CANNON BEACH — Fewer dollars will be going toward tourism promotion as a part of a new contract signed Tuesday night by the Chamber of Commerce and City Council.
In the past, the city diverted 70 percent of the revenue generated from the 1 percent lodging tax enacted in 2015 to the chamber to promote tourism during the offseason.
But this year, the city has decided to cap promotion at $300,000 -- about $86,000 under what the city projected to bring in from this tax. The city plans to use the difference to pay for 50 percent of the expenses at the Visitor Information Center and to start a reserve fund.
The change comes amid debate within the community about how tourism-restricted dollars should be used, and whether the city should invest more in promotion.
Adjusting the contract was initially motivated by the chamber’s request to have a multiyear contract earlier this year –– a measure Jim Paino, the chamber’s executive director, said makes planning ad campaigns easier and more economical.
But the idea to reduce the actual amount that goes toward marketing came during budget season, when the city was looking for ways to be more stringent with transfers out of a shrinking general fund.
In the past, the city has fully funded the information center out of the general fund at about $160,000, City Manager Bruce St. Denis said. Using lodging tax dollars to pay for half of the Visitor Information Center frees up money in the general fund for other city needs, he said.
Capping how much is distributed to the chamber also allows the city to start building a reserve for the promotional fund in the event of an economic downturn.
“It’s important to have a rainy day fund, because that’s when we’ll need more promotion than ever,” St. Denis said.
The contract also addresses other areas of concern the City Council had with the arrangement, including a lack of communication between the two entities about certain projects — most notably the branding guide, which included a city logo that drew criticism from some residents and council members.
“I got the message from the council that we needed to have more control over this money,” St. Denis said. “But we need to be careful to not put them in a position where they can’t succeed.”
The contract now requires quarterly status reports from the organization.
“There was not that kind of interaction in the past,” Paino said. “I think it’s important to do this so we’re all on the same page about where we’re going.”
While the contract was approved 4-1, city councilors disagreed over how the city should account for the costs of inflation in the coming years.
One option, which was ultimately adopted, was to increase payments allocated to the chamber based on the consumer price index –– a percentage that shows the average change over time in the prices paid by urban consumers for consumer goods and services — plus an extra 2 percent each year.
This is an effort to try and account for rising costs within the program with a universally recognized method to account for inflation, St. Denis said.
“We didn’t want to have it stuck at $300,000,” St. Denis said.
Though the chamber agreed to the council’s decision, Paino said the CPI is not a good marker for inflation for the tourism industry. The index is based on what the average consumer would spend on food and beverages, housing, clothing, transportation and more for West Coast states in general, and therefore does not reflect higher cost-of-living prices found in tourist destinations like Cannon Beach.
“The products (Bureau Labor and Statistics) use to calculate it… they don’t include tourism promotion in their calculation,” Paino said.
City Councilor George Vetter, the one dissenting vote, agreed with Paino, and voted against the contract because of it. He argued the council should increase payments to the chamber to mirror lodging tax revenue projections from the city. If the city projects a 6 percent increase in lodging tax revenue for the next fiscal year, then the chamber should get a 6 percent of $300,000 more, as well.
“We are not spending money here. We are investing money,” Vetter said. “There’s no more important investment than making sure the lodging tax will stay the same or go up. That’s our lifeline ... If you want to get the results you want in a contract you need to build in rewards for success. And their success is our success.”
City Councilor Mike Benefield argued the opposite, advocating that the chamber should present a proposed budget like other city departments and have its allocation based on fixed costs from the previous year.
Paino said that approach would be difficult, as the destination marketing organization is designed to facilitate its program based on the set figure they can expect from the city.
Although the chamber still has reservations about the consequences of a tighter marketing budget, Paino said he is ready to move forward and work with the city.
“The chamber felt and still believes that we are good partners with the city and came to these negotiations with an attitude of partnership for the betterment of Cannon Beach,” Paino wrote in a statement.