Steamboat Springs A series of property tax appeals in Routt County this year provided the impetus for a new piece of state property tax legislation dealing with the way in which resort condominiums are taxed.
House Bill 1265, which was signed by Gov. Bill Owens in June, entitles "condominiumized hotel units" to residential status regardless of their actual use for commercial lodging. The Steamboat appeals involved four resort properties that operate to varying degrees like full-service hotels. Two also sell interval ownership in their condominium units.
The bill establishes a new set of criteria for deciding what amounts to a hotel or motel room for purposes of tax assessment. The distinction is crucial because in Colorado, commercial property is required by law to assume a proportion of the overall property tax burden that is three times greater than the property tax share assigned to residential properties. Residential property is assessed at 9.15 percent of its assessed value and commercial properties are assessed at 29 percent.
State Rep. Al White, R-Winter Park, and State Sen. Jack Taylor, R-Steamboat Springs, cosponsored the bill on their respective sides of the legislature. The measure had bipartisan support.
"As long as condominiums have existed in Colorado, they've been given residential status," White said.
He believes the appeals by four local properties Christie Club condominiums, the Inn at Thunderhead, Glen Eden Resort townhomes and the Steamboat Grand Hotel were warranted. However, White also believes that Routt County Assessor Amy Williams' stance on the residential/commercial question was probably in conformance with the old law.
The assessor was probably right in terms of the old statute," White said. "I think her interpretation was a reasonable one."
Chris Diamond, who as president of the Steamboat Ski Area also acts as president of the Steamboat Grand Condominium Owners Association, disagrees. Diamond believes Williams' decision to appraise the four condominium projects in Steamboat as commercial property was contrary to the definition of a hotel or motel under the old law.
"Clearly, our properties do not meet that legal definition," Diamond said in July 2001. "They are secondary residences, including condominiums, time-share units and homes, and their owners use them as they see fit."
The Steamboat Grand sells quartershare interval ownership in its units. Most of them closely resemble the typical resort condominium with bedrooms and kitchens. In many, one of the rooms can be locked off with a separate entrance the hallway. Those lock-off rooms can be sold more like traditional hotel rooms. The property also offers all of the services offered by hotels. And the common areas of the Steamboat Grand are taxed at commercial rates.
Owners of the quartershares have the right to visit the condominium one week in four. They also have the option of turning the available nights back to the management for short-term rentals. Not all of them do that, Diamond said.
Williams has consistently said she felt obligated to assess properties like the Steamboat Grand and Christie Club on a commercial basis as part of her statutory obligation to equalize the tax burden.
She said she did not take interval ownership of units within the property into consideration when making her decision.
"They take the position that I must appraise them as residential because (the resort property) was platted as a condominium," Williams said. "My point is, ownership doesn't make a difference it's not about whether it's a timeshare. And it's not how it's platted. It's all about how they're being used."
The Routt County Board of Commissioners, acting as the County Board of Equalization, agreed with Williams, finding against the properties during a first round of appeals.
Diamond said the properties exercised their option to appeal to the state level, but at the same time, undertook a legislative effort.
White said he was approached by Melanie Mills who deals with public policy issues for Colorado Ski Country USA. White said he was convinced that Mills was correct, and that if Routt County's position prevailed, it would have profound implications at ski resorts all over the state, not just for hotel/condominium/interval ownership properties, but for more traditional condominiums as well.
White said a 1991 case in Eagle County established a precedent that protected the residential status of resort condominiums. However, the state legislature did not seize the opportunity to clarify the language at that time. A decade later, he said it seemed like a good opportunity to make the language of state law more clear and up to date.
"I have a friend in Denver who owns a quartershare at the Grand," White said. "He never turns it into the rental pool he reserves it for his own use. Why should he be (taxed at) commercial rates?"
Mills stressed that the new bill clarifies the old law, but does not represent a change in the way resort condominium properties have always been assessed.
"The bill (House Bill 1265) does not change the way properties are being taxed," Mills said. "It was the Routt County assessor who was proposing a change."
Asked if he was concerned that House Bill 1265 places a greater tax burden on many of his constituents than they would have otherwise borne, White said he thinks the implications of a change in the longstanding policy of assessing resort condominiums as residential property would be more serious.
He feared that a change to commercial status for some or all resort condominiums would cause some units to be removed from the nightly rental pool, reducing the bed base at ski areas. Other owners might be motivated to sell, or not buy to begin with.
"Is it an example of special interest legislation? I thought it was an important issue to address," White said. "The real estate industry is an important economic engine for our economy. People like the checker at the grocery store and the ski tech turning screws on bindings depend upon it."