On the heels of a successful campaign to direct Colorado income tax dollars toward affordable housing, a ballot proposal for Colorado’s 2023 election would impose a fee on every real estate transaction in the state to fund affordable housing.
The Community Attainable Housing Fee ballot proposal submitted by an unnamed group last month to the Colorado Legislative Council would impose a 0.1% fee on all real estate deals in the state. It’s not a tax, said Dee Wisor, an attorney with law firm Butler Snow who submitted the proposed ballot initiative. A real estate transfer tax is prohibited under the 1992 Taxpayer’s Bill of Rights.
“Since it’s a fee and not a tax, TABOR limitations do not apply,” said Wisor, who submitted the proposal for a client who will come forward once the proposal winds through the official title board process, which begins next week.
Wisor said the passage of Proposition 123 — which will direct as much as much as $300 million from the Colorado budget to affordable housing — as well as widespread voter approval on the Western Slope of additional lodging taxes for housing “gives me hope that voters would support this.”
The fee resembles a real estate transfer tax used by 12 western Colorado municipalities where voters approved the tax in the 1970s and 1980s before the passage of TABOR in 1992.
The communities are seeing their real estate transfer tax coffers swell to record levels as home prices have more than doubled in recent years as a buying frenzy sweeps through Colorado’s high country.
Colorado communities across western Colorado are harvesting record-high revenues from sales and lodging taxes as well. Combined with soaring real estate transfer tax revenues, voter-approved new taxes on short-term rentals and a surge of federal stimulus and infrastructure dollars, communities are seeing a once-in-a-generation bounty of income for capital projects.
“It is fair to say that municipalities probably won’t see opportunities to tackle infrastructure at this level ever again,” said Kevin Bommer, the executive director of the Colorado Municipal League, which represents all 270 of Colorado’s cities and towns.
A tally of net taxable sales reported to the state by 18 mountain communities showed visitors and locals spending $2.7 billion from May through August this year. That’s an all-time summer season high, up 34% from the pre-pandemic $2 billion spent in the same span of 2019.
That tracks with a surge of spending in the 2021-22 winter, with spending in those 18 communities reaching $4.7 billion from November 2021 through April, up 55% from the 2019-20 ski season.
There are a lot of reasons behind this record spending and sales tax harvest. The main reason, of course, is that prices are up due to inflation, so total spending numbers are rising.
Hotel prices have never been higher. So even though occupancy was down this summer, high country hotel revenues and lodging tax collections remain high.
Destimetrics, which tracks lodging in 28,000 units in 17 mountain resorts in seven Western states, shows 2022 summer occupancy down 4.8% from the pre-pandemic 2019, but the average daily rate for hotel rooms was up 38.5% last summer compared with 2019.
If the summer of 2022 mirrored 2021, with a similar labor crisis and high visitor numbers, there might have been some spectacular tourist town implosions. But there were fewer visitors spending more last summer, which is essentially the dream scenario for every tourist-dependent community.
The Colorado Sun has charted monthly net taxable sales in these 18 communities since 2018: Aspen, Avon, Breckenridge, Crested Butte, Durango, Frisco, Glenwood Springs, Mountain Village, Mount Crested Butte, Pagosa Springs, Salida, Silverthorne, Silverton, Snowmass Village, Steamboat Springs, Telluride, Vail and Winter Park.
Every month this year has set a net taxable sales record for those 18 communities, with spending through August reaching $5.95 billion, up 37% from 2019.
Another reason for the surge: More locals are shopping online. Colorado started collecting sales taxes on online sales in 2020, thanks to the U.S. Supreme Court Wayfair decision, and that has boosted overall net taxable sales numbers.
Also there are more new residents in mountain towns who are shifting economic rhythms with more year-round spending.
On top of the sales tax harvest, real estate transfer tax collections in 2020 and 2021 in Aspen, Avon, Breckenridge, Crested Butte, Frisco, Gypsum, Snowmass Village, Telluride, Vail and Winter Park climbed to a new high of $178 million in 2020 and 2021, up 84% from collections in 2018 and 2019.
The fee proposed in the potential 2023 ballot initiative would impose a tenth of 1% fee on all sales minus $200,000 and would start on Jan, 1, 2024. The ballot proposal says the revenue would support the development of housing for locals earning 80% to 120% of the area median income.
“Communities will be stronger and more resilient where workers can live close to their jobs and be invested in the community,” reads the text of the proposed ballot initiative. “The culture, inclusivity, diversity or communities is maintained by providing options for variety of housing types and price and rent levels.”
It’s not the first effort in Colorado to pass a statewide real estate transfer tax. Lawmakers in 2017 tried to push for a statewide vote on a constitutional amendment that would approve a 0.1% transfer tax on all property. Colorado Legislative Council staff estimated the tax would generate $27.2 million in tax revenue for the state and $1.4 million for counties in 2019, based on a projected $28.6 billion in real estate sales. That proposal never made it out of committee.
Bommer with the Colorado Municipal League says Colorado’s cities and towns rank affordable housing high on their lists of planned infrastructure expenditures, alongside water and wastewater, transportation, broadband and climate, energy and environmental issues.
Even with overflowing tax coffers, many municipalities are reining in spending for 2023 as clouds darken the economic horizon.
The Town of Vail, for example, has collected record tax revenue in all but one month this year but the town council is urging staff to budget conservatively for the coming year.
“The town council wants to be prepared during these uncertain economic times. We are currently in a strong financial position to make headway on our community priorities including housing projects,” Vail Mayor Kim Langmaid said. “It’s the other more routine capital projects and proposed new full-time positions that we are being careful about including in the 2023 budget. We want to wait and see how visitation and sales tax come in during the first quarter of 2023.”
Pete Strecker, the director of finance for the City of Aspen, said while revenues are up, so are the city’s costs for goods and services. Still, the city is directing more revenue toward the city-owned Cozy Point Ranch and increasing childcare capacity. The city will complete 87 new units at the Burlingame Ranch community next year and soon will begin construction of 277 new affordable units at its Lumberyard neighborhood.
“The city is in a good position on reserves and we are looking at ways to take advantage of the revenues we are collecting and push those back out into the community,” Strecker said.
Jon Stavney, the head of the Northwest Colorado Colorado Council of Governments, said most community leaders will be conservative when budgeting for the coming years, even with the upward trajectory of tax revenues.
“It’s going to be interesting to see what they do with this extra revenue,” Stavney said, wondering if the increased income will be enough to cover high-dollar housing and climate projects.