Dec. 06–Orbitz, Expedia and seven other online travel companies paid the city of Denver $18.8 million to settle a years-old case that claimed that the travel companies didn't charge adequate lodging taxes to customers who booked hotel rooms in the city.
The settlement comes seven months after the Colorado Supreme Court ruled in the city's favor. The City Council gave its first reading Monday night on how the funds will be distributed, with more than half paying legal fees or set aside for the city's new affordable-housing fund. The rest of the money is slated for city tourism efforts. Final council approval is expected next Monday.
"We saw the right outcome of arduous work by the city to ensure that tourism dollars are being invested back into our community. This is a notable ruling nationally as well as locally to ensure we keep our cities great places to experience," Jenna Espinoza, the city's deputy communications director, said in a statement.
Officials from Orbitz and Expedia declined to comment. Others did not respond to requests for comment. The other online travel companies are Priceline, Hotels.com, Hotwire, Cheaptickets.com, Travel Webb LLC, Travelocity and Site59.com.
At issue was the city's lodging tax of 10.75 percent, according to court records. The online hotel companies had charged the tax on the discounted price they paid for hotel rooms — but not what they ultimately charged travelers.
The city said the tax should have been charged on the price that consumers paid. Denver levied its tax assessment in 2010 asking for $40 million in back taxes over a 10-year period ending in April 2010.
The travel companies sued in Denver District Court and lost with the judge awarding the city $3.56 million in uncollected lodging taxes with $1.25 million of it assessed against Expedia over a three-year period instead of 10, according to an earlier Denver Post story.
The companies appealed, and the Supreme Court in April ruled in the city's favor but left the length of time up to an appellate court. The parties settled in September, and the city received payment in October, said Denver spokeswoman Courtney Law. The city is not allowed to comment on the settlement, she said.
The $18.8 million is for 10 years and includes tax, penalties and interest, Law said.
The largest portion — $5.4 million — will pay legal fees. Another $4.1 million is for the city's affordable-housing fund "because it remains a top priority for the city," according to the city.
That will shore up the $15 million-a-year affordable-housing fund, which draws in money from property taxes and new development-impact fees, while collections of those impact fees lag. The fees, which are assessed on new development projects, took effect Jan. 1, but developers filed a glut of paperwork ahead of that date last December to avoid having to pay them.
The rest of the $18.8 million settlement will support city tourism groups with $3.4 million to Visit Denver, $4.8 million for the new Convention Center capital fund and $1.1 million for the Convention Center or National Western Complex purposes.
The settlement was first reported by Denverite.com.
Denver Post staff writer Jon Murray contributed to this story.
