ISSUE #232: No on Aspen 2A - The STR Tax Goes Too Far (10/23/22)

"We do not have government by the majority. We have government by the majority who participate."

-- Thomas Jefferson

It's election season. Your Aspen ballot was mailed on October 17 so you should have it by now. We have several local issues to consider, but I decided to focus on Aspen 2A this week. A tax on short term rentals (STR) was originally conceived to address and mitigate for the impacts to the community from nuisance STRs, but the actual ballot measure reflects something else entirely. The punitive money grab targets the wrong rental units and will be nothing short of detrimental to Aspen's traditional lodging community.  Read my column in yesterday's Aspen Times HERE. MY BALLOT I am voting for / against the following local candidates and issues: County Commissioner District 2: Kelly McNicholas-Kury This is certainly not a ringing endorsement, but sometimes the devil you know is better than the devil you don't. Sheriff: Michael Buglione This is not an "anti-Joe" vote, rather, a vote for change. Simply put, it's time. I was particularly impacted by this letter from a longtime local whose measured views on local issues have always struck me as spot-on, as well as the letter from Judge Erin Fernandez-Ely in green below. Aspen 2A: The STR Tax NO See the linked column. Aspen 2B: Extension of the 0.5% sales tax for Parks and Open Space NO This 0.5% sales tax was added in 2000 to the original 1% sales tax that took effect in 1970. The additional 0.5% was specifically to fund open space acquisitions. Today, all critical acquisitions have been completed: Smuggler, Cozy Point and Sky Mountain, among others. We've succeeded. The 1% sales tax plus a $14 million fund balance is more than enough to fund the city's parks, open space and rec facility needs into the future. Do not extend the additional 0.5% tax. Aspen 6A: Dedicated funding for the Aspen Ambulance District NO We voted to more than double the Ambulance District's mill levy / tax collections in 2014. Today, property tax revenues for the Ambulance District are WAAAAAAY up. I agree with this letter. There is no need for more funding. YOUR BALLOT Got questions? I've done the research and I'm happy to help. Just drop me a note.

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Ballot Issue 2A, the Short Term Rental (STR) tax, fully misses the mark.  The administrative over-reach seeks to add 5% and 10% excise taxes to the nightly sales taxes of various categories of short term rental properties. The rationale, thanks to a financially illiterate city council, is strictly punitive. At the end of the day, this STR tax is specifically designed to discourage tourism. It will be detrimental to Aspen.

Three types of rental properties will be affected by the tax:

An “owner occupied” rental is a local’s primary residence that is rented out no more than 120 nights a year. Think of your neighbors who live here but travel a lot so they rent their Aspen home short term. With the passage of 2A, the nightly sales tax rate would increase from 11.3% to 16.3%. Your neighbor will pass this along to the renters.

A “classic” rental refers to all residential units on the rental market that are specifically not hotels or lodges, which are categorically exempt from the STR tax. The extremely broad “classic” category ranges from large, luxury homes to traditional condominiums, the small complexes you see throughout the downtown core. This category gets whacked the hardest because the tax’s wide net captures the VRBO-type rentals and “party homes” at the center of the STR debate. It will be subject to a 10% excise tax, bringing the nightly rate to an astonishing 21.3%. 

Take that, owners of investment properties! City council does not like you running “mini hotels” in Aspen when you only pay residential property taxes! And as for the hundreds of other legacy condominium units that have been rented short term to people who have preferred condos to hotels for the past 50 years, council wrongly believes these are equally to blame for the negative impacts to the community such as parking, noise, traffic and displacement of locals, despite their business model never having changed. For these traditional condos, their long-time group business, families and foreign visitors will simply go elsewhere. Aspen will price them out of the market.

The “lodge exempt” condo-hotel properties, specifically Aspen Square, The Gant, North of Nell and Aspen Alps, have been detrimentally singled out. Comprised of individually-owned condos and functioning as hotels under unified brands and marketing models with comparable amenities to hotels, these properties are only “exempt” from individual-unit business licenses, not the proposed 5% STR tax.  Oddly, “fractionals” like Dancing Bear and the Residences at The Little Nell which only differ from condo-hotels in that they have multiple-owner vs individual-owner deeds, get a pass on the tax.

Issue 2A was originally conceived to mitigate for negative impacts to the community from nuisance STRs, however, the perceived impacts are distinctly not being driven by the operation of traditional condominiums and condo-hotels. Issue 2A simply targets the wrong market segments. These properties have seen relatively flat occupancies over the years and the notion that their impacts to the community have increased is incorrect. If anything, these sectors are competing with STRs for staff, not generating new demand for employees. And each condo-hotel already provides proprietary housing to a large percentage of its staff.

Most notably, condos and condo-hotel unit owners pay the RETT, directly benefitting subsidized housing. Furthermore, the short term rental of traditional condos and condo-hotel units has never displaced local households.  

These properties should not be subject to any STR tax.

Leading the charge to tax condominiums and condo-hotels has been councilwoman Rachel Richards. Her over-simplified rationale is that these properties pay residential property taxes (6.9%) when hotels pay commercial (27%). But, clean up on aisle five. Richards is looking solely at tax rate, not actual taxes paid. A simple analysis shows that last year’s taxes paid were equitable on a square footage basis. Property values and assessed values are derived using different methods, so to apply a commercial tax rate to a condo property, the assessor would have to value the property as a commercial one, dramatically reducing its value. Richards’ premise is fatally flawed: she’s comparing apples to kumquats as a spiteful means of soaking owners of private properties who she disdains. But it’s Aspen’s tourism that actually gets hurt.

One little-known secret of 2A is a provision that siphons nearly a third of the total revenue collected (over $3 million in year one) for “infrastructure and environmental projects,” the result of a half-baked and leading community survey that asked where the expected windfall should be spent. Tax first, then maybe fund a pet project or two. 

City finance director Pete Strecker recently acknowledged that occupancy numbers are trending downward, but pointed to summer 2022 nightly rates which were “way up.” He concluded that this simply “balances the books, so to speak.” No Pete, that’s more flawed logic from the city. Inflation has already dramatically raised the costs of supplies and utilities, and the Aspen lodging community is bracing for a significant reduction in occupancy with lower nightly rates amid a looming recession and global uncertainty. It’s no time to tax our traditional tourist accommodations.

Focus on the real problems. Vote no on 2A. 

Be like Breckenridge, where traditional “resort accommodations” are exempt from the STR debate. Contact TheRedAntEM@comcast.net.