Colorado counties could ask voters to triple lodging taxes for guests of hotels and short-term rentals to fund a host of community programs under a proposed bill making its way through the legislature. 

Currently, counties can’t have more than a 2% lodging tax. House Bill 1247 would raise the cap to 6%, putting counties on par with the maximum rates that can be imposed by towns and cities. 

Counties would still need to secure voter approval before implementing a lodging tax in unincorporated areas, and the rates couldn’t be stacked on top of a municipality’s existing lodging tax. 

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The bill would also further expand the ways lodging tax dollars could be spent to include infrastructure, conservation and public safety initiatives. The effort builds on a 2022 law that allowed local governments to use the revenue — once reserved exclusively for tourism projects — for affordable housing and child care.

“We’ve seen immense success with that,” said Sen. Dylan Roberts, D-Frisco, who championed the 2022 lodging tax measure and is a Senate sponsor of this year’s bill. 

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In mountain resort areas like the ones Roberts represents, the move has been critical to local governments’ efforts to mitigate cost of living issues, be it through building more income-based housing or boosting wages for child care providers. 

House Bill 1247 continues the approach of “letting local communities address the local needs that come with tourism,” Roberts said. 

Ahead of this year’s legislative session, local government groups proposed other ideas for bills that would allow jurisdictions to implement a vacancy tax on empty homes and targeted taxes on specific industries, like ski resorts. 

Roberts, who initially signed onto the excise tax proposal, said it’s unlikely the bill will come forward this year and that he is instead focused on the lodging tax expansion. Halfway into the legislative session, a vacancy tax bill also hasn’t been introduced. 

County governments see the lodging tax measure as a way of further diversifying their revenue as property taxes shift and community needs grow. 

Testifying before a House committee on the bill this week, Thomas Davidson, executive director for the nonprofit Counties and Commissioners Acting Together, said the current 2% cap “severely limits our ability to reinvest in the communities that sustain Colorado’s tourism economy.” 

Having multiple revenue options is “increasingly important in light of state and federal budget cuts,” added Davidson, a former Summit County commissioner. 

The proposal faces backlash, however, from short-term rental advocates who fear additional taxes could exacerbate already softening lodging trends. 

Resort markets over the past two years have reported flattening or decreasing occupancy and revenue rates for vacation properties, though visitor use remains historically high. It comes after years of volatility in which spending on lodging initially cratered during the COVID-19 pandemic before roaring back.

Julie Koster, executive director for the Colorado Lodging & Resort Alliance, said increased taxes risk pricing out visitors, particularly in-state residents. 

While going from a 2% up to a 6% lodging tax may not sound like much, Koster said those higher rates would be in addition to other taxes levied by special districts. She gave the example of Copper Mountain, which charges a 9.9% surcharge for resort purchases, including lodging. 

“Making those last-minute reservation choices, making those last-minute bookings, is going to be harder for people if they keep watching the price go up,” Koster said, adding that vacationers who book stays will be on a tighter budget. 

“It’s going to impact their ability to go to restaurants, it’s going to impact their budget to go shopping,” Koster said. “It’s going to have a reverberating effect that impacts everything.” 

Koster said the vacation industry wants to be “supportive of local infrastructure and local needs and workforce needs,” but that funding for broad community initiatives shouldn’t fall on the shoulders of lodging properties alone. 

“If it’s going to be things that benefit the entire community, then it should be the entire community that participates, not just one industry,” Koster said. 

The growing pressures on resort towns — from affordable housing shortages to traffic congestion — have led to friction at times between the short-term rental market and local leaders. 

A recent study sponsored by the rental industry has been used to argue against regulations on short-term rentals, while a survey commissioned last year by two government groups found a sense of declining quality of life among ski town residents, who said they want more focus on local services rather than on tourism.

Roberts views the lodging tax measure as a way to “benefit the tourism industry” by enhancing local communities and, in turn, the visitor experience. 

“You can’t have a vibrant tourism industry without a strong local workforce, which requires housing and child care,” Roberts said. “You can’t expect people to want to come back if they are vacationing in a place and they call law enforcement and law enforcement doesn’t show up … or the roads are in such disrepair.” 

House Bill 1247 is also sponsored by Reps. Katie Stewart, D-Durango, and Karen McCormick, D-Longmont, as well as Sen. Cleave Simpson, R-Alamaso. It passed a House committee Tuesday in a 9-3 vote and now heads to the full chamber.