Aspen City Council made a move Monday that is aimed at capturing what could be millions of dollars in uncollected sales and lodging tax revenue on short-term rentals flying under the local government’s radar.
Council agreed to move forward with requiring owners of rental properties to file for a business license and pay $150 annually.
By requiring the unit owners, many of whom rent their properties on sites including VRBO and Airbnb, to have business licenses enables the municipal government to collect the city’s 2% lodging and 2.4% sales taxes.
Currently, about 50 business licenses include remittance of sales and lodging tax on short-term rental units out of the 1,000 or more properties on the short-term market, according to City Finance Director Pete Strecker.
Tricia McIntyre, representing Aspen Luxury Vacation Rentals, told council during its work session Monday that she believes there are around 4,000 short-term rental units in town.
They include fractionals, individually owned properties that use property management companies or manage on their own, as well as what are referred to as “condo hotels” like The Gant or Aspen Alps in which the condos are individually owned but managed by one entity with a front desk and onsite 24/7 service.
Council was supportive of giving those types of properties an exemption since the onsite operator collects the sales and lodging taxes in aggregate and pays the city on behalf of the owners.
But a definition needs to be created by the city’s Community Development Department on what constitutes a “condo-tel” because not all management companies operate the same or provide onsite services even though they may have 24/7 response for guests.
Strecker pointed out that by allowing responsible parties to file a return for an unknown number of properties, there is no cross validation possible to ensure properties are obtaining permits.
The current structure allows for a “designated representative” to utilize one business license and one tax return to file taxes for an unknown number of undisclosed properties.
That was likely an attempt to gain compliance when the vacation rental permit was first introduced.
“This may have been a manageable approach in 2012. However, the number of short-term rentals have exploded, and it is not feasible to manually monitor 1,000-plus properties for compliance with licensing, permitting and tax requirements,” Strecker wrote in a memo to council.
Council directed staff to create language for exemptions to “condo-tel” units to continue to remit taxes on a single return and single vacation rental permit for all units under their management.
Council will have to approve the changes to the municipal code via ordinance, which will require two public hearings in the near future.
When council does that, the city will join dozens of mountain and resort towns that already have short-term rental property ordinances.
Beyond the sales tax collection, a short-term rental property ordinance allows the city to have a better understanding of what type of lodging inventory the resort has.
“It’s well past time,” Councilwoman Rachel Richards said. “It’s about how much real data we have, where they are and how they are being used” to determine whether the resort town needs more lodges.
Each rental property also will have to apply for and receive a short-term rental permit that has the owner acknowledge local rules including noise and trash ordinances, as well as providing contact information for the fire department and other emergency response entities.
“It’s also a health and safety issue,” Councilwoman Ann Mullins said.
What’s more is that having a short-term rental ordinance levels the playing field for those who are cheating the system and have a competitive edge over those who are following the rules, according to Aspen resident and former Mayor Mick Ireland.
“I find it outrageous that people who are renting at $1,000 a night can’t share the (tax) burden,” he told council.
The city finance department has rolled out new software that scrubs the internet to identify properties in the rental pool.
The software, called MuniRevs, is designed to streamline the process for the public, better monitor applications, track issued licenses and signal expiration dates.
Anthony Lewin, the city’s tax auditor, said his department will rely heavily on the data to enforce a future short-term rental ordinance.
“The good thing about the software is that it builds a case for us,” he said.