Looking to make creative use of the lodging tax, Cannon Beach may divert money from tourism promotion to an event center.
The idea came up during the early stages of contract negotiations with the Chamber of Commerce, which has been getting the tax money since 2015. The chamber uses 70 percent of the funding generated by state and local lodging taxes to promote tourism. City councilors are considering redirecting a percentage of that money to buy the former elementary school building for an event center.
“Granted, it would take away funds you are receiving,” Mayor Sam Steidel said at a city work session, “But it would also go into a project we think is pertinent and supports tourism.”
Cannon Beach joins a growing number of cities exploring how to use lodging tax dollars for capital projects or maintenance needs.
With more cities and counties facing budget shortfalls, there’s an effort to broaden the definition of what counts as tourism-related spending.
The Astoria City Council voted last year to increase the lodging tax from 9 percent to 11 percent, with the intent to use some of the money for maintenance at city parks known to have heavy tourist traffic. Bend voted to reduce the percentage of lodging tax designated for tourism promotion in order to pay for road repairs, a move that is being legally challenged by the Oregon Restaurant & Lodging Association as a violation of state law.
Opponents say lifting restrictions on the tax money ultimately defeats the purpose, which is to promote tourism that generates revenue for cities in the long term.
In Cannon Beach, Greg Swedenborg, the president of the chamber’s board, said the chamber is open to the idea but needs more specifics.
“I think it addresses an area that Cannon Beach has a need for. But it’s not just buying the school. You have to consider operating costs before you can make a decision,” Swedenborg said. “Whether it’s used for the arts or as a conference center, sure, we could use that. But will it benefit year-round business? Is it doing what the intent of the law is, which is making it a place that regenerates that transient lodging tax?”
‘Loved to death’
A state law passed in 2003 imposed a 1 percent lodging tax increase, with 70 percent of the revenue collected restricted to tourism promotion and tourism-related facilities.
As a fundraising mechanism, the law has done its job. The Oregon Department of Revenue collected more than $145 million in revenue as of 2015. Cannon Beach in 2016 alone received $3.8 million in lodging tax revenue.
But Wendy Johnson, an intergovernmental relations associate with the League of Oregon Cities, said some cities are having a hard time keeping up with the demand that tourism promotion creates.
“A lot of communities are spending a lot on marketing and are getting loved to death,” Johnson said. “Cities rely on tourism for their economy and they want to be a welcoming place. But they also have a strapped budget, and they want more flexibility to use those revenues. This law is one size fits all, and every city has different expenditures and needs.”
A survey done by the league asked 46 cities how each would prefer to spend lodging tax revenue. Johnson said the top responses were city beautification, public safety and transportation improvements — all issues related to a booming tourism industry.
“We just disagree with what tourism-related means,” Johnson said. “You don’t have a good event if you have a traffic jam or not enough cops to keep it safe. They won’t come back.”
In the last legislative session, Johnson said she pushed to broaden what can be considered a tourism facility, which is defined as a conference center, convention center, visitor information center or other property with the substantial purpose of supporting tourism.
“Right now the law says it has to be real property, and has to have a use of 10 years. So maybe you can’t cover flowers, but maybe you could fix a light post,” she said. “We think it should help with beautification issues, but the definition is too narrow. We think it should include anything that makes the experience better for the tourist.”
The proposal didn’t make it out of committee in Salem. Johnson said she hopes to continue working with the lodging industry to find a solution.
“The growth in Oregon has been great,” she said. “But at what point do you have a destination that’s no longer a destination because it’s been loved to death?”
Return on investment
Jason Brandt, CEO of the Oregon Restaurant & Lodging Association, argues a city already can use 30 percent of the lodging tax on general city needs, and that public infrastructure isn’t a reliable metric to help define tourism-related facilities.
Redirecting the tax money to capital projects or maintenance takes away from the “big picture” of what it takes to support Oregon’s second-largest industry, Brandt said.
“The reality is, whenever we don’t put that dollar out for promotion, and instead for a local investment for a capital improvement, in a way we are shooting ourselves in a foot,” Brandt said. “We are using a long-term investment strategy for a short-term challenge a community may be facing.”
That investment, Brandt said, is supported by a report from Longwoods International, which shows for every $1 invested in tourism promotion, $237 is generated in economic impact and $11 in tax revenue to the benefit of Oregon residents.
The concept of “how much tourism is too much tourism” looks different for each community and should be solved on a local level, Brandt said.
But investing in tourism over time is a greater benefit to city’s general fund, he said.
“I can’t emphasize how strong the tourism economy can be if we focus on tourism promotion and less on maintenance backlogs,” he said.
In Cannon Beach, since the Chamber of Commerce has been the recipient of 70 percent of the lodging tax dollars, the amount of taxes paid to the city has increased by double digits almost every quarter.
“We can’t claim it all,” Swedenborg said. “Good weather, good economy goes into growth, as well. But before the contract the city would see maybe 4 percent or 6 percent growth. When we started you are seeing around 16 percent or 10 percent increases (in the lodging tax revenue). We think we have something to do with that.”