The current radical changes proposed to Chelan County’s short-term rental (STR) code are the result of lobbying by special interest groups, specifically: the Leavenworth Chamber of Commerce, the Lake Chelan Chamber of Commerce, and the Short Term Rental Alliance of Chelan County (STRACC).
When lodging facilities are rented, the owners are required to collect sales and lodging taxes. Total lodging taxes in Chelan County range from 4% to 5% depending on the jurisdiction. While sales taxes are used to fund the general operations and services of local governments; use of lodging tax is generally restricted to activities which support tourism. For example, local chambers of commerce rely heavily on lodging taxes to fund their operations. Lodging taxes are distributed by local governments (cities and counties) to entities that promote tourism.
STR owners and advocates, and entities that promote tourism, are stating that the decline in lodging tax revenue in Chelan County following the pandemic was caused by the County’s STR code. This code capped the uncontrolled growth of STRs in Chelan County’s residential neighborhoods, established regulations for operations (e.g., limits on occupancy), and required STR owners to obtain annual permits.
We have prepared a report that takes a careful look at the recent trends in sales and lodging tax revenue in Chelan County and the cities of Leavenworth and Chelan. Here are our findings:
• Lodging tax revenues in unincorporated Chelan County were affected positively in the early stages of the COVID-19 pandemic and, like many other areas of the country (and even the world), this boost is wearing off as the effects of the pandemic have waned.
• Declines in lodging tax revenue in unincorporated Chelan County appear to have leveled off, whereas lodging tax declines in the cities of Chelan and Leavenworth are just now being seen. These two cities have their own STR codes and are unaffected by the County’s STR code.
• Declines in lodging tax revenue in unincorporated Chelan County do not appear to be adversely affecting the broader economy in that same area (as measured by total taxable sales).
• Revenues from hotel/motel stays in unincorporated Chelan County appear to also have been adversely affected in 2022 and 2023 similar to total lodging revenues, indicating that the declines in overall lodging tax revenues in unincorporated Chelan County are not exclusive to STRs and, therefore, not exclusively due to the STR code.
This analysis demonstrates that the current radical proposal for changes to the Chelan County STR code is not justified by the trends in lodging tax revenues. As a result, the County is at risk of making policy decisions based on incorrect assumptions. The STR code was put in place to achieve specific goals related to residential housing availability, quality of life for Chelan County residents, and neighborhood sustainability. Any short-term decline in the growth rate of lodging tax revenue, with no discernible impact to the overall economy, is certainly not a reason to abandon these goals