Tom Kern, the new CEO of Steamboat Springs Chamber Resort Association, began work Sept. 6. One of his top priorities is to develop a sustainable funding source for summer marketing in Steamboat Springs.

Photo by John F. Russell

Tom Kern, the new CEO of Steamboat Springs Chamber Resort Association, began work Sept. 6. One of his top priorities is to develop a sustainable funding source for summer marketing in Steamboat Springs.

Steamboat chamber CEO Kern focuses on marketing efforts

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Steamboat Springs summer marketing funding by the numbers

— Tom Kern said he understands the importance of the Steamboat Springs Chamber Resort Association’s summer marketing program, having been a visitor here since 1973 when there wasn’t much going on during the months between the end of one ski season and the start of the next.

But the new chamber CEO also said with less revenue from city sales taxes, which fund summer tourism marketing, the program needs a more sustainable funding source.

“I’m optimistic that we can come up with a summer marketing financial plan that will be acceptable to all the parties concerned,” Kern said last week. “What that looks like, I don’t really know yet. But I believe that everybody in this community benefits from the marketing of Steamboat in the summertime and that everyone appears, at this point in time, to be open and willing to have that conversation.”

The summer marketing program was a hot topic during a joint meeting of the Chamber board of directors and Steamboat Springs City Council on Sept. 6, which happened to be Kern’s first day on the job. He replaces Sandy Evans Hall, who left in March after 25 years with the chamber to lead the North Lake Tahoe Resort Association in California.

Kern said summer marketing is one of several big issues facing Steamboat. He said a task force of yet-to-be determined elected or appointed officials, business owners, lodging operators and personnel from Steamboat Ski and Resort Corp. could start meeting by the end of the year to begin discussing a sustainable funding source for summer marketing.

Then and now

Historically, the city has funded summer marketing with a

3.3 percent allocation of sales tax revenues, an amount identical to the old vendor’s fee. The city did away with the fee, which was a rebate from the state for processing its sales taxes, in 1984. Previously, Steamboat’s merchants donated those revenues to the city to fund summer marketing efforts.

The city agreed to continue providing 3.3 percent of sales tax revenues for summer marketing, and even provided additional general fund support in some years. The city in recent years also has provided special event funding, some of which is dedicated to marketing Steamboat’s summer attractions and events. City Council member Jon Quinn said while it’s important to determine a sustainable funding source for summer marketing, the city’s support of those efforts make sense.

“When we look at the core functions of government, I bel­­­ieve for a city like Steamboat, you could easily say marketing is and should be a core function of our government, but I know not everybody feels that way,” he said. “There are certainly folks in the community that feel that marketing should be left to the business community, that it’s not appropriate for government to fundraise financing in that way.”

But Quinn acknowledged the city’s support of the chamber’s summer marketing efforts — $525,000 this year — may take a back seat to providing government services, such as making sure roads are drivable.

Quinn added that, as a community, Steamboat spends less than other mountain communities on summer marketing.

According to an informal survey conducted by the Chamber, similar mountain communities spent considerably more on summer marketing each year, including Aspen ($950,000), Breckenridge ($1.8 million), Crested Butte/Gunnison ($1.08 million) and Vail ($1.18 million). And they use lodging taxes to either entirely fund or to supplement support of summer marketing.

Steamboat has a 2 percent lodging tax that supports the winter air service program.

Chamber board President Jeff Steinke said the city should not be solely responsible for funding the summer marketing program. But he said the city should play a role in the effort that could include the Chamber, local businesses and maybe even Routt County.

Next steps

Steinke said the Chamber board would help Kern work with members of the community to develop a sustainable funding source for summer marketing.

“One of the big attractions that we had was his ability to build alliances with city, county and state government as well as other businesses within the community,” Steinke said about Kern. “He’s been successful doing that in the past, and we felt certain that would be one of the characteristics that would benefit everyone instead of everyone trying to push their own agendas. If we work together, we’ll get more accomplished.”

Kern said developing partnerships would be key to the Chamber’s other marketing efforts, such as creating new events during shoulder seasons.

But just as important would be defining how the Steamboat community measures success, he said.

“And that’s not just the City Council,” he said. “It’s citizens groups. It’s downtown merchants. It’s the ski corporation. It’s the hotel operators. It’s the restaurants. What does success look like? Because if we can’t articulate that and define that, clearly it’s very difficult to know what strategic marketing plan to put together to try to meet those objectives.”

Kern said it’s important that any possible funding source for summer marketing be amendable to the whole community, not just the City Council.

Kern said he hopes the task force would identify some possibilities by spring. If a sustainable funding source is identified during that time period, the earliest it could be implemented and begin supporting summer marketing efforts would be 2013.

The Chamber will request $600,000 from the city in summer marketing funding in the 2012 budget year, and another $100,000 for summer event funding.

Comments

steamboatsprings 3 years, 2 months ago

Welcome Tom and we look forward to seeing your efforts to put Steamboat's summer marketing efforts on sound footing. The transition away from Triple Crown has been a good thing and we have a great opportunity with our plan for Ski and Bike Town USA.

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Scott Wedel 3 years, 2 months ago

Hmm, the chart of historical funding vs realized sales tax indicates no appreciable evidence that the amount spent on marketing correlates to summer sales tax. City has increased and cut marketing expenditures with no statistical evidence that it affected resulting sales tax.

Sure, it is nice to have special events, but as an economic plan then funding summer marketing appears to be a waste because spending more does not bring in more. In these times of tight budgets then it would appear that City could cut funding without negatively affecting the resulting sales tax revenues.

Given these pretty clear facts then it makes no sense to ask for a permanent funding source (aka a tax).

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sodacreekpizza 3 years, 2 months ago

Tom is an interesting and accomplished manager with experience in both government and chamber leadership positions. He has a track record of finding the common ground between communities, regions and the business community. I look forward to his contribution in his new role.

Scott, you state that the chart " indicates no appreciable evidence that the amount spent on marketing correlates to summer sales tax". hmmm In the first 16 years of the marketing contribution the amount of sales taxes collected nearly tripled. During those years the average contribution was 4.8%. Since that period, contributions have declined both in real dollars and in % of tax collected (29% decline as a % comparing the average for the first 16 years to the most recent 8) and sales taxes have declined. Pretty good correlation I would say.

Of course, these tax figures are annual not just Summer and many other factors are involved. With other influences such as the economy, forest fires, construction cycle and even the weather it is very difficult to draw year by year conclusions in any case. It is also unreasonable to attribute changes in tax revenue to Summer marketing based solely on this chart. It would be interesting to track just the Summer tax receipts over this period and to track it for the areas where marketing should have the greatest influence such as lodging receipts and restaurants (retail is more of a mixed source).

In the end, we exist in a competitive environment. We compete to attract business with other choices that the consumer has both in the experience we can provide and in putting a message about that experience in front of them to attract their attention. In the narrow sense we compete with the choices mentioned in the article (Aspen, Vail, Breckenridge, Crested Butte). We also compete with other kinds of destinations such as beaches, golf communities, cultural destinations and big cities. We are already under-spending the immediate competitive set.

Years ago there was a discussion about a permanent funding source for Summer marketing. After much dialog a conclusion was reached and a permanent funding source was identified: the vendor fee. Businesses gave up the reimbursement offered for collecting and remitting taxes that offsets the cost of collecting the taxes on behalf of the taxing entity and the city agreed to spend that money on Summer Marketing.

We could use additional funds for this purpose and an exploration of appropriate sources for those funds is warranted but the permanent source already in place should continue.

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Scott Wedel 3 years, 2 months ago

I see the chart showing solid sales tax growth from 1988 to 2008 then a (recession) drop to a basically unchanged for the past 3 years.

During that period funding was about 6% from 1988 to 1993, 3% from 94 to 98, over 6% for 1999 and 2000, and then around $600,000 a year from 2001 to 2011 (during which time retail sales increased 50% 2001 to 2008 and then dropped 15% in 2009 and since has been largely unchanged).

I do not see any evidence that the better revenue years match increases in funding, nor did poor revenue years match funding cuts.

Mr Scott Ford is far more practiced than myself in the processing of economic statistical data, but I do not see the data showing there is any impact by spending level between 2.79% and 6.6% affecting sales tax revenues.

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Scott Ford 3 years, 2 months ago

Hi Scott W - It is a bit of a brainteaser to draw well-defined return on investment (ROI) line between marketing dollars spent and sale results. It is easier to draw this line when the intended demographic is well defined and unique product or promotion is targeted to them. This is the rifle approach. I am sure that some of the SSCRA Summer marketing budget can be classified as such.

Most of summer marketing can best be described as a shotgun approach. There is likely a general sentiment that 50% of the marketing effort works - it is just difficult to pinpoint which 50% worked. The challenge is to be blasting in the right direction.

I am not too sure using total sales tax collections as the key measurement metric of success is the best tool. Lodging sale tax collection is a sharper tool but it too is far from perfect because discounting amongst various properties in response to market conditions make this difficult to compare. The lodging occupancy report is likely the best metric - but it is still a blunt tool.

How strong is the correlation between summer marketing dollars and city sales tax collections during the summer? Very weak at +.42, (used 2000- 2010 data). This correlation should be stronger if we compared only sales tax collections associated with lodging. It would likely be stronger still using average monthly lodging occupancy percentages for the months of Jun - Sep.

Most likely the highest correlation that exist between the summer sales tax collections is the average summer temperature in the Front Range. No matter how well one markets summer in Steamboat Springs - if it is generally pleasant in the Front Range and cool and raining in the mountains- visitors do not come in great numbers. The best of all worlds is to have it sunny pleasant in Steamboat Springs and very hot in Denver week after week. "If you bake them long enough at 90 degrees plus they will come."

Calculating an ROI on Summer Marketing Dollars with as many variables as there is and controlling for them may be possible but it is beyond my pay grade.

Metaphorically speaking it takes dollars to buy the "shotgun shells" used in summer marketing. They need to have sufficient power and pellets to hit more often than not, what we are generally shooting at. And we need to do this at the same time folks in towns such as Vail and Breckenridge are shooting at the same flock of visitors. The challenge is that they may be able to buy more and bigger shotgun shells with more pellets.

I think we have done pretty well with the little box of marketing shotgun shells $600K will buy.

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Scott Ford 3 years, 2 months ago

Steve H - You are correct - a funding source has been identified - it is the value of the vendor fee. It is a simple calculation, multiplied City Sales Tax Collections by 3.3%.

The real rub is that the City of Steamboat Springs City Council and staff thinks that this 3.3% is their money. It is NOT! There was a time when the City would match these fees to some amount. Without question the match is the City's funds, but the amount associated with the 3.3% vendor fee is not.

The problem associated with this annual debate is that the arrangement regarding the vendor fee was not clearly codified. When this arrangement was first established it was done during a time when a handshake was sufficient to seal the deal. The intent of the use of these funds has always been clear / summer marketing. It seems like a wonderful funding mechanisms that would still work today.

Jon Quinn since I know you read the comments section, why do you think the perception exist that this is the City's money? The City role is essentially that of an agent regarding the collection and disbursement of these funds. These funds should pass through to whom the merchants of Steamboat Springs have designated as the recipient - - The Steamboat Springs Chamber Resort Association.

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Scott Wedel 3 years, 2 months ago

Scott F, How about the correlation numbers going back to 1988? I note that was when funding had some big fluctuations. And assuming you are using a spreadsheet to calculate it, could you please send me a copy so I can see how it is done right?

Could you please better explain the vendor fee situation?

It is not obvious to me why it isn't the city's money if the city collects the money. If it isn't the City's money then how can they collect it?

If the vendor's fee belongs to the vendor then could a vendor simply decide to keep it and not give it to the City?

I thought this was all tied up as a SB home rule issue.

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Jon Quinn 3 years, 2 months ago

Scott F. - Guess I am busted! Well I think this is fairly straight forward. The City of Steamboat collects a sales tax, 100% of which is for use by the city's General Fund. There are no legal restrictions which obligate the City to set aside 3.3% of its sales tax collections to use for marketing purposes; however, there are many reasons to support this expenditure including that handshake many years ago.

Here is a link from the state which summarizes all sales tax rates and associated service fee rates: http://www.colorado.gov/cms/forms/dor-tax/dr1002.pdf

There seems to be some consistency around the 3.3% number where the service fee is in place. The State just reinstated its own service fee and set it at 2.2%. Amongst municipalities which collect their own sales taxes there is almost a 50/50 split between those who have no service fee and those who have one. Steamboat has no service fee.

Back to the handshake... There is little question in my mind that there was a partnership struck between business and government those many years ago, and its purpose was to promote Steamboat. Businesses willingly gave up these service fees and the City agreed to use the dollars for marketing. It is refreshing to see the public and private sectors work towards common goals, particularly in today's world. The reality still remains, however, that the City of Steamboat is no more obligated to spend money on marketing than it is to issue a service fee to sales tax remitters. That is the will of the sitting council.

I still believe in the spirit of that handshake. The public and private sectors should continue to work creatively together to nourish the tourism engine we all benefit from. No matter how you look at it, about half of our city's amenities are paid for and maintained by visitors and part-time residents. Fostering visitorship benefits our citizens, businesses, and our city.

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Scott Wedel 3 years, 2 months ago

So, let me get this straight. State of Colorado currently has a service fee of 2.2%. That service fee is actually a credit for the business for collecting the sales tax.

The state service fee used to be 3.3%.

When the City of Steamboat went to home rule and thus collected the sales tax instead of the State, SB didn't institute a service fee but had a handshake agreement with the business community to use the 3.3% for marketing.

So the money belongs to the City of SB, but it'd be breaking a promise to not use it for summer marketing. But then since the State has since lowered the service fee to 2.2% then it is debatable whether SB is morally obligated to spend 2.2% or 3.3%.

Regardless, in the real world this money fight is all about gravy. Chamber should be so thrilled that City gives them a substantial amount of money. And the City should be so thrilled that it has enough money that it's budget issues are over items long cut from other cities' budgets. When people compare SB spending to what Vail or Aspen spends on this or that item then be happy. You've just said your concerns are less than 99% of other cities.

So personally I think going for a permanent funding source that affects the public as if it was a tax then it is dead on arrival.

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Jon Quinn 3 years, 2 months ago

Perhaps there is just a new balance to be struck. The real question is "What does it take to effecively market Steamboat?" The answer is both a dollar number and a winning strategy. Bottom line is that you have no chance of winning if none of your chips are committed to the pot.

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Scott Ford 3 years, 2 months ago

Hi Jon and Scott W - I am likely going to be a wee bit fuzzy on some of the historical details because my understanding is not firsthand but what I was told by folks such as Bill Malone (SSCRA Executive Vice President) and Scott Flower SSCRA Marketing Director during the 5 years I worked for SSCRA during the early 1990s.

Part I In the early 1980's economic development meant one thing - "Build Summer Tourism" with the key focus of creating more year round jobs. Steamboat Springs was not the only ski resort trying to address this challenge. Obviously the big questions was how is this summer marketing effort going to be paid for.

One way that this could be accomplished would be to raise chamber membership "dues." Nevertheless, that was not going to result in enough monies to jump into this game in a meaningful way. In addition, as is the case today there were and still are businesses that benefit directly from the summer marketing effort that do not belong to the chamber. Receiving the benefits but do not pay.

The other idea discussed was to pass some sort of additional dedicated "summer marketing" sales tax. This idea was met with resistance. A creative alternative solution to fund summer marketing emerged. The businesses that collect city sales tax would agree to forgo the vendor fee they used to retain in exchange in order that this money collected by the city and subsequently re-directed to the Steamboat Springs Chamber Resort Association to pay for summer marketing efforts.

This creative alternative accomplished three things. 1) No additional Taxes 2) All businesses paid a share of the expense (chamber members and non-chamber members alike) 3) Provided a dedicated funding source for Summer Marketing.

There was some type of vote that I am very fuzzy on regarding the details that took place amongst the "businesses" where they agreed to forgo the collection of the vendor fee with the understanding that it would be dedicated to summer marketing. (Folks like Tracy Barnett or Joe Kboudi because they lived it. Keep in mind this happened almost 30 years ago.)

It is my understanding that during the early days of this approach the City of Steamboat Springs matched the value of the vendor fee dollar-for- dollar. As time went on - the City's match was lowered to the point that it was eventually eliminated sometime in the mid-1990s. The City's match was always referred to as the "vendor's fee match."

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Scott Ford 3 years, 2 months ago

Part II From my perspective, because this arrangement was not well codified there was a philosophical shift that occured and the City began to view the value of the vendor fee the merchants agreed to forgo as their money. I think this is because Bill Malone (Chamber Exec) and Harvey Rose (City Manager) had moved on as well. The key players in the original agreement are gone - but the intent remains. The value of the vendor fee is the dedicated funding source for summer marketing.

SSCRA has honored the intent of these funds from the inception of the agreement. It would be truly discouraging to see the City Council to take the position stated, "… that the City of Steamboat is no more obligated to spend money on marketing than it is to issue a service fee to sales tax remitters. That is the will of the sitting council."

The words about public / private partnership seem very hollow in this context if one of the partners does not live up to their obligation even if "legally" they do not have to. The right thing in the spirit of the "handshake" original arrangement would be to codify it via ordnance so the city council 30 years from now is not having the same debate.

It late my friends - catch-up with you tomorow (today) / good night

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sodacreekpizza 3 years, 2 months ago

Aside from the merits of the main topic of discussion, perhaps some additional comments on the vendor fee might be helpful:

  1. Sales taxes are owed by the consumer on the goods they purchase. They are collected and remitted by the business that sells the goods, but it is clearly stated in law that the tax is owed and paid by the consumer. Therefore the business is acting as an agent for the taxing entity. This is why purchases by a tax exempt organization such as schools, churches etc are not subject to the tax. If the tax was owed by the business, it would not matter who purchased the goods as is the case with income tax earned from those sales.
  2. Like other public money collected by private enterprises such as hunting and fishing licenses, there is often a nominal fee paid to the business to offset the costs associated with collecting, recording and remitting the funds. These costs are book keeping (paying an accountant or book keeper to track the sales and accurately remit the taxes) and transaction costs.
  3. The transaction costs are by far the larger part of the cost picture. In today's world, in many businesses credit and debit cards are used for the overwhelming majority of transactions. They are no longer an "optional" means of payment; they are the consumers preferred means and therefore mandatory for most businesses in this community who collect and remit taxes.
  4. A local business doing 1 million in annual sales probably does 50% to 100% of those sales by credit/debit card. (For my businesses the amounts are 58% and 96%) For the sake of this example let's say 80% is the average. On a sale where a credit card is used, the sales taxes will also be paid by credit card. On sales of 1 million with 80% using a card, the credit card fees on the city sales taxes will be about $1000.
  5. i.e. the business is out of pocket these costs plus the costs of book keeping and the banking costs associated with making the remittance all to collect and remit a tax that is owed by someone else. (Exception: somehow the car dealers got around this and consumers pay the tax directly upon registration) Most businesses with tell you these costs significantly exceed the 3.3% being discussed.

When this deal was made 30ish years ago, the businesses gave up something real in order to get the summer marketing program funded with a handshake deal that the city would use those funds for a specific purpose. They now absorb costs of doing the cities work that used to be covered. It is unfortunate in hindsight that the details of this deal were not chiseled on stone tablets, but that does not change the facts about the deal that was made.

BTW Scott, I like the shotgun and rifle analogy.

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captnse 3 years, 2 months ago

The role of government is not to use tax Money to susidise a exclusive group of Buisness owners. Other cities chamber of commerce cannot Except tax money. The city should be concerned with Schools, fire protection, roads and Infastructure. Not susidising the chamber Or the airlines.

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Jon Quinn 3 years, 2 months ago

Scott, you know well that no council may bind the hands of future councils with an ordinance directing the expenditure of funds. I am not trying to de-value the vendor fee sacrifice, but simply to point out that there are no restrictions on how councils may spend sales tax dollars. If you all feel, as I do, that it is important for the city to participate in these marketing efforts then I would encourage you to ask each candidate where they stand on the issue. I am certain that some share "captnse" sentiments that marketing dollars should never come from the city. This is precisely why for the last few years I have been encouraging all involved to focus on finding a dedicated funding source that gets all of the stakeholders involved once again.

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Scott Wedel 3 years, 2 months ago

Jon Q, So then shouldn't everything find a dedicated funding source? Shouldn't we find dedicated funding source for roads so stakeholders will be involved? A dedicated funding source for BikeTownUSA and so on?

Personally, I think dedicated funding sources are bad public policy because then those stakeholders are now set for life and the program is never again seriously evaluated for relevance and effectiveness.

I think it is far better pubic policy for government to have full freedom to allocate revenues as the currently elected officials think is best. Which is why I think Routt County is notably better run than the City of SB because City has serious ongoing debt requirements imposed by previous City Councils for things like Iron Horse.

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Scott Ford 3 years, 2 months ago

Hi Jon -

It is important to understand the merchant is not the party that owes the sales tax. The merchant is acting in an "agent" capacity and performs a valued service to the City by collecting the tax. As Steve points out in his posting there is a cost the merchant undertakes when they collect sales tax owed by the consumer. The State of Colorado recognizes the merchants efforts and allows them to retain a small portion of this taxed owed by the consumer that they collected to recognize the expenses.

By what we are calling a "handshake" agreement, the merchants in Steamboat Springs agreed to forgo the vendor fee (retaining a small portion to offset their expenses) in exchange that these increase funds would be dedicated to summer marketing. The efforts the merchants go through to collect city sales tax cost them money.

A partnership exists between the city and the merchants regarding the collection and remittance of sales tax. I like the Four Way Test the Rotary encourages its members to follow in regards to their business dealings as individuals and as leaders of establishments. It is a good practice to review the Four-Way-Test when faced with decision that affects others. Although the City may be within its legal right to treat the vendor fee, however they please - does it pass the test of being the right thing to do.

ROTARY FOUR-WAY-TEST Of the things we think, say, or do 1). Is it the TRUTH? 2).Is it FAIR to all concerned? 3).Will it build GOODWILL and BETTER FRIENDSHIPS? 4).Will it be BENEFICIAL to all concerned?

Jon -as a member of City Council if you can answer each of these questions in the context of the discussion that has occurred in the affirmative - I am OK. I will defer to your judgment and honor your decision.

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Jon Quinn 3 years, 2 months ago

Scott F, I think we really share the same opinion as to the moral obligations we are discussing, and I know that we both feel that it is important for the public sector of our community to share the burden for promoting our tourist economy on some level. I believe we are debating the mechanics... the realities.

So, I would respectfully submit to you that the Rotary Four-Way Test might actually suggest that the original deal was flawed. Could I as a councilman expect that a handshake deal struck between the current council and business community, with no public vote, no ordinance, and no public process, would be honored 30 years from now? Is that trurhful or fair? Of course not. If, some day, the city were faced with budget shortfalls that it must choose between snow plowing and marketing, do you believe that the city would still be bound by this promise from a generation ago?

I'll offer one more analogy... you get the business community to donate the frequent flyer miles they earn towards a program which flies students around the world for study abroad programs... good effort. Does this contribution from the business community obligate Visa card to continue the frequent flyer rewards program?

I personally believe that the city SHOULD continue to fund summer marketing efforts. I also know that planning a marketing strategy is a whole lot easier with a defined budget. And finally I am convinced that every citizen will get the most value if the business community, city, and county continue to work together towards these common goals.

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