The Waupaca Area Chamber of Commerce may lose $20,000 a year in room tax funding in the 2012 city budget.
A five-year agreement between the city and the chamber regarding the room tax will expire in December. Depending on how the Common Council votes on the 2012 budget, the city may not renew the agreement.
In a letter sent last week to chamber members, the chamber’s board of directors argued that “room tax funds should only be used for programs, services and staffing directly related to tourism promotion as outlined in the room tax statutes and not for something it is not intended for. The tax is imposed on visitors for the purpose of generating funds to promote and generate visitors, which in turn boosts the economy by bringing in outside dollars.”
“Tourism is the third largest economic sector in the state of Wisconsin and the local economy certainly reflects that,” says Terri Schulz, president of the local Chamber of Commerce. “A study found that 36 percent of the tourism in Waupaca County is in the Waupaca and Chain O’ Lakes area. Tourism is very important to our area. It helps sustain our local retail businesses.”
Schulz said the room tax funding the chamber receives from the city goes toward marketing and advertising, a toll free phone number, printing brochures and maps, and helps support the visitors center in downtown.
Mayor Brian Smith and City Administrator Henry Veleker say that the city has been paying the Chamber of Commerce $110,000 from annual room tax revenues. They believe that city services and programs, such as the parks, recreational opportunities, police protection and well-maintained roads play as important a role in promoting tourism as brochures and advertising.
“Our city taxpayers have already been paying for the kinds of things that promote tourism,” Smith said. “We have a public beach at South Park. We have weekend softball tournaments that fill those hotel rooms. When summer festivals occur, we provide support and spend money. We provided funds for the Arts Summit that has resulted in bringing tourists. We are giving $15,000 to the Waupaca Historical Society out of our general fund in 2012.”
Currently, guests at hotels in the city of Waupaca are charged two separate room taxes on their bills: a 5 percent tax that dates back to 1988 and a 3 percent tax that took effect in 1994.
Under the original state law, municipalities were allowed to use most of the revenues from the room tax for general operations. In 1994, a new state law required that at least 70 percent of all new room taxes be used to promote tourism.
The chamber receives 70 percent of 3 percent room tax. Last year, the chamber’s portion of the 3 percent room tax amounted to $51,744. The city received $22,176.
In the first 10 months of the 2010-11 room tax cycle, which runs from Oct. 1, 2010, to Sept. 30, 2011, the chamber received $39,787. The city received $17,051.
The 5 percent room tax is basically divided equally between the city and the chamber. However, the city deducts a 5 percent administrative fee from the chamber’s share of the revenues.
In the 2009-10 room tax cycle, visitors spent $2.46 million for rooms at local hotels. The city collected $123,200 on its 5 percent room tax.
Of the total amount received, the city deducted $6,160 for its administrative fee and gave the Chamber of Commerce $58,520. From the 5 percent room tax, the city also gave $25,000 to the Waupaca Area Youth Hockey Association and $5,000 to the city band. In addition, the city gave grants totaling $24,000 to the Curling Club, the Waupaca Community Arts Board and the Waupaca Historical Society.
“The room tax doesn’t just help the chamber promote tourism, it also helps other clubs and organizations that rely on room tax funds to help fund their programs,” Schulz said.
The chamber’s letter to members noted that “other local organizations supported with room tax funds such as the Waupaca Curling Club, WAYHA, Waupaca Historical Society, and Waupaca Community Arts Board/Arts on the Square may suffer.”
Smith said the city does not plan to use the portion of the room tax going to local organizations.
“There’s a misunderstanding that we’re proposing to take that $20,000 from events and groups,” Smith said. “The city and the chamber had a five-year agreement regarding 50 percent of the 5 percent room tax. That ends in December. We’re telling them they’re going to get $20,000 less than the full 50 percent next year. We will continue using the other 50 percent of the room tax for WAYHA and the grant applicants.”
Veleker said the $20,000 from the room tax will help the city cover a tight 2012 budget.
“These are really challenging times for the city,” Veleker said. “It’s tough as an organization when you see employees taking furlough days, when departments have to cut back. We’ve gone three years without capital projects.”
“We’re not asking for this money to be greedy. We’re running out of options. We need this money to balance the budget,” Smith said.
Smith noted that the city faces two difficult years in 2012 and 2013, as it struggles to make debt payments totaling almost $1.6 million in 2012 and approximately $1.8 million in 2013.
Beginning in 2014, Smith anticipates a positive cash flow from the Tax Incremental Financing districts, as well as a drop of almost $570,000 in annual debt payments between 2013 and 2014.