THE BUZZ: Room and Board

By on January 12, 2016

Has the lodging tax run its course?

Before 2010, the county was required to spend 90 percent of lodging tax proceeds on the promotion of tourism. Teton County has since become the only county in the state to qualify for its current 60/40 split, allowing 40 percent of tax revenue to be spent on mitigating visitor impact.  (Photo: Painted Buffalo Inn)

Before 2010, the county was required to spend 90 percent of lodging tax proceeds on the promotion of tourism. Teton County has since become the only county in the state to qualify for its current 60/40 split, allowing 40 percent of tax revenue to be spent on mitigating visitor impact.  (Photo: Painted Buffalo Inn)

Jackson, WY – Timing is everything.

More than two decades ago, as the final touches were being put on the 1994 Comprehensive Plan, valley voters had had it with tourists. The town and county were bursting at the seams through the 80s and early 90s, and the lodging tax – in place since 1986 – was a suitable fall guy. The tariff was put to bed in the fall of ’94, soundly defeated at the polls. Attempts to resurrect it met with little traction in following years.

How soon we forget. Fast forward to 2010. With the local economy in the crapper and a pro-business mayor leading the way, the bed tax made a predictable appearance on the November ballot after a hasty August JIM meeting was called to test the waters. Again, the community was engaged in hammering out another Comp Plan but this time in the grips of a recession. The measure narrowly passed with 59.7 percent of the vote.

By 2014, with economic recovery on the verge of shifting into high gear, voters renewed the tax overwhelmingly – 76 to 22 percent. Last summer, the so-dubbed “tax you don’t pay” bit us in the ass. We paid. Dearly.

Taming the beast

Can we make an ally out of our new nemesis? And is the bed tax solely to blame for our recent DEFCON-level summer from hell? As some elected officials ponder harnessing the tax for the valley’s housing and transportation needs, and less for vacation marketing, others aren’t convinced it will even be around after 2018, when it next appears on the ballot.

Commissioners Smokey Rhea and Mark Newcomb are among a few electeds who don’t want to leave any stone unturned when it comes to finding revenue sources for housing and transportation issues. Both have stated a desire to explore the lodging tax, as well as a possible real estate transfer tax, in addition to whichever way joint board representatives from the town and county elect to go with the SPET versus General Sales Tax debate.

Tapping lodging tax dough wouldn’t exactly be hitting the lottery. The two percent tax currently generates about $5 million, annually. That money is split in a 60/30/10 formula with 60 percent ($3M) going toward the promotion of tourism in Jackson Hole, 30 percent ($1.5M) to mitigating those visitor impacts, and 10 percent ($500k) into the general funds of the town and county for use any way officials see fit.

Town and county leaders typically spend the 30 percent portion on cleaning restrooms, picking up trash, and pumping money into START Bus and Pathways. If electeds are looking to divert that money to, say, housing it might be a tough sell to the public. Besides, one-and-a-half-million bucks would put less than three affordable units on the ground, according to the Housing Authority’s historical calculations.

That leaves dipping into money earmarked for promoting Jackson Hole. County attorney Keith Gingery said a case might be made for making that fall within state mandates…but not a very strong one.

“Statute says it has to be used for promotion. That’s where there has been some discussion,” Gingery said. “The statute says that includes ‘promotional materials, television and radio, printed advertising, promotion of tours, and other specific tourism related objectives.’ It’s that ‘other’ part at the end that many think opens the door for quite a few things.”

Councilman Jim Stanford, who voted for the lodging tax in 2010 but against it in 2014, said tweaking the way Jackson Hole is touted might be a compromise worth considering.

“I favor using the promotional revenue from the lodging tax more creatively but that would likely require a legislation change,” Stanford said. “Seeing how quickly and sharply the economy has rebounded, I have reservations about [the lodging tax] and would vote against it again. Unless a broader or more creative definition of promotion were employed, like when we used some of that money to plow open Yellowstone. Let’s not be timid. Let’s be bold.”

The Travel and Tourism Joint Powers Board (TTB) is the governing body charged with doling out the $3.5 million. By most metrics, the seven-member board has done an effective job of promoting the valley’s off seasons – spring and fall. According to Chamber of Commerce president Jeff Golightly, hotel occupancy is up an average of 6.8 percent in spring over the last three years, and 14.6 percent in fall since 2013. This compared to summer growth, where average occupancy rates have risen less than one percent over the past three summers.

TTB member Aaron Pruzan feels his board has done a good job boosting shoulder season tourism that helps get local employers through lulls that traditionally cause layoffs. Pruzan has also been a longtime fan of marketing spring and fall events which can be enjoyed by locals as well as visitors.

But as the owner of a retail/service business in Jackson, Pruzan knows there is a point of diminishing return.

“There were times last summer at Rendezvous River Sports where I was like, whoa, we can’t even answer the phone right now,” Pruzan admitted. “I’m saying this as an individual, and I might get in trouble for saying this, but If we are selling a Wild West experience and we are not delivering on that; if you are leaving Teton Village, for instance, and the traffic is backed up to Snake River Ranch, then that’s not quite right. I’ve spent my life in customer service so the question of balancing the quality of the visitor experience with maintaining our assets and still having the community feel the way we all want to feel is a question I think we still don’t know the answer to.”

Blaming the tax for our tourism tipping point

Golightly doesn’t feel the lodging tax should be looked to as a source of funding the valley’s housing and transportation needs. “It strikes me as an odd place to look; there are more logical places than one statutorily earmarked for tourism,” he said.

Golightly also said the tax is not necessarily to blame for our recent summer of overindulgence.

“I think it’s easy to look at this growth and conclude it must be this lodging tax. The tax is being blamed for visitation in the summer even though we are not up as much as Zion, Rocky Mountain National Park or Yosemite over the last six years,” Golightly said. “The Park Service is spending an extraordinary amount of money and two dollar gas has reenergized the great American road trip. Macroeconomics is much more consequential than a lodging tax promoting winter, fall and spring.”

Local economist Jonathan Schechter thinks other forces are at work as well. Data analysis is unclear whether there is correlation or causation between tourism promotion and visitation growth, he said.

“Lodging tax advocates could not have timed their proposal better in 2010 because our taxable tax table had hit bottom in July of that year. If the election had been on the ballot this last November I suspect it would get voted down because I think it would be, accurately or not accurately, a convenient scapegoat like it was in the 1990s,” Schechter said. “Now there are a lot of other players out there. The state is promoting the parks and increasing visitors are coming from China. I don’t believe the Tourism Board is targeting any of those folks.”

Blaming the tax for housing and traffic

If the lodging tax is not playing a significant role in herding tourists to Jackson, it most certainly is partly to blame for exacerbating a housing shortage and traffic jams, right? TTB coordinator Kate Sollitt and town administrator Bob McLaurin don’t think so. Independent planning consultant Melanie Rees, who studies Jackson Hole and other mountain resort communities, says that’s absurd.

“You can’t have more jobs and growth without more employees. The fact is we have so much job growth with near zero unemployment because we have had record setting visitation. That’s not a whim. It takes more and more people to serve more and more visitors, and the parallels between the number of jobs created and visitation are clearly there. I know [joint planner] Alex [Norton] would say new development is driving growth. But I’ve looked at all the statistics and it’s clear in Teton County and across all the mountain towns I’m working with that a labor shortage since the rebound from the recession is caused by a demand for primary and secondary jobs associated with increased visitation.”

Stanford agrees.

I think they are connected. It’s not the soul source of that pressure and growth and shortage of housing, but it’s part of the equation,” Stanford said. “We are fanning the flames to the point where our economy is overheating while at the same time we are trying to cool it down.”

In the past, Golightly and others have advocated raising the lodging tax and potentially using a floating split system where more money is spent on advertising during lean years, and during boons more could be allocated toward alleviate the stress on the infrastructure. No one is talking about raising the tax now.

A lodging tax is collected in most Wyoming counties and municipalities. Across the region, Vail employs a 1.4 percent lodging tax, Aspen collects 2 percent, and Moab charges a 1.5 percent transient room tax.

Long shot funding source

Some politicians have suggested enacting a real estate transfer tax, though it is thought to have little to no chance of passing at the state house. The measure would require a change to statute. Gingery, who spent more than a decade in the legislative body, said the idea has a better chance today than it did when he made the annual trip to Cheyenne.

“There has been some discussion about it. Someone would need to approach Ruth Ann [Petroff] or Leland [Christensen] or another representative about getting it on a bill,” Gingery said. “Most of the people that were opposed to it 10 years ago aren’t there anymore. It would be pretty much a bill of first impression. But I don’t think there is the strong opposition that there used to be.”

Still, a real estate transfer tax would be a long way off from generating actual revenue even if the appetite for it was there. “With this legislature I wouldn’t hold my breath,” Stanford said. Sen. Leland Christensen said there has been some preliminary discussion in a broader sense about ways local governments in Wyoming can enjoy more flexibility and freedom in assessing taxes to suit their individual needs.

“We had a conversation last week and the outcome was maybe it’s time to work together with the County Commissioners Association, the County Soil and Water Conservation District, the Water and Sewer District, and all other districts to put together an interim community tools tax package that would allow local communities to come up with solutions to local problems especially during these troubling financial times,” Christensen said. “There would have to be a limit at the top because Wyoming continues to be a state very suspect about any additional taxing. But many of us are realizing there needs to be more tools available to local governments.”

Christensen said he would consider the idea of presenting something to a standing or ad hoc committee next month. PJH

About Jake Nichols

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