Plan to boost accommodation tax being formulated

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A tentative proposal for a 2 percent increase in city accommodation tax is just one piece of what could become a permanent funding solution for year-round air service at Yampa Valley Regional Airport. The other pieces of the funding puzzle are not in place and may not be known for another six weeks, chamber lodging committee members said this week.

"We don't have it yet and I don't think I'm going to have it until the end of June," Steve Dawes said Friday.

Committee members estimate an additional two points of lodging tax (the city now collects 1 percent, which is dedicated to funding capital projects that benefit tourism) initially would raise about $1.25 million annually toward total airline costs. The cost of the ski season jet program has ranged from $1.6 million to $2.3 million during the past five years.

The lodging committee voted unanimously to investigate the concept of funding airline revenue guarantees with additional accommodation taxes. However, it made no formal decision to ask the city of Steamboat Springs to take the question to voters.

Committee member Dawes said he thinks it is premature to discuss the accommodation-tax plan until the entire plan is in place.

"You can see from basic math that $1.25 million doesn't cover the historical costs of the airline program, as well as summer air," Dawes said. "There are pieces that remain that are not in place and not agreed upon. They have to, in their own way, be permanent funding."

Typically, the Steamboat Ski and Resort Corp. has funded the majority of the revenue guarantees, which five airlines require in exchange for serving YVRA during ski season. During ski season 2003-04, Ski Corp. put up $1.02 million, businesses pledged $680,000, and the city promised $100,000. The estimated cost of the program last winter was $1.7 million, down from $2.3 million the previous winter despite an increase in the number of inbound seats.

Historically, Ski Corp. has signed the contracts with the airlines and assumed ultimate responsibility for any shortfall in the revenue guarantees.

For the first time this summer, YVRA has attracted a daily 50-passenger jet flight on Continental Airlines from Houston. Of the $240,000 in revenue guarantees demanded by Continental, the business community will supply $140,000, and the city will cover the remaining $100,000.

During a Wednesday presentation to the city's Tax Policy Advisory Board, Steamboat Springs Chamber Resort Association Executive Vice President Sandy Evans-Hall said the lodging committee feels strongly that finding permanent funding sources for the airline program is vital to the region's economy.

"This is critical," Evans-Hall told the board. "We'd like to see direct year-round air into our valley, not only for tourism, but for our businesses."

As part of its tentative proposal, the lodging committee is considering recommending that oversight of the airline program move away from American Skiing Co. and be assumed by a "government structure" that would take responsibility for signing contracts and administering funds, Evans-Hall said.

"We'd still be looking for a significant contribution from the Ski Corp.," she said.

Although an additional 2 percent of accommodation tax would commit the lodging industry to raising more than $1.2 million from its guests, Evans-Hall said it is possible that the existing "Fly Steamboat Program," which ties merchant passes for employees to airline contributions, would remain in place for other segments of the local business community. That program might generate $200,000, she said.

"The lodging community would encourage other businesses to continue to supply voluntary funding to support the airline program," Dawes said. "If it's determined the merchant-pass program is desirable, the lodging committee would support that."

Dawes rejected the notion that the lodging committee's tentative proposal is intended to head off any move by the tax advisory board to recommend expanding the accommodation tax to meet funding goals other than the airline program.

"We were discussing 2 percent long before the city ever dreamt of forming an advisory board," Dawes said. "It was part of 3-2-1."

He was referring to a tax measure that voters rejected soundly in November 2001. It would have imposed varying taxes on restaurant meals, lift tickets and lodging to pay for airline flight guarantees.

Tax Policy Advisory board Co-Chairman Ken Solomon confirmed that his group has not had any previous conversations about additional accommodation taxes being dedicated to other funding needs.

Dawes said the lodging committee began its renewed investigation of a tax to fund airline guarantees by consulting with Ski Corp. about the funding levels it anticipates needing for the next five years.

Pegging funding needs at between $2.4 million and $2.5 million in the near future, the committee posed the rhetorical question, "How about if we came up with half?" Dawes said.

Next, the committee undertook a thorough analysis of the sales taxes collected by 11 other Colorado resort towns and contrasted them to Steamoat's situation, paying particular attention to lodging sales taxes and how they are applied.

The committee concluded that boosting Steamboat's accommodations tax to 3 percent would put the community into the middle to upper-middle range of the communities Steamboat competes with most directly.

Evans-Hall told the Tax Policy Advisory Board last week that even as Steamboat enjoyed growth in March sales-tax collections, accommodations tax was down. That's a sign that Steamboat's guest lodging properties are finding it necessary to discount their rates in order to compete, she said.

"We've seen explosive growth in (available rental) pillows," Dawes said. "Lodging tax was down, but we know March is the single biggest month in ski rentals. Lodging is a sick industry."

-- To reach Tom Ross call 871-4205

or e-mail tross@steamboatpilot.com

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