Marketing money seen differently

City, businesses disagree on source of fee, municipal-match requirement

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— The use of city sales tax dollars to fund summer marketing has been a hot topic in Steamboat Springs this year. Now, the city and a local business group are exchanging differing versions of how it all got started, more than 15 years ago.

The Downtown Business Association says $387,000 of the total $815,000 provided to the Steamboat Springs Chamber Resort Association last year, most of it for summer marketing, was a payment from local businesses. The money doesn't belong to the city of Steamboat Springs, the business people say.

City Manager Paul Hughes agrees that the city doesn't have a claim to the money (it places the true figure at $404,000, not $387,000), but the city counters that the source of the money is the tax-paying public, not local businesses.

The latest twist in the debate over use of public tax dollars to fund summer tourism marketing here was prompted by a letter from Downtown Business Association President Pam Bentley. Bentley's group objects to public statements and published characterizations that claim the city "gives" the chamber more than $800,000.

"There appears to be a misunderstanding as to what we believe the facts to be," Bentley wrote in a letter to City Council President Kevin Bennett. "Out of the $815,000 that the city 'gives' the chamber, $707,000 is specifically for summer marketing. Fifty-five percent of that amount, or $387,000, is paid directly by the businesses in town."

The $387,000 Bentley refers to corresponds to the amount the DBA believes local businesses would have received if the city still had a vendors fee. The vendors fee was compensation provided to businesses for collecting sales tax on the city's behalf. It amounted to 3.33 percent of the local sales tax receipts collected by businesses. They concurred in late 1984, when the vendors fee was put to an end, and an equivalent amount of money was diverted to the chamber for summer marketing.

City Finance Director Karen Feeney, who recently left the city, said that the city actually passed along $404,000 to the chamber last year based on the old vendors fee. That corresponds to 3.33 percent of $12.13 million in local sales tax receipts. In addition, she said the city contributed $286,780 for marketing from the general fund and $36,000 for special events.

But the city and the DBA disagree on the terms of the original agreement.

The city agrees the intent in 1985 and 1986 was to pass an amount of money equivalent to the former vendors fee on to the chamber for marketing. But it does not agree that the money belongs to the businesses. Nor does it concur that it agreed to perpetually maintain a rough match of that money out of the city's general fund.

Feeney replied to Bentley's letter.

"The funds you mention are not paid by local businesses, but are paid by taxpayers," she wrote. "Local businesses collect the taxes from customers and remit them to the city."

Bentley told the Steamboat Pilot that she was not the sole author of the letter to the city. Others, including longtime Lincoln Avenue businessman Ty Lockhart, collaborated in drafting the letter.

Lockhart said that when the businesses agreed to give up the vendors fee it was done on a "volunteer basis." He believes the city has a moral obligation to turn the money over to the chamber for summer marketing.

"Why would the merchants give up the vendors fee if it was going into the general fund?" Lockhart asked.

However, City Manager Paul Hughes said recently that Feeney's written remarks do not mean the city believes it can someday divert those funds to its general fund and use them for other purposes.

But Feeney's letter also points out that the ordinance rescinding the vendors fee did not guarantee the money would always be used for tourism marketing.

Bentley's letter states: "We relinquished this money for the express purpose of creating a dedicated funding source to market Steamboat Springs in the summertime."

The letter from the DBA also states that the city agreed in 1986 to match the money raised by the businesses in the form of the rescinded vendors fees. The letter observes that the city has decreased that contribution the last two years.

"In 2000, the city put in $319,000 from the city's general sales tax fund to be used for summer marketing. This was the same as for 1999 and a 32 percent decrease from 1998."

But the city's records show the only commitment the city made to match the former vendors fee came in the form of a one-year contract with the chamber in 1985.

The contract was never renewed.

The DBA contends that summer marketing has helped improve the city's ratio of seasonal sales tax receipts from 75 percent winter and 25 percent summer, to 60 percent winter and 40 percent summer today.

"If we were to project the old ratio on last year's sales tax numbers the city would have had $3.2 million less in sales tax revenues," Bentley wrote. "We consider investing $319,000 by the city, to take in $3.2 million a tremendous return for the city."

Dean Sandvik was president of City Council in 1984 when the city passed an ordinance repealing the section of the municipal code that dealt with the vendor's fee.

Sandvik said the intent at the time was that the city would continue to collect an amount consistent with the vendor's fee had it remained in place, and earmark those funds for summer marketing.

"The vendor's fee was a mechanism for painless money, the merchants gave up and the city was to apply to summer marketing, Sandvik said. "It was something that was in the community interest."

To reach Tom Ross call 871-4210 or e-mail tomross@amigo.net

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