Frisco Town Council plans to put short-term rental excise tax on April ballot
Ordinance readings planned for January; short-term rental license cap also in discussion
Frisco Town Council is pursuing an excise tax on short-term rentals in an effort to help the community’s workforce housing issue. Though the language still needs to be drafted, the tax question would likely be placed on the April 5, 2022, ballot for voters to approve.
In addition to discussing the tax at a work session Tuesday, Nov. 30, Town Council also considered a cap on short-term rental licenses. Community Development Director Don Reimer recommended a cap of 25%, which is roughly 900 licenses. That is 200 more than currently exist to give the town room for growth.
Council was in favor of a cap in that range and asked staff to provide more information for a future meeting. Council member Andrew Aerenson said he wants to look into reimbursing the 1% real estate transfer tax to encourage people to move to and live in Frisco, and he mentioned how one of his biggest concerns is other towns, such as Breckenridge, having their own short-term cap.
“All of a sudden, we now become a dominant market for anybody in the Front Range that’s looking to buy a vacation home and use it as a short term rental,” Aerenson said. “We need to be ahead of that problem.”
The majority of the work session discussion focused on the exact fee percentage of the excise tax, which is a tax imposed on goods, services or activities. There is already a sales and lodging tax of 10.725% applied to short-term rental stays in Frisco, meaning the proposed additional 7.5% tax would make the total 18.225%.
Reimer said that would put Frisco on the higher end of similar mountain towns, yet Crested Butte would be the highest at 20.9% after an additional 2.5% was passed in November. To compare, Avon has a 14.4% tax, and Vail is at 10.3% after the election. Breckenridge is 12.275%, Dillon is 10.875% and Silverthorne is 10.375%.
“Recently, there have been a number of ballot issues that were approved in the November election by various communities to place an excise tax on short-term rental stays,” Reimer said. “Most of those passed, so I think you could make a general comment that the voters in these communities were generally supportive of the concept that short-term rentals do have an impact, and the revenues from short-term rentals should be used for workforce housing solutions.”
If approved, the 7.5% excise tax would generate an estimated $1.8 million in revenue annually. Reimer said the tax rate was picked to supplement 5A revenue to cover projected expenses over time so as not to be in the red by 2024. Summit Combined Housing Authority’s 5A measure is a 0.6% affordable housing tax that was recently extended for 20 years.
Aerenson felt that 7.5% was too high and thought 4% or 5% would be better. Council member Melissa Sherburne said the tax should be high.
“In my opinion, we just need more money,” Sherburne said. “We’ll figure out a way to spend it, and there’s not really an amount of money that’s going to solve our housing problem, so more money is good.”
However, Sherburne said council should be careful about increasing the taxes too much.
“It should be palatable, but also make a difference,” Sherburne said. “I would hate to see it rejected outright if we go through the trouble of proposing such a tax. Logically, I fall sort of in that 5% range. I think 2.5% is too low, and I see the argument that 7% is maybe too high.”
Council member Dan Fallon said he was concerned about total taxes being around 15% and thinks a 2% excise tax would have broader support.
“Frisco is a strong brand, and we’re going to attract a crowd,” Fallon said. “I’d like to think we’re a premium brand and that we can attract a higher-paying crowd. At the same time, we need to be sensitive to this market and the fact that that is a big ask in this market to raise prices 5% above and beyond.”
A deeper discussion about the excise tax rate is slated for a future work session. In the mean time, town staff will also research various types of exemptions for short-term rentals, such as those for owner-occupied properties, and provide council with more details about the use of excise tax funds.
A resolution referring a ballot measure must be completed by Jan. 31 to be put on the April ballot. That means the first reading is scheduled for Jan. 11 and the second will be Jan. 25.
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