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Hotel tax should be used more for tourism than property tax relief, city told

Kristin Czubkowski  —  10/15/2008 8:08 am

Madison's financial committee got an inhospitable reaction from tourism officials Tuesday night on the mayor's budget decision to use an additional $1 million from the city's tax on hotel rooms for property tax relief.

Deb Archer, president of the Greater Madison Convention and Visitors Bureau, told the Board of Estimates that the city should not be spending more of the estimated $9 million from room tax collection on general city purposes than on marketing Madison as a tourist destination. In the mayor's current budget, about $2.1 million would go to the city and $1.9 million would go to the bureau for non-Monona Terrace-related expenses.

The amount the bureau receives from the fund corresponds to its 2006 contract that guarantees it at least 20 percent of room tax funds for marketing, but Archer said the difficult economy and greater resources of other convention and visitors bureaus put the organization in greater need of funds.

"We're in a completely different economic position than we were three years ago," she said. "From 2006 when we had that conversation, the difficulty we're having in closing business is creating issues for us in order to achieve the revenues that people expect us to."

The bureau is also in a unique situation because it is charged with maintaining the Monona Terrace Community and Convention Center, which limits the amount of funds that can be used flexibly to promote a variety of tourist attractions, Archer said. Monona Terrace requires more than $5 million of the room tax fund each year for operations and debt service.

Ideally, the bureau would like to see the city increase the portion of the room tax fund directed solely to general tourism marketing to 35 percent in the next few years, Archer said.

"The money goes to market this destination to grow the economy," she said. "I think it's important for people to recognize that what we do, we do for you. I'm not doing this for my health, we're doing it for the economic vitality of this community."

The Board of Estimates also heard sharp testimony from George Wiesner, president of the Madison chapter of the Wisconsin Innkeepers. Wiesner criticized the city for using the increased revenues from a 2006 increase in the room tax from 8 percent to 9 percent to balance the city budget rather than to enhance tourism. Wiesner supported the increase in the tax at the time, but said he could not defend its current use.

"I sit here embarrassed because I see the City of Madison take the entire 1 percent increase and more," he said. "The city of Madison has been a poor steward to the TOT (room tax) fund with regard to the additional revenue from that 1 percent increase."

Cieslewicz pointed out, however, that the city contribution to the Convention and Visitors Bureau for destination marketing has more than doubled since his taking office, from about $800,000 to $1.7 million, while other local governments and the Dane County government have not increased their contributions as substantially. Archer countered that the bureau will be pressing for more funds from those agencies, but that it makes sense for Madison to contribute the most when 85 percent of the bureau's work benefits the city.

There is precedent for using the room tax fund for property tax relief. Cieslewicz said the $2.1 million the city received in 2009 would still be less than the $3 million the city received in 1992, particularly when those numbers were adjusted for inflation. Earlier in the fund's history, the city received the majority of the fund for property tax relief, but now receives less than one-quarter.

"My point, and maybe it's a rhetorical question, but if not now, when? If we're going to promise increased property tax relief in the future but never actually take the resources to do it, when does that property tax relief come?" he asked Archer and Wiesner.

Wiesner responded, however, that the city does not have to jump $1 million in one year to increase property tax relief, and that more equitable increases to the city and bureau would allow the bureau to market the city more and increase the fund for future property tax relief.

"There's a difference between $300,000, $500,000, $800,000 and $1 million," he said. "Why can't we do it progressively?"

Kristin Czubkowski  —  10/15/2008 8:08 am