The summaries of the Colorado Court of Appeals published opinions constitute no part of the opinion of the division but have been prepared by the division for the convenience of the reader. The summaries may not be cited or relied upon as they are not the official language of the division. Any discrepancy between the language in the summary and in the opinion should be resolved in favor of the language in the opinion.
SUMMARY March 26, 2026
2026COA20
No. 25CA0030, Dorotik v. Breckenridge — Taxation — TABOR; Municipal Law — Regulatory Police Power — Regulatory Fees
As a matter of first impression, a division of the court of
appeals considers whether a “revenue positive” regulatory charge is
a tax subject to a vote under the Taxpayer’s Bill of Rights (TABOR).
The division holds that a government can impose a regulatory fee —
and provide fee-funded services in exchange for that fee — even if
the activities subject to the fee also generate revenue under the
government’s general taxation scheme. The division then concludes
that the challenged charge is a regulatory fee that did not require a
vote under TABOR. Accordingly, the division affirms the trial
court’s dismissal of the complaint for failure to state a claim for
relief. COLORADO COURT OF APPEALS 2026COA20
Court of Appeals No. 25CA0030 Summit County District Court No. 24CV30182 Honorable Karen A. Romeo, Judge
Alexander Dorotik,
Plaintiff-Appellant,
v.
Town of Breckenridge, a Colorado municipal corporation,
Defendant-Appellee.
JUDGMENT AFFIRMED
Division III Opinion by JUDGE KUHN Dunn and Lipinsky, JJ., concur
Announced March 26, 2026
Ingenuity Law Colorado, Alexander Dorotik, Denver, Colorado, for Plaintiff- Appellant
Berg Hill Greenleaf Ruscitti LLP, Josh A. Marks, Geoffrey C. Klingsporn, Boulder, Colorado, for Defendant-Appellee ¶1 This case requires us to consider whether defendant, the Town
of Breckenridge, violated the Taxpayer’s Bill of Rights (TABOR) by
enacting a charge on short-term rental (STR) owners. Plaintiff,
Alexander Dorotik, claims that the charge is a tax that violates
TABOR because the activity subject to the charge allegedly
generates more revenue than the amount of the claimed expense.
¶2 We hold that a government can impose a regulatory fee even if
the activities subject to the fee also generate revenue under the
government’s general taxation scheme. Applying Colorado Union of
Taxpayers Foundation v. City of Aspen, 2018 CO 36, we conclude
that Breckenridge enacted a regulatory fee, not a tax requiring a
vote under TABOR. Accordingly, we affirm the trial court’s order
dismissing the case.
I. Background
¶3 In 2021, Breckenridge passed Ordinance No. 35, which
enacted an annual charge it referred to as a regulatory fee. The
charge applies to owners obtaining or renewing a license for an STR
in Breckenridge. The primary purpose of the charge, as specified in
the ordinance, is to “defray[] the costs of housing policies and
1 programs for the local workforce essential to the [t]ourism economy
that benefits the short-term rental licensees.”
¶4 Before passing the ordinance, Breckenridge retained a third-
party consultant to calculate a reasonable fee or charge to impose
on STR owners to bridge “the gap between what . . . [the town’s]
employee-households can afford and the cost to purchase a home”
in Breckenridge. The consultant conducted a study and issued a
report finding “a reasonable relationship between guest spending
from STRs in the town and the demand for housing affordable” for
the local workforce. The consultant’s report indicated that a
“regulatory fee is needed to support the local labor force and [t]own
housing programs that sustain the tourism economy in
Breckenridge.”
¶5 The consultant concluded that “the maximum fee per bedroom
is $2,161.” However, Breckenridge capped the enacted fee at thirty-
five percent of the study’s finding, which resulted in “a final fee of
$756 per bedroom.”
¶6 Dorotik, who owns a townhome in Breckenridge subject to the
STR regulatory fee, filed a complaint challenging the fee. He alleged
that the charge was a tax, not a fee, and was therefore enacted in
2 violation of TABOR, which requires “voter approval . . . [for] any new
tax, tax rate increase, . . . or a tax policy change directly causing a
net tax revenue gain to any district.” Colo. Const. art. X, § 20(4)(a).
Dorotik alleged that STR guest spending generated more revenue for
the town, in the form of sales and lodging tax revenue, than the
expense of the programs addressed by the fee. So, he alleged, the
charge was not a fee because it didn’t merely offset the town’s cost
for the programs but generated excess revenue for the town.
¶7 Breckenridge moved to dismiss the complaint, arguing that
the regulatory fee enacted by the ordinance was indeed a fee, even
though “STR renters also create tax revenues.” The trial court
granted Breckenridge’s motion to dismiss, holding that “Ordinance
No. 35 does not facially purport to levy a tax because it is to protect
the public’s health, safety, and welfare and it labels the charge as a
fee.” The trial court also ruled that because the primary purpose of
the charge is to defray the costs of “administering [Breckenridge’s]
regulatory scheme,” and not to raise revenue for general
government expenses, the charge is a fee and not a tax.
¶8 Dorotik now appeals.
3 II. Analysis
¶9 Dorotik contends that the trial court erred by concluding that
Ordinance No. 35 imposes a fee rather than a tax. As he did in the
trial court, Dorotik argues that the activity Breckenridge “cites as
an expense to defray (in order to justify the fee) directly generates
revenue for [Breckenridge] in an amount far greater than the cited
expense.” And because the amount generated is allegedly “far
greater” than the expense, he argues that the charge is a tax and
not a fee. We are not convinced.
A. Applicable Law and Standard of Review
¶ 10 Voters amended the Colorado Constitution in 1992 to include
TABOR. Aspen, ¶ 16. “In so doing, voters specifically limited the
legislative taxing power of the state and local governments by
requiring that any new tax must receive voter approval prior to
implementation.” Id. at ¶ 2. If a tax is illegally adopted without a
vote, “a portion of the revenue collected . . . must be refunded to
taxpayers along with ten percent interest.” Id. at ¶ 17. “TABOR
applies to ‘districts,’ which are defined as ‘the state or any local
government.’” Id. (quoting Colo. Const. art. X, § 20(2)(b)).
4 ¶ 11 “To survive . . . dismissal for failure to state a claim under
[C.R.C.P.] 12(b)(5), a [plaintiff] must plead sufficient facts that . . .
suggest plausible grounds to support a claim for relief.” Froid v.
Zacheis, 2021 COA 74, ¶ 29 (quoting Patterson v. James, 2018 COA
173, ¶ 23). A court will grant a Rule 12(b)(5) motion to dismiss if
“the plaintiff’s factual allegations do not, as a matter of law, support
the claim for relief.” Norton v. Rocky Mountain Planned Parenthood,
Inc., 2018 CO 3, ¶ 7. We review a Rule 12(b)(5) motion to dismiss
de novo, “accept[ing] all factual allegations in the complaint as true,
[and] viewing them in the light most favorable to the plaintiff.” Id.
¶ 12 We also review “a trial court’s legal conclusions concerning the
interplay of TABOR and related statutes de novo.” TABOR Found. v.
Colo. Bridge Enter., 2014 COA 106, ¶ 18. “Generally, municipal
ordinances are presumed to be constitutional, and the party
challenging an ordinance bears the burden to prove its
unconstitutionality beyond a reasonable doubt.” Town of Dillon v.
Yacht Club Condos. Home Owners Ass’n, 2014 CO 37, ¶ 22.
5 B. Ordinance No. 35 Implements a Regulatory Fee
1. General Principles
¶ 13 This case requires us to determine whether Ordinance No. 35
imposes a tax or a fee. When reviewing a charge involving a
regulatory program, such as the one at issue here, “we must
determine if the government is exercising its legislative taxation
power or its regulatory police power.” Aspen, ¶ 26. The supreme
court has “defined taxes as charges that ‘raise revenues for general
municipal purposes.’” Id. at ¶ 20 (quoting Bloom v. City of Fort
Collins, 784 P.2d 304, 308 (Colo. 1989)). Distinct from its taxation
power, a municipality can also regulate activities under its inherent
police power “to promote the health, safety, and welfare of its
citizens.” Id. at ¶ 21. Unlike taxes, the supreme court has held
that “regulatory charges are not subject to TABOR’s election
requirements.” Id. at ¶ 26.
¶ 14 To determine whether a municipality has enacted a tax under
its legislative taxation power or a fee under its regulatory police
power, we must identify the “government’s primary purpose for
enacting the charge.” Id. If the charge’s primary purpose is to raise
revenue for general government expenses, then it is a tax. Id.
6 However, if the “charge is imposed as part of a comprehensive
regulatory scheme, and [its] . . . primary purpose . . . is to defray
the reasonable direct and indirect costs of providing a service or
regulating an activity under that scheme, then the charge is not
raising revenue for the general expenses of government.” Id.; see
also Chronos Builders, LLC v. Dep’t of Lab. & Emp., 2022 CO 29,
¶ 23 (concluding that premiums collected under the Paid Family
and Medical Leave Insurance Act are fees). In that case, the charge
is not a tax. Aspen, ¶ 26.
2. Label and Stated Purpose
¶ 15 Ordinance No. 35 includes the following statement of
legislative intent and findings:
1. It is the purpose of [the ordinance] to protect the public health, safety, and welfare by establishing a comprehensive accommodation unit regulatory scheme that will strike an equitable balance between the short[-]term rental industry and the local community.
2. The regulatory fee will benefit accommodation unit licensees by supporting housing policies and programs for the local workforce that supports industries that create the World Class resort experience.
3. The regulatory fee will help address the secondary impacts caused by the short[-]term
7 rental industry by protecting the character of the local community and [Breckenridge] neighborhoods where accommodation units are located.
4. To ensure that the amount of the fee bears a reasonable relationship to the direct and indirect costs of implementing [Breckenridge’s] comprehensive regulatory program established by this Chapter, the administration retained an expert consulting firm to conduct a fee study and establish the reasonable amount of the fee.
5. The fee established by this section is not designed to raise revenues to defray the general expenses of [Breckenridge] government, but rather is a charge imposed for the purpose of defraying some of the costs of the particular [Breckenridge] services and programs described in subsection D of this section.
6. Consistent with Colorado Union of Taxpayers Foundation v. City of Aspen, 418 P.3d 506 ([Colo.] 2018), that a charge is not a tax if the primary purpose of the charge is not to raise revenue for general governmental purposes but is instead to defray some of the costs of regulating an activity under a comprehensive regulatory scheme, the fee imposed by [Breckenridge] under this section is collected from the short-term rental licensees for the primary purpose of defraying the costs of housing policies and programs for the local workforce essential to the Tourism economy that benefits the short[-]term rental licensees.
8 ¶ 16 The stated purpose of Ordinance No. 35 shows that
Breckenridge intended to implement a regulatory fee rather than a
tax. The ordinance indicates that its purpose is to “protect the
public health, safety, and welfare” through a “regulatory scheme
that will strike an equitable balance between the short[-]term rental
industry and the local community.” It also indicates that the
regulatory fee is designed to address the “secondary impacts” of
STRs on the local community. And the ordinance states that the
regulatory fee is not designed to raise revenue for general
government expenses “but rather is a charge imposed for the
purpose of defraying some of the costs of the particular [t]own
services and programs.”
¶ 17 Finally, the charge is labeled as a “regulatory fee,” not a tax.
While labeling a charge as a fee does not necessarily make it so, a
court cannot “ignore the stated legislative intent” behind the charge.
Colo. Bridge Enter., ¶ 30. We therefore conclude that Ordinance No.
35 does not facially purport to impose a tax.
3. Practical Realities of the Charge’s Operation
¶ 18 We do not end our inquiry there. Next, we must analyze the
“practical realities of the charge’s operation” to determine whether
9 the charge constitutes a tax despite its label. Aspen, ¶ 27. We do
this by
examin[ing] the practical realities of how the charge operates to determine if [it] is in fact imposed to defray the direct or indirect costs of regulation and if the amount of the fee is reasonable in light of those costs, or if the charge’s primary purpose is to raise revenue for general governmental use.
Id. at ¶ 30.
¶ 19 Ordinance No. 35 requires STR licensees in Breckenridge to
pay an annual fee, which is “fixed by the Town Council as part of its
annual budget process in an amount not to exceed $756.00.” The
fees are then collected and, importantly, “separately account[ed] for”
by the Finance Director. The ordinance restricts the collected funds
such that they “shall not be used for general municipal or
governmental purposes or spending.” And the ordinance prohibits
the collected funds from “ever be[ing] transferred to or becom[ing]
part of” Breckenridge’s general fund.
¶ 20 A previous division of this court has concluded that similar
factors support the conclusion that a charge is a fee because the
funds it raises cannot be used for general government spending. In
Colorado Bridge Enterprise, ¶ 7, the division noted that “[n]one of
10 the [Colorado Bridge Enterprise’s] revenue [was] available for
general expenses of the state . . . [or] credited to the state’s general
fund.” Likewise, the funds were deposited in a separate account,
could not be used for other purposes, and could not be transferred
to the state’s general fund. The division concluded that all these
facts indicated the charge was a fee rather than a tax. Id. at ¶ 34.
¶ 21 In addition to restricting how the funds are treated, Ordinance
No. 35 also limits the purposes for which the charge’s funds can be
spent. The funds from the charge can only be used to “defray the
reasonable direct and indirect costs” of three distinct program
areas.
¶ 22 First, the ordinance provides that the funds generated from
the charge can be used for Breckenridge’s “housing policies and
programs, including buy downs, lease to locals, acquisition of deed
restricted units, and/or construction of new units.” This use of
funds is designed to address or defray the impact that STRs have
on the local community in which they are located. According to the
consultant’s study, the industries in which STR guests spend
money, such as retail, food, and beverage, do not pay their
employees enough to cover the cost of market rate housing in the
11 town. “Without an adequate supply of housing support programs,
[Breckenridge] risks losing some of its labor supply that is essential
to the businesses in which STR guests spend money during their
stay. Tourism is [Breckenridge’s] economic base.” The consultant
warned that, without an adequate labor force and adequate worker
housing, “the guest experience and the [t]own’s economy are likely
to degrade.”
¶ 23 Second, the funds generated from the charge can also be used
to “address the secondary impacts caused by the [STR] industry by
protecting the character of the local community . . . including . . .
lack of parking, loud noise, and increased trash associated with the
higher density use.”
¶ 24 Third, the funds can be used to defray costs for the personnel
necessary to administer and enforce the regulatory program itself.
Thus, the funds can only be spent in furtherance of these three
¶ 25 Dorotik doesn’t assert that any of these uses do anything
other than defray the direct and indirect costs of the STR regulatory
program in Breckenridge. Nor do we see how he could. Each of the
permissible uses for the funds raised by the ordinance is tied to the
12 purpose of the regulatory program or the expenses of the program
itself. The practical realities of the program thus also support the
conclusion that the challenged charge is a fee rather than a tax.
4. A “Revenue Positive” Charge Does Not Convert a Charge into a Tax
¶ 26 Notwithstanding this analysis, Dorotik contends that the
charge here must be a tax because the activity on which it is levied
generates revenue on “the activity that caused [Breckenridge] the
expense used to justify” the charge. Dorotik argues that “the study
ignores the ample sales tax and lodging tax revenue generated by
the occupation of STRs.”
¶ 27 Recall that the study underlying the ordinance concluded that
Breckenridge would have to charge a $2,161 fee per STR bedroom
to defray the STR impact on the local housing market. The study
used a “jobs-housing economic impact model” to quantify the
relationship between “jobs and households supported by guest
spending in STRs.” It concluded that guests staying in STRs “spend
money in the local economy, mainly in the retail, food and beverage,
and recreation industries.” Because these industries employ
workers who do not make enough money to live in Breckenridge,
13 the study based the proposed fee on “the gap between what the
employee-households can afford and the cost to purchase a home”
in Breckenridge.
¶ 28 Using the study, and based on his own calculations, Dorotik’s
complaint alleged that these same STR guests also generated
additional tax revenue to Breckenridge from their spending in
hospitality and recreation businesses. Dorotik alleged that each
STR generated $7,503.60 per year in sales and lodging taxes. He
argues on appeal that this amount is “approximately 87% greater
than the expense of the activity to [Breckenridge].”1 Therefore,
Dorotik claims, there is no “‘expense’ to offset with a fee.” In other
words, Dorotik claims that as long as an activity generates tax
revenue in excess of program costs, that activity cannot be subject
to a regulatory fee. We are not convinced.
¶ 29 As the trial court noted, Dorotik “cites no authority for [his]
position that the government must include revenue generated from
1 It is unclear how precise these comparisons are, given that the
study bases its fee on bedrooms but Dorotik bases his tax revenue figures on dwellings. Regardless, we accept these allegations as true for the purposes of our analysis under C.R.C.P. 12(b)(5). See Norton v. Rocky Mountain Planned Parenthood, Inc., 2018 CO 3, ¶ 7.
14 taxes into its cost analysis.” And while it’s true that when the
government enacts a fee, the fee amount must be “reasonably
designed to meet the overall cost of the service [or activity] for which
the fee is imposed,” Bloom, 784 P.2d at 310, that doesn’t mean that
the fee calculation must take other tax revenue into consideration.
To the contrary, a fee need only be “reasonably related” to the cost
of the service and “mathematical exactitude” is unnecessary. Colo.
Bridge Enter., ¶ 26. Like the trial court, we do not see anything
unsound about the methodology the consultant used to support the
amount of the fee.
¶ 30 In support of his position, Dorotik argues that Ordinance No.
35 is an outlier because in all other TABOR fee cases the activity
that was regulated did not also generate tax revenue. But that’s not
right. For example, in Aspen, the city adopted an ordinance
prohibiting stores within its city limits from providing customers
with plastic bags. Aspen, ¶ 4. Stores could, however, provide paper
bags to customers while charging them a “$0.20 ‘waste reduction
fee.’” Id. The fee was designed to defray the cost of “recycling,
collection, and disposal of plastic and paper bags.” Id. at ¶ 5.
15 ¶ 31 Dorotik argues that the waste reduction fee was calculated to
directly offset the cost of recycling one bag. And he claims that the
underlying activity didn’t generate any revenue. It’s true that tax
revenue wasn’t a focus in the Aspen case, but the premise of
Dorotik’s argument still fails. The city’s need to subsidize recycling
was driven by the distribution of single-use bags by stores. But the
distribution of those bags was an impact of shopping in the first
place. In other words, shopping was the underlying activity in that
case.
¶ 32 Accordingly, for any shopping transaction in Aspen,
consumers were paying both sales tax and the waste reduction fee.
See id. at ¶ 6 (“Grocers remit the remainder of the charge to Aspen
on a form separate from their sales tax form.”). Increased shopping
leads to an increase in bag usage, but it also leads to an increase in
sales tax. So contrary to Dorotik’s argument, we cannot say that
this is the only TABOR fee case in which the underlying activity also
generates tax revenue in another way.
¶ 33 It is unsurprising, then, that the supreme court has also
observed that a government can use its legislative taxation power
and its regulatory police power “in tandem with one another.” Id. at
16 ¶ 22. The Aspen court noted that the General Assembly had
previously imposed regulations on the sale and use of marijuana
through its regulatory powers, and that it had also separately levied
a tax on marijuana. Id. The court concluded that “the government
may permissibly regulate and tax the same product.” Id.
¶ 34 The touchstone of the fee amount analysis is whether “the
charge b[ears] a reasonable relationship to the direct or indirect
costs to the government of providing the service or regulating the
activity.” Id. at ¶ 23. But “the particular mode adopted by a city in
assessing the fee is a matter of legislative discretion,” and the
“methodology chosen [will not be set aside] unless it is inherently
unsound.” Bruce v. City of Colorado Springs, 131 P.3d 1187, 1190
(Colo. App. 2005).
¶ 35 As supported by the study, the charge challenged here
“demonstrates a reasonable relationship between guest spending
from STRs in the town and the demand for [affordable housing].”
We see nothing inherently unsound in Breckenridge regulating
STRs — and providing additional fee-funded services in exchange
for the charge — on activities that are also subject to the town’s
general taxation scheme. Accordingly, we hold that Ordinance No.
17 35 did not violate TABOR by imposing the STR charge on a “revenue
positive” activity.
¶ 36 Therefore, like the trial court, we conclude that Ordinance No.
35 levies a fee and was not subject to a vote under TABOR. Given
this conclusion, we also agree with the trial court that Dorotik failed
to state a claim for relief. The trial court did not err by dismissing
his complaint under Rule 12(b)(5).
III. Disposition
¶ 37 The judgment is affirmed.
JUDGE DUNN and JUDGE LIPINSKY concur.