ family members, with a majority of the respondents saying the extra money reduced stress, made them feel valued and they were more likely to remain working in early childhood education.
“Lodging taxes for early childhood education feels like an easy first step because you are taxing someone else, not yourself,” said Jason Callegari, director of initiatives at the Buell Foundation, which has built an online tool kit for communities working to invest lodging taxes in early childhood education.
Without funding for child care, Callegari said communities based on tourist spending could become too hard for young families. The 2022 legislation “acknowledged that housing and child care are really essential industries for tourism-based economies,” he said.
“We see this lodging tax question translating into larger conversations around what does Colorado want to be and how do we support families in livable communities,” Callegari said.
While many communities have approved lodging taxes in recent years, especially on short-term rental homes, a tax hike on visitors is not a sure thing at the ballot box. In 2023, Pueblo voters rejected a lodging tax for child care. Last year, voters in Gypsum, Hudson and Monument rejected a lodging tax for parks while voters in Kiowa and Yuma refused to use lodging taxes for roads and government spending.
Lodging advocates are rallying opposition to the lodging tax increases. The new Colorado Short-Term Rental Alliance – or COSTRA, which launched Tuesday – plans to mobilize a host of “community captains” who can tap a statewide and national collection of advocates to help voters better understand the impacts of increased taxation and regulation of the lodging industry.
“This is our opportunity to mobilize more folks. A 300% increase in lodging taxes will impact our guests, who will make different decisions about not just where they travel, but how they spend money when they are in our communities,” said Julie Koster, executive director of COSTRA. “These increased lodging taxes will reach beyond lodging and dining and retail and recreational activities. It really impacts everyone in the communities that rely on visitors who spend money.”