Dorotik v. Breckenridge

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

areas.

¶ 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.

18