As the April 6 city election approaches, Durango residents are weighing the pros and cons of a proposed lodgers tax increase in addition to their choices for City Council candidates.
Ballot measure 1-A asks residents to increase Durango’s lodgers tax, paid by commercial lodging guests for room rentals, for the first time in 41 years.
If residents vote Yes, the tax will increase from its current rate, 2%, to 5.25% in perpetuity. More than half, 55% of the revenue would be used for sustainable tourism marketing, 20% for city transit, and 14% for arts and cultural organizations, facilities and events. Each year, City Council would allocate the remaining 11% for any of the above uses, or tourism impacts, depending on the city’s needs at the time.
If residents vote No, the tax will remain at 2%. Its revenue would support tourism advertising and transit without set allocations. A lodgers tax increase could be proposed again as soon as November.
Based on 24 statements submitted to the city, residents seem comfortable with the increase but divided about how the money should be spent.
The city of Durango first approved its lodgers tax in 1980. By 2019, the average lodgers tax in Colorado had risen to 3.6%, according to Visit Durango.
In total, Durango lodgers collect 10.4% in taxes on commercial lodging, the ninth lowest rate compared with 30 “destination” cities in Colorado, according to a Smith Travel Research analysis provided by Visit Durango. With the increase, Durango would collect 13.65%, the fifth highest rate according to the analysis.
Like any tax increase, a higher lodgers tax rate risks making Durango less appealing than similar cities with lower fees.
“Given that we’re already below the Colorado average ... it’s not going to make us the most expensive city. Definitely not by a long shot,” said Wade Litt, assistant professor of economics at Fort Lewis College.
Based on academic research, there is no substantial occupancy decline with similar lodging tax rates, except with larger events like conferences, Litt said.
If the tax increase passes, city councilors might choose to divvy up funds right after the election – with distributions in 2021 – or allocate the money as part of the 2022 budget, said Dirk Nelson, Durango city attorney.
Of note, the ballot measure allocates money only for specific uses – not specific organizations, Nelson said. City Council would have to create new contracts with any organizations receiving lodgers tax money.
For and againstSupporters said the tourism industry adds jobs for Durangoans, and marketing is essential. Also, cultural nonprofits will receive funding – adding to the quality of life for residents, according to pro statements submitted to the city of Durango.
“The good news is: You don’t pay this tax. Visitors do,” said statements in favor of the ballot measure. “Good marketing is essential.”
About 24 arts, lodging and restaurant businesses have endorsed the ballot measure, according to the Vote Yes on 1-A Committee.
“The distribution of funds raised from the tax is wrong,” said statements against the ballot measure. “We firmly believe if there was no tourism marketing our community would still be overwhelmed with visitors.”
Instead of marketing and arts, the city should focus on its core services, such as transportation, police station or storm drainage upgrades, opponents said. Durango already has plenty of tourists, and increased marketing will just bring more. That reduces the quality of life through impacts like crowding and air pollution.
How would the money be used?With 55% allocated for sustainable tourism marketing, City Council would need to create a contract with a marketing agency.
Visit Durango currently handles tourism advertising for the city. If Visit Durango maintains its contract, it aims to lure more mid-week and off-season visitors. The organization also plans to implement outdoor education and diversity, equity and inclusion programs, create a sustainable tourism division, support electric vehicle charging stations and collect more data about Durango tourism.
If the tax increase passes, 20% of revenue would support the city’s transit operations, principally staffing and maintenance, said Assistant City Manager Amber Blake.
Durango Transit faces a financial shortfall as state funding drops. The additional funding would not fill the funding gap, but it would help, Blake said.
“It would help address the need for dedicated, local funding sources to support transit operations,” she said.
Durango City Council would determine how 14% of the lodgers tax revenue would be distributed for arts and culture events, facilities and organizations.
Councilors might decide to give out grants, said Bill Carver, former Durango Creative District president. He listed about 25 potential beneficiaries, such as the Durango Arts Center, Powerhouse Science Center, Music in the Mountains, Taste of Durango, Animas Museum and Snowdown.
Arts organizations have been shuttered since the pandemic began, he said.
“They’re really hanging on by a thread,” he said.