An excise tax on short-term rentals moves one step closer to appearing on the April ballot. Frisco Town Council approved the ordinance for the tax on first reading Tuesday, Jan. 11.

After discussing the excise tax — which is a tax imposed on goods, services or activities — in November, the originally proposed 7.5% tax has been lowered to a 5% tax. It is estimated to generate between $1.2 million and $1.5 million in additional revenue each year that would be used for workforce housing programs, supplementing 5A revenue.

“I want to ensure you that we are not looking purely to short-term rentals to fund workforce housing,” council member Melissa Sherburne said. “What we’re looking to do is to help offset the problem short-term rentals have created in our local housing landscape. … Workforce housing is an age-old problem in mountain towns — has been for decades.”

Adding a new 5% excise tax to the current 10.725% in taxes applied to short-term rentals brings the total tax to 15.725%. To compare, Crested Butte has the highest short-term rental tax among mountain towns at 20.9%. Avon has a 14.4% tax, Vail is 10.3%, Breckenridge is 12.275%, Dillon is 10.875%, and Silverthorne is 10.375%. Breckenridge’s figure does not include the bedroom license fee, and Silverthorne is proposing a 4% incremental increase to the lodging tax.

Council member Dan Fallon was the only one present who voted against the ordinance. One reason being he felt that the tax is too high. Though he agreed the increase of short-term rentals have had an impact on local housing, he reiterated that he would be more comfortable with a 2.5% tax.

Summit Alliance of Vacation Rental Managers Executive Director Julia Koster said in the public comment portion of the meeting that they, too, would like to see a 2.5% tax or similar, but on all lodging within Frisco, that would end after five years or be renewed by voters as needed. She said the organization welcomes further conversation and that she would prefer an open dialog rather than rushing to put the tax on the ballot.

“This issue impacts everyone, including our members of (Summit Alliance of Vacation Rental Managers) as well as their employees,” Koster said. “We want to be a collaborative force within every discussion that seeks to impact our shared community issues.”

Mary Waldman of Summit Mountain Rentals also expressed concern over the percentage and would rather have a 0.5% tax. She said it will hurt the owners more than the renters as they try to keep their prices competitive.

“Yes, the money comes from renters, but because I must lower rent to stay competitive, the money comes out of my pocket, not the renters’,” Waldman said. “You are not taxing the guests: You’re taxing me, the property managers and all second-home owners.”

Council member Andy Held said that the town isn’t against short-term rentals, but added how he’s seen them affect the ability to live in Frisco in the 30 years he has lived there.

He also reminded the audience that it still has to go to the ballot before it becomes official.

“We’re not passing this. We’re putting it to the people,” Held said. “It’s not just a handful of people just making a decision on this sort of thing. This is who should be making the decision.”

Fallon said he wants to explore exemptions for the tax and incentives for short-term rental owners rather than penalizing them. One example, he said, is to waive the tax if a rental is leased to a local worker for 90 days.

Other council members agreed that exemptions and incentives are a good idea. However, they said that they didn’t want to complicate ballot language by explaining additional programs and rules. The Town Council can pass exemptions after the tax has passed, giving town staff time to draft the proper exemption language.

“I think this is a good start, and I don’t also want to not do this, or lower it to a point where it doesn’t happen and we’re back to draconian petitions going around the community to really affect what we need, which is short-term rentals within our town,” Mortensen said, referring to James Hayes Walsh’s petition to prohibit rentals. “Our economy is built on them, we depend on them, and I think if we don’t put this language to the voters to see, we risk having a far worse outcome where we might not have any (short-term rentals). And I don’t think that will serve us well at all to accomplish any of our goals.”

If passed, the tax would take effect June 1. A second reading is set for Jan. 25.