The court agreed on Monday, Oct. 19, to hear an appeal by Alexander Dorotik, a short-term rental owner who is challenging the town’s 2021 fee. The justices will also review a related question: whether a local government may impose a fee on an activity that already generates more revenue for the municipality than it costs to manage.

TABOR, a 1992 state constitutional amendment, generally requires voter approval for new taxes and tax-rate increases. Fees typically do not require an election, but courts have distinguished them from taxes by requiring a connection to the cost of providing a service or regulating an activity, rather than broader government revenue-raising.

Breckenridge adopted the rental fee after a town-commissioned study found that visitors using short-term rentals support local jobs, while many workers in those jobs cannot afford the town’s market-rate housing. The study recommended a fee to help address the housing gap.

Dorotik argued that the charge is effectively a tax and therefore should have been put to voters. He also argued that short-term rentals already generate town revenue through sales and lodging taxes, undermining the need for a separate fee to cover associated costs.

A trial judge dismissed the case, and a three-judge Colorado Court of Appeals panel upheld that decision in March. The appeals panel said Breckenridge could regulate short-term rentals and provide fee-funded services even though the activity is also subject to the town’s general tax system.

In its ruling, the panel compared the dispute with a 2018 Colorado Supreme Court decision that upheld Aspen’s 20-cent fee on paper bags as part of a broader regulatory program. Judge W. Eric Kuhn wrote that shopping in Aspen generated both sales-tax revenue and greater use of bags, so the case did not establish that a fee is invalid whenever the underlying activity also produces tax revenue.

Dorotik asked the Supreme Court to review both the revenue question and the appeals panel’s description of Aspen’s fee. He argued that treating the Aspen charge as a fee on shopping could allow a municipality to impose a charge on all taxable sales, which, he said, would function as a tax.

The Supreme Court’s review could clarify how Colorado cities and towns may structure fees for regulated activities that also bring in tax revenue. Justice Richard L. Gabriel will not participate in the case; the court did not explain his recusal. The case is Dorotik v. Town of Breckenridge.