A state bill recently introduced by State Sen. Luther Olsen, R-Ripon, would shift authority over the hotel room taxes collected by cities to the private sector.
If enacted, the bill would require municipalities such as Waupaca to spend at least 70 percent of room tax revenues on promoting tourism.
Currently, cities which imposed room taxes after 1994 must spend at least 70 percent on tourism, while the rest may be used for any purpose.
Cities which collected room taxes before 1994 could keep more than 30 percent of it.
Under the proposed law, all municipalities must use at least 70 percent of room taxes for tourism.
Instead of the city determining how the 70 percent is spent, the law would require that a local committee or commission comprised of the owners or managers of tourism-related business, such as hotels, restaurants or gift shops, would decide how to spend it.
“Tourism is a substantial driver of the Wisconsin economy and represents a significant source of business sales, employment and revenue. The total tourism business sales in 2012 totaled $16.8 billion, helping sustain 184,000 jobs,” Olsen said. “With one in every 13 jobs in the state of Wisconsin being maintained by tourism activity, we need to continue working with these small business owners to expand this industry and create jobs.”
According to the League of Wisconsin Municipalities, however, the change benefits tourism-related businesses at the expense of other property taxpayers.
“Given the severe financial stress municipalities are under, it doesn’t make sense to reduce a source of revenue that some municipalities use to pay off convention center debt, to pay for police and fire services provided to hotels, or to pay for other municipal services necessary for tourism to thrive,” Curt Witynski, the league’s assistant director, said in a memo to the state Assembly Tourism Committee.
Bill’s local impact
Visitors spent more than $2.7 million to stay in Waupaca hotels from October 2012 through September 2013, according to figures from the city.
During that same period, the room taxes generated nearly $217,000 in revenues for the city of Waupaca.
Waupaca enacted its first room tax in 1988, charging 5 percent on the cost to rent a hotel room in the city.
“A group of individuals wanted a room tax to help build the Expo and use it to fund other events in the community,” Mayor Brian Smith said.
Smith noted that most of the original room tax helped fund and maintain the Waupaca Expo Center.
Although the 17,000-square-foot oval is used in the winter primarily for ice skating and hockey, from late March to early September the Expo provides space for trade shows, art exhibits and fairs, stamp and coin shows, banquets and other events.
Located directly across from the Best Western and next door to the Waupaca Mobil Travel Center, the Expo is home to the Waupaca Area Youth Hockey Association.
WAYHA continues to receive $25,000 annually in room tax revenues.
“WAYHA has been helping us with tourism because they’re bringing people here for weekend events and tournaments,” Smith said.
The $135,570 in revenues from the 5 percent tax also support the Waupaca Area Chamber of Commerce ($64,395) and several other organizations such as the City Band which performs on the city square on Friday nights during the summer.
Room taxes also support the annual Arts on the Square and the Waupaca Historical Society, which is responsible for several local landmarks such as the Hutchinson House Museum, the refurbished Waupaca Train Depot and the Holly History and Genealogy Center.
“There are only a few communities in the state that actually give grant money to organizations to support events,” Smith said. “We have events that were started solely because of room tax monies.”
The Waupaca Curling Club will also receive $18,320 from 2012-13 room taxes.
“The Curling Club has been able to run some major bonspiels,” Smith said. “There are junior national teams coming here and they’re bringing their families and coaches with them. They’re putting people into hotels.”
The city receives a 5 percent administrative fee ($16,778) from the 5 percent room tax.
In addition to the 5 percent room tax, Waupaca also collects a 3 percent room tax which was enacted in 2007.
Of the $81,342 in revenues from the 3 percent tax, 70 percent went to the Chamber and 30 percent went to the city.
When asked about the bill that would require cities to give 70 percent of all room tax revenues to a private entity, City Administrator Henry Veleker said, “My biggest concern is that you’re taking the control away from the local government who’s collecting it and giving the money to a non-elected body.”
Veleker said the city has established a Room Tax Committee that includes two council members, four local business owners and the president of the Chamber of Commerce.
He said the city’s share of the 3 percent room tax helps support Waupaca’s economic development director because part of his duties include promoting tourism.
“Being a safe, vibrant community certainly helps bring visitors back, especially if they have a good, positive experience,” Veleker said. “The day-to-day activities of city government, such as the police and the parks, create a positive atmosphere.”
Veleker said the change in the law would affect the city’s share of room taxes less than it would the organizations and events the city helps fund.
“We can’t compel them to support events,” Veleker said.
Chamber’s role in tourism
Under the proposed law, only the Waupaca Area Chamber of Commerce would qualify as the entity that could have authority over 70 percent of all of Waupaca’s room tax revenues.
The Chamber has been promoting tourism in the area since its inception and it currently has a tourism committee in place.
Terri Schulz, president of the Waupaca Area Chamber of Commerce, said the Chamber’s tourism committee is comprised of 18 members, who represent local hotels, restaurants, retail shops, banks, the state park and one Common Council member appointed by the mayor.
“We believe reform would put the right people at the table to make the right decisions in how the money is spent,” Schulz said.
In addition to the Chamber having a full-time position dedicated to promoting tourism, it also distributes brochures at five locations in the area, as well as at state travel centers.
The Chamber’s efforts to promote tourism include two informational kiosks on Main Street and at the Waupaca Mobil Travel Center, a website, a Facebook page, a community calendar, maps, a toll-free number, mailings to people who call for information and ads and press releases in travel magazines, ads in newspapers across the state and a Visitors’ Guide.
“We also run four major events,” Schulz said, noting the Chamber’s events – Strawberry Fest, Hometown Days, the Chain Blues Festival and the Wintervernugen Pond Hockey Classic – draw visitors to the area throughout the year.
“There needs to be more of a defined advertising campaign,” Schulz said.
If the Chamber received more of the city’s room tax funding, it could expand its advertising.
When asked about the city’s concern that groups such as the Waupaca Historical Society or the Curling Club would no longer receive room tax funding, Schulz said, “We would have a grant program for other organizations that develop programs and events to bring visitors to the area.”