Durango lodgers tax increase would fund marketing, transit and arts

The Durango City Council set the terms this week for a lodgers tax increase – a tax paid by people staying in hotels and motels – which is expected to appear on the April election ballot.

The proposal includes raising the tax to 5.25% from its current rate of 2%. The increase would primarily pay for sustainable tourism marketing, transportation, and arts and cultural events. The City Council’s vote Tuesday was the end result of weeks of debate among councilors and months of preparation by impacted stakeholder groups.

“We’ve got three disparate groups working together making lots of concessions to bring to us something that is coherent and relative to the needs of the community,” said Councilor Chris Bettin.

Currently, lodgers collect a total of 10.4% in taxes on stays at hotels, motels, campgrounds and vacation rentals within city limits. With the increase, Durango would collect 13.65%.

In 2019, the 2% lodgers tax generated more than $1 million in revenue from Durango’s commercial lodging guests.

The tax revenue pays for efforts to advertise the community, improve its transportation services, finance new facilities and attract events.

The community has tried multiple times since the 1990s to increase the tax. The latest attempt launched with the combined efforts of groups like Visit Durango, the Durango Creative District and the Durango Area Hospitality and Lodging Association.

In a 4-1 decision Tuesday, City Council directed staff members to craft ballot language asking voters to increase the lodgers tax to 5.25%.

Each year, 55% of the revenue generated by the increase would go to sustainable tourism marketing. The funding would support Visit Durango’s efforts to strengthen the off-season tourism economy while avoiding overtourism. Its goal has been to increase lodging by about 40% during off-peak months.

“Let’s not state that the idea is to bring more tourists,” Bettin said. “The idea is to create more stability in that economy by stretching out its impacts into off-season periods.”

Fourteen percent of the tax revenue would support arts and cultural events, programs and facilities. The funding ties into the city’s efforts to strengthen its creative economy through the Durango Creative District.

“I am in favor of supporting that,” said Councilor Melissa Youssef. “I see the long-term benefits to the community of diversifying our economy. ... I see great value in supporting the arts and culture in Durango.”

Twenty percent of the tax revenue would fund transportation and transit services, equipment and facilities.

That was a sticking point among some councilors because some transportation funding provided by the state is projected to decrease from $811,000 in 2021 to $413,000 in 2023, a 49% drop.

“I’m supportive of the lodgers tax increase. I also am extremely concerned about our transportation system,” said Councilor Barbara Noseworthy. “This is an issue of equitable services, inclusive services and geographic services. ... We recognize that we have a structural challenge with our budget, and this is an example of it.”

All of the councilors acknowledged the need to find sustainable transportation funding, but they did not agree that the lodgers tax should be the primary tool used to do that.

Noseworthy advocated for allocating more of the tax revenue, like 43%, to transportation. She voted against the motion, which included less funding for transportation.

The City Council also proposed a flexible fund of 11% that could be directed toward marketing, transportation, and arts and culture programs. Future councils could also use the fund for purposes related to the impacts of tourism.

It is unclear exactly how much the tax could generate as the economy begins to recover from the coronavirus pandemic. Councilor Kim Baxter roughly estimated that it could equal more than $2.6 million during Tuesday’s meeting.

The council will vote to finalize and submit the language Tuesday after a public hearing about the proposed increase.

smullane@durangoherald.com

This story was updated with Councilor Barbara Noseworthy’s preferred transit allocation, 43% of the lodgers tax revenue.