Cannon Beach considers lodging tax hike

Cannon Beach may raise the local lodging tax.

Hoping to improve reserves and finance a visitor center, Cannon Beach may raise the local lodging tax.

Thirty percent of the new revenue — an estimated $140,000 next fiscal year — would go to the city’s general fund. The other 70 percent — about $385,000 — would go toward tourism promotion.

Of the tourism promotion money, $160,000 would fund the Visitor Information Center, which is now subsidized by the general fund. The other $220,000 would be available to invest in ideas like public art, creating an event center at the former Cannon Beach Elementary School or possibly funding portions of the Haystack Rock Awareness Program.

The proposed tax increase, which is set to be discussed at a work session in August, would raise the lodging tax from 8 percent to 9 percent. The last time the lodging tax went up was in 2015, after the Chamber of Commerce argued new revenue would fund better marketing. The chamber is still in contract with the city to use the tourism-restricted money from the tax hike for promotion.

The new increase was first suggested during budget committee hearings by City Manager Bruce St. Denis as a way to address shrinking general-fund reserves. Years of heavily subsidizing other city funds like public works, which has projects that can’t be covered by water and wastewater rates, has caused the general-fund balance to decrease over time.

“If everything stopped, we would make it about three months,” St. Denis said in May, referencing the city’s reserve.

Raising the lodging tax would allow the city to pay for items like the Visitor Information Center or a possible event center without having to dip into the general fund.

“There might be other things that are clearly related to tourism promotions and it would be nice to explore that,” St. Denis said.

Some in the lodging community, however, are pushing back.

Jason Brandt, CEO of the Oregon Restaurant & Lodging Association, sent a letter to the Cannon Beach City Council in mid-June, raising concerns about the proposal.

“Our concern has everything to do with little communication between city and lodging stakeholders,” Brandt said in an interview.

In May, a Deschutes County judge ruled in favor of the industry group in a lawsuit against Bend, asserting the city misappropriated lodging tax dollars to fix roads.

Brandt cited no specific concerns with how Cannon Beach so far has planned to use the tax revenue, but rather takes issue with the fact local hotels and vacation rentals weren’t invited to the table before an increase was suggested.

“Local lodging property managers are the experts. They can help determine whether there is enough demand to justify an increase,” Brandt said. “If the experts aren’t at the table for the discussion, how are you going to make the best of these funds?”

Greg Swedenborg, the general manager of The Waves Cannon Beach, has come out against the tax increase, calling it an “extremely inefficient” choice since only 30 percent of the new tax would benefit the city’s general fund.

“The other 70 percent goes into promotion, and a lot of our scuttlebutt in town is how we’re promoting ourselves too much,” Swedenborg said.

A common argument for raising local lodging taxes has been that the impact of the increase is minimal, often going unnoticed by hotel guests. But Swedenborg argues the lodging community is already “paying its fair share,” with lodging tax dollars making up about 70 percent of Cannon Beach’s general fund.

He said continuing to raise the lodging tax does not address the problem of maintaining city infrastructure under the pressure of thousands of tourists. He suggested instead that the city find revenue by taxing a different kind of tourist — those who only visit for the day — through parking surcharges or a food and beverage tax.

“You’re going back to the same well, and you are making people already contributing 70 percent of the general fund contribute even more,” Swedenborg said.

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