Alert - Room Tax Raid Planned!
December 4, 2015
Dear WH&LA Lodging, Lodging Executive, CVB, and Chamber Member:
Yesterday, State Senator Mary Lazich and State Representative Joe Sanfelippo routed a bill draft to members of the state legislature asking them to co-sponsor a new bill that basically would give municipalities the authority to take Room Tax that was supposed to go to "tourism promotion and tourism development" and instead use it on what is very loosely defined as "economic development," which goes so far as to include anything that expands the property tax base or simply improves what they perceive as the economic vitality of a municipality. To make this even more of a loss to tourism promotion and development, this revenue can be taken up front - and only the remaining room tax revenue then would go to tourism promotion and tourism development, if there is any revenue left!
Unfortunately, with the complexity of the room tax law, too many legislators may not understand that this bill will alter dramatically the concept of using a tax on the tourism industry to grow tourism locally and will instead open the door wide to municipalities using the revenue instead for their own purposes, with no real obligation to leave anything for the intended tourism promotion and development.
LRB-3692/1 is in the hands now of all state legislators, and they have been asked to co-sponsor by next Friday, Dec. 11, so time to act is limited. You will see the Memo the sponsors have circulated, which does not tell the whole story, farther down in this Insider, so you can see the one side legislators are hearing first.
What is Needed Now!!
If you do not want to see the portion of Room Tax revenue that is supposed to be designated for "tourism promotion and tourism development" raided by municipalities for other general municipal purposes, it is critical that you do the following:
- Contact BOTH your state representative and your state senator by early next week (if you need their email address or do not know their name, go here).
- Tell them how LRB-3692/1, routed by Sen. Lazich and Rep. Sanfelippo will strongly hurt tourism funding in your community and how losing local tourism promotional dollars will also hurt your business - ask them to NOT sign on as a co-sponsor, AND to actively oppose this proposed bill. Feel free to use a few of the bullet points noted below.
Message Points (feel free to add your own, these are only a few to consider)
- Room tax is a tax on overnight guests at our lodging properties. This bill would raid the revenue already clearly designated to go to "tourism promotion and tourism development" and instead allow it to be used for municipal intentions under an extremely broad umbrella. These other intentions would be funded before the tourism purposes, with only any money left going to what was clearly noted as tourism promotion and development.
- With the reduction in real tourism promotion and tourism development funding as is proposed in this bill, the local tourism economy will be hurt, with many tourism businesses negatively impacted just to allow municipalities to retain even more than the 30% they already retain for their own purposes. Room Tax is a tax on the tourism industry to help grow the tourism industry - it is not a tax to grow municipal government.
- The memo asking for co-sponsors refers to some municipalities needing more money to support police and fire service demands that hotels in the community require. First, the room tax law already allows municipalities to retain up to 30% of total room tax revenue that can be used for such services if the municipality wishes. And second, many of these claims are inflated and do not take into consideration similar demands that other retailers that do not collect an additional tax place on these same services.
- In the memo, it is stated that local communities should be authorized to spend room tax to benefit local taxpayers. As local taxpayers are not the ones paying this room tax, it would make more sense to retain the current statutory focus on using the funds for tourism promotion and development. Local taxpayers should receive the benefits from the taxes they pay, not the taxes that lodging guests pay.
- Tourism development benefits the community by generating traveler expenditures in many businesses in the area, and the businesses rely and thrive on this revenue. It makes more sense to have a tourism tax go to tourism promotion and tourism development to ensure these local business continue to thrive and grow instead of diverting the revenue to other purposes or businesses that are not contributing to the tourism economy - the one who is collecting and paying this tax.
Memo Sent to Legislators Asking for Co-Sponsors on LRB-3692/1
From: Rep.Sanfelippo
Sent: Thursday, December 03, 2015 3:06:05 PM (UTC-06:00) Central Time (US & Canada)
To: *Legislative All Assembly; *Legislative All Senate
Cc: The-Wheeler-Report
Subject: Co-sponsorship of LRB 3692/1, relating to: changing the permitted uses of room tax revenues.
CO-SPONSORSHIP MEMORANDUM
DATE: December 3, 2015
TO: Members of the Wisconsin State Legislature
FROM: Sen. Mary Lazich and Rep. Joe Sanfelippo
RE: Co-sponsorship of LRB-3692/1, relating to: changing the permitted uses of room tax revenues.
DEADLINE: Friday, December 11, 2015 at 4 p.m.
Wisconsin Act 55 in the 2015-17 biennial budget made revisions to state statutes pertaining to the municipal room tax, one of which required a greater share of room tax revenue to be devoted to tourism promotion and tourism development.
For decades, some municipalities in Wisconsin have been using a portion of their room tax revenue to help fund their general budgets. City, village and town officials argue that hotels place substantial demands on municipalities, particularly for police and fire services, which exceed the demands of other property taxpayers.
Those same officials say the changes made to the room tax law are expected to make even less revenue available to municipalities, likely resulting in a reduction of services offered to local taxpayers.
When municipalities were authorized in 1967 to impose a tax on establishments providing rooms or short-term lodging, revenues could be used for an expense that benefited the public. It wasn't until 1994 that municipalities were required to divert 70 percent of room tax revenues strictly to pay for tourism promotion and development.
The problem with the one-size-fits-all approach is some municipalities are not tourism destinations and are known more for being business centers. Local communities should be given the authority to spend room tax revenue in ways that will benefit local taxpayers the most.
This bill would allow municipalities that charge a room tax to spend any amount earmarked for tourism promotion and tourism development on economic development. That way municipalities are given the ability to best fit their needs, whether the revenues are spent on tourism, economic development or both.
Some communities would be better served using room tax revenues for economic development, promoting job growth and retention and while improve the general economic vitality of municipalities and the entire state. In addition, municipalities would be attracting business travelers increasing room tax revenues.
Additional economic development opportunities are projected to lead to more people staying at local hotels further spurring local economies and increasing room tax revenue.
If you would like to co-sponsor this legislation please reply to this email or contact Rep. Sanfelippo at 6-0620.
The deadline to co-sponsor LRB-3692/1 is Friday, December 11, 2015 at 4pm.
All co-sponsors will be added to the Senate companion version of the bill unless otherwise requested.
Analysis by the Legislative Reference Bureau
This bill changes the definition of "tourism promotion and tourism development" under the room tax to include within that definition economic development. The effect of this change is to authorize a municipality that imposes a room tax to spend any amount that must be spent on tourism promotion and development to be spent by the municipality on economic development. Amounts not spent by the municipality on economic development are forwarded to a commission or tourism entity to be spent on other aspects of tourism promotion and development.
Generally under current law, a municipality may retain a certain percentage of room tax revenues to be spent by the municipality for any public purpose, and the remainder of the revenue must be forwarded to a tourism commission, if the municipality has created one, or to a tourism entity, to be spent on tourism promotion and development. Current law defines "tourism promotion and tourism development" as expenditures by a commission or tourism entity on items including tourism marketing projects, tourist information services, and tangible municipal development that are significantly used by transient tourists and are likely to generate paid overnight stays at hotels and motels.
Generally, a municipality may retain approximately 30 percent of the room tax and must forward approximately 70 percent to a commission or tourism entity, although that ratio will begin to change somewhat beginning in 2017 such that an increasing percentage of room tax revenue must be spent on tourism promotion and development.
Under this bill, out of the approximately 70 percent that must be spent on tourism promotion and development, a municipality may spend any amount of that revenue on economic development and amounts not spent for that purpose must be forwarded to a commission or tourism entity. The bill defines "economic development" as development designed to promote job growth or retention, expand the property tax base, or improve a municipality's overall economic vitality. Beginning in 2017, a municipality must certify each year to the Department of Revenue the amount of room tax revenues it spends on economic development.
For further information see the local fiscal estimate, which will be printed as an appendix to this bill.
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