June 8, 2015
Dear WH&LA Lodging, CVB, and Chamber Members:
The tourism industry has been struggling for years to retain a sufficient level of funding from local room tax to actually grow local tourism as was originally intended with the state's authorization of a local room tax for municipalities that pass such an ordinance and follow certain state-imposed guidelines.
As you know, there is a package of proposed changes on Room Tax Reform approved by the state Joint Finance Committee that will by and large get many communities on a better track for tourism growth heading into the future - something the lodging and tourism industry has been looking into for many years. There is a considerable amount of misinformation spreading that appears to be targeted to creating negatives, instead of celebrating the positives for tourism. We ask that everyone take a look at the facts instead of listening to the uninformed who may not have all the facts on the current statutes, the new proposal, and the history.
The following is a compilation of some of the questions we have been asked in the last week, which we thought may be helpful to address, so that others can better understand the package that is moving forward to state legislative caucuses soon. We hope that you will find this helpful as a WH&LA member service.
- Where did this Room Tax Reform proposal come from? The proposal approved by Joint Finance combined some components from the bill we supported last session along with WACVB and the support of the Tourism Federation; however, with a new approach to the grandfathered municipalities that keep most of the room tax revenue for themselves. The new approach, based on dollar caps versus eliminating the grandfather clause, would reduce the financial impact on most grandfathered communities, to make it more feasible for gaining legislative support.
- The Mayor of Madison and other people have been saying this will cost Madison millions of dollars with dramatic costs to services - is this true? No, as the City of Madison is required under the revisions to the state statute in 1994 to only retain approximately 18% for their own use, with the remainder to be spent on tourism promotion and development (which includes debt payments on Monona Terrace), the new dollar caps do not apply. The dollar caps are only for municipalities that retain over 30% for their own use. The dramatic media coverage about the $1 million or more cost to the city was unfounded, and we even met with Mayor Soglin last week to outline why.
- Can you elaborate on what happens to the room tax dollars for tourism promotion & tourism development? Under the Joint Finance package, the municipality may choose to send this money to the oversight of a local tourism commission (appointed by the Mayor or administrator) OR to a local tourism entity. Both the commission and the tourism entity have specified criteria.
- I don't understand why the dates in the new tourism entity definition apply - can you explain this? Currently a "tourism entity" must have been in existence by January 1, 1992, meaning that any entity created and operating as a tourism entity from 1992 cannot officially be considered a tourism entity. The change extends the date to January 2015 instead, plus it states that if there is no tourism entity in a municipality, one may be created. Why does this matter? CVBs had said last session that this would prevent a potential new organization that would compete with an established CVB or chamber that fits the definition, from being created just to have access to room tax funding.
- What if our current tourism entity (CVB, chamber, commission) does not fit under the revised tourism entity definition? If there is no local entity that fits the new tourism entity definition, either one can be created (or revised) to fit the definition, OR a tourism commission can still contract with the entity to perform the tourism promotion and development services, if there is no tourism entity. In other words, as long as there is oversight by a tourism commission, a local entity that does not fit the new definition could still be contracted to perform the services, as long as a new entity fitting the definition is not created. Click here for the motion containing the revised tourism entity definition.
- Why did Joint Finance Committee not just eliminate the "grandfather clause" for municipalities keeping all or most of room tax revenue for themselves? Municipalities are very skilled at political pressure and lobbying, which was demonstrated in past efforts to phase-out the grandfather clause by our industry. It became apparent that another approach would be necessary to gain sufficient legislative support. The imposition of dollar caps to phase out having municipalities that are investing little or nothing to help grow local tourism from keeping the growth in room tax revenue made sense.
- I received a copy of one of the language drafts Joint Finance was considering - is this current? We have heard that one of the drafts of the proposal's statutory language (/4) was routed by a source other than WH&LA. This was not the final document and changes had been made to it, so it should not be relied upon as what Joint Finance has approved. We tend not to route documents that are not final and public, as they are not ours to route, and they can lead to confusion later.
- I would like to see more parts of the room tax statute changed for our local needs - why did we not have a chance to add ours? For the last two sessions, WH&LA listened to many many suggestions from individual tourism businesses and chambers or CVBs on what they would like to see changed in the statute to fit their community. If you consider that there are over 270 municipalities with a room tax in our state, one can quickly figure what would happen if individual changes were added without a broad-based need. From our perspective, WH&LA was interested in a less complex package that addressed a few widespread concerns around the state that had already been vetted in past hearings. If individual areas wish to pursue new changes through the legislature, this is certainly something that can be discussed in the future, independent of the current opportunity to make a statewide difference for growing local tourism.
- Why was the word "tourism" added to the current language to now say "tourism promotion and tourism development"? While it appeared clear that tourism promotion and development referred solely to tourism, in the statute, there are some areas that thought this opened up expenditures to other types of development, even though reading the definition further should have made it even more apparent. This one word was added to make it abundantly clear that the development must be tourism development, still with the other criteria and limitations in the statutes.
- What happened to the proposal stating that lodging properties may retain 3% of collected room tax before remitting locally (to cover their credit card processing out of pocket costs)? This was removed by the Joint Finance Committee before the motion was finalized.
- Some of the mayors are saying that Joint Finance voted on this without any hearings - what do we say to this? As referred to previously, in the last legislative session there was a public hearing on AB 385, a Room Tax Reform package supported by the tourism industry. In addition to representatives primarily of the lodging but also the tourism industry speaking in support, numerous Mayors and city officials and lobbyists spoke in opposition, with their voices heard. It is simply not true that municipalities were not able to provide public comment - it was just that the comment was a year ago, which may have worked in their favor as Joint Finance Committee approved a package that no longer removed the grandfather clause.
- What is so important about the "Transparency" component in the package? By requiring an annual report to the state DOR on Room Tax from each municipality imposing a room tax that includes information such as the tax rate, total collections, who oversees the tourism portion, what are the expenditures over $1,000, and a new important requirement that requires those municipalities that have claimed to be able to keep more than 30% as they are "grandfathered" to simply provide the documentation proving it. By having this information (that does not include individual property collections by the way) available to the public, including the media and the tourism industry, we believe that this will lead to more of an interest in following the statutory language and ensuring proper distribution and expenditures to improve growing local tourism, the primary goal here.
Again, this Room Tax Reform package is not intended to correct every challenge with Room Tax, but it focuses on key common components that will move us in a better direction statewide.
WH&LA has been trying to refute misinformation when we see or hear about it. If you are aware of this happening in your area, please let us know, and we will do our best to make clarifications where possible. As we have been repeatedly mentioning, room tax is a tax ON tourism FOR tourism, and it is time to make changes to get us on track for the future to help grow local tourism, as was originally intended when the room tax was created.
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