Q. The Lodging Committee has proposed a local marketing district that would implement a 2 percent tax on lodging within the district's boundaries to pay for airline flight guarantees. What is a local marketing district and why did the lodging community choose this approach?
A. During the past four years, the business community has looked at several mechanisms that would provide a sustainable stable funding source for the airline program. After the failure of the more broad based 3-2-1 tax, the lodging committee realized that a lodging tax may be the best solution. A Local Marketing District is a statutory district that, in Colorado, has been used successfully by Gunnison, Telluride and Vail. The only tax that can be levied within this district is a lodging tax, and the use of the funds is statutorially limited to marketing, promotion, special events and business development. The name, "Local Marketing District," can be deceiving in our case as it can be perceived as a fund for marketing dollars; however the revenue is to be earmarked for the airline program, an element critical to our local economy. The advantage of a LMD is that it assures strong accountability by providing for a city-appointed board to make the complex decisions with council approval -- all in a public forum. The statute also requires that greater than 50 percent of the real commercial property owners sign a petition to establish the district. The Steamboat Springs LMD was able to garner 67 percent of the property owners within the proposed district and 50 percent of the property owners within the city to sign the petition in less than one week, showing strong support. Finally, the statute states the City Council can dissolve the LMD at any time with the passage of a resolution.
Q. There only are an estimated 200 to 300 voters living within the boundaries of the Local Marketing District. There has been criticism that this decision should be made citywide, not by a few voters. How do you answer such criticism?
A. The most recent statistics show there are 640 voters living within the boundaries of the proposed district. Those who live in the vicinity of the lodging properties collecting the tax are most directly impacted and therefore will be able to vote. The state statute provides for those most directly impacted to vote on this issue and serve on the board of directors, and we are abiding by the statute.
If the boundaries of the district were to be re-aligned, it is highly debatable how far the lines could be drawn. Looking at the question, "Who pays this tax?" the answer is visitors paying for lodging. Looking at the question, "Who benefits from the tax?" the answer is hard to define. Workers at the Yampa Valley Regional Airport working in Hayden and Craig, and workers commuting from communities surrounding Steamboat Springs all will potentially benefit. The Lodging Committee decided that making the district as small as possible, limiting it to voters who will be affected by the tax itself, would be the simplest way to draw the boundaries.
Q. The tax is estimated to generate $1.2 million per year for airline flight guarantees. The Steamboat Ski and Resort Corp. is expected to pick up the balance of the flight guarantees' cost. In general, what is the agreement between the LMD and Ski Corp.?
A. In general, the Ski Corp. has agreed to match dollar for dollar the amount of revenue generated by the lodging tax or pay 60 percent of the proposed winter air program, whichever is less. This is consistent with the level of participation that they have been at for the past five years. In addition, the Ski Corp. has agreed to continue to oversee and manage the winter air program and the marketing of winter air service. They will also sign the contracts and letters of credit with the respective airlines, thus eliminating the risk for the city.
Q. What are the limits on how the funds raised from the proposed tax can be spent? Are they strictly for flight guarantees or can they be used to fund other endeavors, such as marketing and promotion of the flights and Steamboat in general? What are the limits?
A. Statutorily, the funds can be used for the purpose of marketing, promotion, business development and special events. The only capital improvement allowable under statute is a visitor center. The priorities for the funds are the winter air program, the summer and fall air service and marketing that service. The annual average cost of the winter air service for the past five years has been $2.1 million. This year's summer service was $200,000 plus an additional $40,000 to market the flight. A federal grant for fall service recently was awarded which also will require matching dollars each year. It is hard to see that there would be any funds left for general marketing once the priorities are met. While the petitioners of the Steamboat Springs LMD are willing to cap the amount of money going to general community marketing, the ultimate cap is the annual approval of the budget and expenditure plan by the City Council.
Q. There is already a voluntary program in place in which lodging properties tax guests to help fund the airline flights. What do members of the Lodging Committee feel will be the impact, if any, on their business if this tax is approved?
A. The average sales tax on lodging in competitive Colorado resort communities is 11 percent. With the additional 2 percent lodging tax, the total tax would be 11.4 percent at our properties, which is still below the national average of 12.4 percent. The lodging community realizes that there is an upper limit to what can be charged before negatively affecting the consumer. Right now, the voluntary fees being assessed are not consistent and equitable. A lodging tax would ensure that everyone collects and remits the same proportion and that the monies collected go to a single purpose. Under current anti-trust laws, this is only permissible with mandated taxes, not with voluntary fees.