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State would study impact of lake home rentals on resort industry

People who rent their lakefront homes may be adversely affecting resorts, which already face hardships to keep their cabins open, says Assistant House Majority Leader Frank Moe, DFL-Bemidji.

The state's tourism agency, Minnesota Tourism, will study the impact that private lakefront home rentals have on the resort industry under a bill authored by Moe that is now on Gov. Tim Pawlenty's desk after the House passed it Wednesday night.

"We need to know, really, how broad this practice is," Moe said in a telephone interview, "and if there are any laws being violated, or if there is in fact unfair practices between resorts and groups of homes that are being rented out."

The issue is the resort industry's chief priority of the 2008 session, he said.

Most resorts are already struggling as lakefront property values increase but resorts are limited in what the market will bear in cabin rentals. In many cases, when property taxes rise beyond what the resort business can handle, owners sell the resorts to developers who divide the properties into lakefront home sites.

Now a fear is that people who own lakefront cabins or seasonal homes may be renting them out at a profit, like a resort, Moe said.

"We know anecdotally that people are doing this, and we know there are Web sites where real estate companies are renting out. In some cases, hundreds of homes are available on them."

Moe said the study will look at issues like tax compliance, consumer safety and tourism promotion, as well as the extent that private lakeside homes and cabins are being used as vacation rentals and whether the same taxes and regulations should apply to them.

"A lot of commercial resorts and cabins are going through tough times and this study is intended to look at things we can do to make sure the playing field is level and they remain competitive and profitable," Moe said.

Rep. Brita Sailer, DFL-Park Rapids, is a House co-author and Sen. Dan Skogen, DFL-Hewitt, is author of the bill in the Senate.

"If they are in competition with resorts, should the Department of Health be inspecting these properties?" Moe asked. "Should the fire marshal be inspecting them? Should they be paying the same taxes as resorts are? We really have to look at the issue."

The state will always have resorts, "but we need to keep as many as we can," he said. "People who come to stay at the resort spend more in town -- $12 for every $1 that a seasonal property owner spends. That's a lot of money for our resort community."

Resorts also pay the operating levy for schools, while season recreation homeowners don't, Moe said. "We'd like to change that, which is important for our schools."

The environmental impact on the lake is far less with a resort that if the property were subdivided into seasonal rec properties or into a planned unit development, he said. "Resorts in general are much more environmentally friendly."

Resorts, Moe said, "are a vital part of the economy throughout Minnesota. They provide a lot of jobs in our area. This study will help us make sure they continue to be a vital part of our economy in the years to come."