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Home My WebLink AboutCity Council Committees - Lodging Tax Advisory Committee - 07/29/2004 (2) OFFICE OF THE MAYOR Jim White, Mayor 400 Phone:253-856-5700 • Fax: 253-856-6700 KENT Address: 220 Fourth Avenue S. W A S H I N G T O N Kent,WA. 98032-5895 AGENDA and MINUTES FORM LODGING TAX ADVISORY BOARD MEETING Thursday,July 29,2004 10:00 am City Council East Chambers Kent City Hall,220 41h Avenue South Attendance: Councilmember Tim Clark, Chair_ Nathan Torgelson, Staff_ Jacquie Alexander Bob Nachlinger, Staff Denise Gray Robert Goehring, Staff Kathy Madison Greg Haffner, Guest Vickie Molzer Marcelle Pechler,Guest Andy Wangstad Robin Hasbrouck,Guest Kathrine Kertzman,Guest Introductions and Call to order—Councilmember Tim Clark Information Items: 1. State Auditor's Workshop on Lodging Tax—Robert Goehring, City of Kent Auditor 2. Cancer Treatment Centers of America—Nathan Torgelson 3. Kent Station—Nathan Torgelson 4. Financial Report—Bob Nachlinger 5. Other Items Requiring Action: 1. Approval of minutes of May 20, 2004 2. New lodging tax advisory board member—Greg Haffner 3. Contract with Seattle Southside Visitor Services for 2004, and 2005-2007 4. 2005 Contract with Kent Chamber of Commerce Next meeting date, time and location Assignments for next meeting ��IKC EE N LODGING TAX ADVISORY COMMITTEE W A9 HINOTON May 20, 2004 Committee Members Present: Tim Clark, Vickie Molzer, Kathy Madison, Denise Gray, Andy Wangstad. Others Present: Nathan Torgelson, Bob Nachlinger, Marcelle Pechler, Robin Hasbrouck. The meeting was called to order by Clark at 2:05 p.m., and introductions were made. Approval of Minutes. Molzer moved to approve the minutes of April 30, 2004, as amended relating to the spelling of names. Madison seconded and the motion carried. Seattle Southside Visitor Services. MOLZER MOVED that the City of Kent enter into negotiations for an agreement between the City of Kent and Seattle Southside Visitor Services with full participation for a three year contract, and to negotiate with the Kent Lodging Association to utilize the Kent Chamber of Commerce for fulfillment of local tourism promotion, website management and reporting, and KLA meeting facilitation. Wangstad seconded. Torgelson and Molzer recapped the April 30th meeting and answered questions regarding the process, the costs and advantages, and how growth can be tracked. The motion then carried unanimously. Next Meeting. The next meeting was tentatively scheduled for 2:00 p.m. on Thursday, July 29, 2004. Adjournment. The meeting adjourned at 2:20 p.m. Brenda Jacober, CMC City Clerk 1 ADMINISTRATION Mike H. Martin, Chief Administrative Officer Phone:253-856-5710 Fax: 253-856-6700 Address: 220 Fourth Avenue S. Kent,WA.98032-5895 KENT WASHINGTON PROPOSED TOURISM AND MARKETING SCOPE OF SERVICES: 3 YEAR (2005-2007) INTERLOCAL AGREEMENT WITH SEATTLE SOUTHSIDE VISITOR SERVICES AND 1 YEAR (2005) CONTRACT WITH KENT CHAMBER OF COMMERCE Kent Chamber of Commerce; $15,000 or$18,000 contract Following are the list of services the City of Kent would contract with the Kent Chamber to perform in 2005. The Kent Lodging Association would no longer do print advertising or host quarterly meetings. 1. Kent Chamber of Commerce web site service found at www,kenthotels.org $9,600 a. Hosting @ Portent Interactive and content administration b. Modification of web site c. Search engine marketing 2. Individual Travel Collateral $155 a. Postage b. Print c. Envelopes 3. Advertising $50 a. Toll free number @ $0.10/min 4. Tourism Services $8,195 or $5,195 a. Staff Time: Tourism related calls, inquires, updating website, attending advisory board meetings b. Payroll c. Benefits d. Administration overhead 5. Tourism Industry Development (include in #4 above; the $5,195 budget would cut most of this item) a. Staff Time: Research and Development I 1 Seattle Southside Visitor Services; 3 year, $300,000 contract plus $25,200 start-up costs to redesign vacation planner Following are the list of services available to the City of Kent if we sign the 2005-2007 interlocal agreement for tourism and marketing services ($100,000 annually) with Seattle Southside Visitor Services. These services are also available to the Cities of Tukwila and Sea-Tac, which currently make up Seattle Southside Visitor Services. Because Kent will receive all of the benefits of the program for less than 1/3 of the total cost of the program, some businesses (but not hotels, major City venues or major tourist attractions) will pay a small fee for marketing strategies in which they choose to participate. These activities are noted with a *). SSVS 2005 Budget: Kent $100,000 SeaTac $370,000 Tukwila $370,000 TOTAL $840,000 Vacation Planner: What to do. Where to go. How to get there. SSVS publishes a 40+ page, four-color Vacation Planner that promotes the area's reasonably priced hotels, great shopping and dining, central location and easy access to major attractions in the Seattle &Tacoma area. Hotel amenities are featured in an easy-to-use grid format. Over 80,000+ are distributed annually. Hotels, motels, RV parks, festivals, attractions and full services restaurants are listed in this publication. The City of Kent would supplement the $100,000 annual contact with SSVS with an additional $25 200 (from 2004 unallocated funds)to update and add pages to the vacation planner to reflect Kent's hotels restaurants attractions etc. The vacation planner would need to be updated in 2004 for distribution in early 2005. Business Community Liaison: As a result of Kent's participation, a new position will be created to enhance our marketing efforts. The Business Community Liaison will work directly with our business associates to increase their participation and to insure they benefit from the many marketing opportunities available to them. SSVS will strive to extend corporate/business travelers stays by engaging groups and individuals in leisure activities, generate new group leads,offer FAM tours to acquaint group tour operators and meeting planners with Seattle Southside and provide our business associates direct contact with these prospective customers. Media Campaign: Annual Seattle Southside advertising campaign featuring ads in Sunset, VIA,Washington State Visitors Guide, Journey, Northwest Travel and the Seattle-King County CVB Visitors Guide and more. Mailing labels generated specifically by SSVS's comprehensive ad campaign are available on diskettes FREE to our hotel associates upon request. Website: Detailed Visitor Info— Everything a guest needs to know when planning a trip to Seattle's Southside. Events Calendar—Check out what's happening in the area with our calendar of events.Want to add something?Just let SSVS know, they update daily. *Coupons—Have a great offer or promotion? Build traffic with a coupon. SSVS' system gives associates control over offers and expiration dates. ($100 charge for Kent businesses, other than hotels, major tourist attractions and City venues). 2 Hotel Reservations—SSVS receives over 10,000 visits to SeattleSouthside.com and over 125 calls monthly to our toll-free visitor information line. Tap into this great pool of qualified leads and increase room nights FREE. Travel Packages—Great attractions at super prices are available to Southside hotel guests only through SeattleSouthside.com. Reservations Editor—SSVS' reservations editor gives hotel reservations manager control over room rates, blackout dates and specials on a daily basis in real time. Press Room—Want to tell the world about your business or service? SeattleSouthside.com offers an extensive catalog of press releases from around the area-updated daily. Photo Library— Have a fun photo of your location you'd like to see featured in national travel publications? SeattleSouthside.com offers a comprehensive photo library that can be accessed by the media and the general public. *Website Links— From SeattleSouthside.com web site to yours. ($100 charge for Kent businesses, other than hotels, major tourist attractions and City venues) Toll-free Concierge Services: SSVS' travel experts help travelers make the most of their vacation by assisting them with their vacation plans, Monday through Friday, 9 am to 5 pm. Offering information, hotel reservations, travel itineraries, discounts, etc. SSVS bring together the products and services offered by our associates with the customers SSVS serve. *Coupon Book: Attract visitors with a coupon in Play& Save in Seattle Southside. Featuring discounts to area restaurants, attractions and retail businesses. Coupon books are distributed to visitors who are staying in Southside area lodging facilities. ($250 per coupon offer for Kent businesses other than hotels, major tourist attractions and City venues) Public Relations Campaign: SSVS strive to build public awareness and usage of Seattle Southside as a travel destination by generating positive, editorial media coverage. SSVS serve as a helpful and dependable resource to members of the media through their media relations program, working proactively and reactively; SSVS pitch a broad range of editorial ideas to the media. Associates benefit from SSVS' free distribution of press releases and media relations efforts. Networking Opportunities: Educational tourism summit meetings offer public and private sector collaboration. SSVS serve as a catalyst, advocate,convener and partner in helping the Southside build its preferred future,"exceptional visitor experiences"! SSVS keep their associates informed about SSVS's programs and industry news through their many communications tactics and personal contact.The Business Community Liaison works directly with SSVS'associates to increase their participation and to insure they benefit from the many marketing opportunities available to them. Brochure Distribution: SSVS distribute their associate's brochures FREE in their office. Free Group Sales Leads: Group Sales Leads, generated by SSVS, are faxed and emailed immediately to all hotels (within the city limits of our contracting and partnering Cities)with detailed contact information for timely follow-up. Hotels benefit from these qualified leads. SSVS will strive to extend corporate/business travelers stays by engaging groups and individuals in leisure activities, generate new group leads, offer FAM tours to acquaint group tour operators and meeting planners with Seattle Southside and provide SSVS associates direct contact with these prospective customers. 3 Representation: SSVS maintains memberships and cooperate, network and participate in co-op marketing efforts where appropriate within the following trade organizations representing Seattle Southside as a travel destination: • Travel Industry Association (TIA) represents the whole of the U.S, travel industry to promote and facilitate increased travel to and within the United States. It is through this organization that we receive Travel News Links, industry research, access to International Pow Wows and overall marketing resources. • National Tour Association (NTA)is the premier packaged travel association in North America. NTA's membership comprises more than 645 tour companies that package and sell to and within North America. • Seattle CVB Tacoma CVB • Puget Sound Attractions Council Washington State Tourism Washington State Group Tour and Travel Association Washington State Hotel and Lodging Association Washington State Association of CVBs Western Association of CVBs Greater Seattle Chamber of Commerce • National Association of Sports Commissions South King County Lodging Association *Restaurant Concierge Book: SSVS's Restaurant Book features sample menus, driving directions, hours of operation, from restaurants in Tukwila and SeaTac is available FREE to hotels to display at the front desk. Guests can browse through the wide variety of choices and make their dining selection. (There would be a $600 charge for each Kent restaurant in the Restaurant book. Each restaurant would receive 2 pages in the book.) Business Associate Eligibility: Tourism-related business within the city limits of partnering or contracting cities. Such as hotels, restaurants, entertainment venues, transportation services, etc. (Marketing activities noted with an may require additional fees) Regional tourism-related venues that enhance our overnight guests stay e.g. regional tourist attractions, regional entertainment venues, and regional events. 3 4 ADMINISTRATION Mike H. Martin, Chief Administrative Officer Phone:253-856-5710 Fax: 253-856-6700 Address: 220 Fourth Avenue S. Kent,WA. 98032-5895 KENT WASHINGTON July 2004 CITY OF KENT LODGING TAX DOLLARS SUMMARY AND PROPOSAL FOR FUTURE EXPENDITURE City of Kent Lodging Tax Revenue History 1999 $132,166.00 2000 $162,379.00 2001 $151,176.00 2002 $127,389.00 2003 $119,197.00 2004 (estimated) $111,170 1 Summary of current 2004 budget Resources $52,420 Beginning balance 2004 $111,170 Projected revenue 2004 $163,590 TOTAL Expenditures $77,404 Riverbend $32,320 Kent Chamber (Lodging Association) $5,000 Senior Western Softball Tournament(July 2004) $1,000 Kent Bike Festival $3,333 Bid for 2006 World Softball $119,057 TOTAL 2004 balance (unspent funds) $44,533 Future obligations Due 2006 $20,000 (for 2006 World Softball) 9 P 1 3- o Q` SEATTLEwa, bouthside t . ,'SEATTLE �' � l. e THE PACIFIC NORTHWEST STARTS HERE 2. Proposal for spending balance of 2004 dollars ($44,533) $25,200 to Southside Visitor Services to update 2005-2006 Vacation Planner (includes listing of all Kent lodging facilities, key parks and trails, golfing, shopping (Kent Station), theaters, events and restaurants, new map and copy writing, editing and scanning, touch up and photo placement. $19,333 Ending fund balance In addition, $50,000 in lodging tax dollars remains in the Performing Arts Center fund 3 Proposal for spending of 2005 dollars (estimated $112K) $100,000 Southside Visitor Services contract $15,000 or$18,000 (2 options) Kent Chamber (still have $16,333 or$13,333 fund balance cushion+ $5OK reserve for sport tournament bids) In 2006 and 2007, any additional dollars beyond $112K(if hospitality market improves) could be added to Kent Chamber contract or go towards sports bids contracts or be left as fund balance 1-J 2 iy i i •A. SoUtSEATTLE .... ...... ................ 5 Website Optimization .i Website Visitors Per Month 14000 12000 - - - - - - - 10000 -- - - - - -- -- 8000 6000 - - - - - 4000 - - - - - - - 2000 - 0 Jan Feb Mar Apr May June Jul Aug Sep Oct Nov Dec El 2002 2112 I 2280 2303 2841 2946 3152 3580 4223 3910 3696 3409 3788 ®2003 3663 4072 4803 4093 3915 4087 4521 I 3942 3858 3752 3317 3753 ❑2004 4199 4070 8933 9208 10014 9444 12617 Accomplishments • 56% increase in toll-free calls YTD • 101 % increase in unique website visitors • 85% increase in Vacation Packets distributed • 35% increase in Tourism Networking Summit attendees YTD • 7% increase in YTD Lodging Tax g M< SEATTLE So uthside ^t Accomplishments Groups Western Region Senior Softball Championships National Senior Softball World Championships USS Chicago Reunion Piano Technicians Guild West Coast Region Conference on Marine Vessels and Port Air Quality Impacts Haddonfield United Methodist Church Davis Reunion Washington State Crime Prevention Association Japanese Tour Group Gig Harbor/Japanese Group Doyle Basketball Team Southside Church of Christ Girls Fast Pitch Tournament Rogainis Group 31 st Infantry Reunion Oldsmobile Club of America r` CURRENT BUDGET ANALYSIS LODGING TAX OPERATING FUND as of June 30,2004 2003 2004 2004 2004 2005 Actual Adj Budget YTD Est Actual Forecast BEGINNING FUND BALANCE 19,586 53,925 52,420 52,420 9,536 REVENUES Lodging Tax 119,198 121,268 50,851 110,644 111,750 Interest Income 166 526 217 526 526 TOTAL REVENUES 119,364 121,794 51,068 111,170 112,277 TOTAL RESOURCES 138,950 175,719 103,488 163,590 121,813 EXPENDITURES Strong Local Economy Transfer Out-Tourism Destination 85,000 77,404 1,424 77,404 Transfers Out-Tourism-Related Projects 66,530 76,650 18,231 76,650 76,650 Reverse Transfer-Kent Station Land (65,000) - - - - TOTAL EXPENDITURES(TRANSFERS) 86,530 154,054 19,655 154,054 76,650 Change in Fund Balance 32,834 (32,260) 31,413 (42,884) 35,627 ENDING FUND BALANCE 52,420 21,665 83,833 9,536 45,163 CURRENT BUDGET ANALYSIS TOURISM-RELATED PROJECTS ACCOUNT as of June 30,2004 2003 2004 2004 2004 2005 Actual Adj Budget YTD Est Actual Forecast BEGINNING PROJECT BALANCE 11,402 11,522 12,772 12,772 12,772 OTHER INCOME Transfers in-Lodging Tax Fund 66,530 76,650 18,231 76,650 76,650 TOTAL OTHER INCOME 66,530 76,650 18,231 76,650 76,650 TOTAL RESOURCES 77,932 88,172 31,003 89,422 89,422 EXPENDITURES Tourism-Marketing (Softball) (1223) 11,250 - 1,000 1,000 - Tourism Chamber 2000 (1263) - - Tourism Chamber 2001 (1271) - - - Tourism Chamber 2002 (1272) - (9,790) Tourism Chamber 2003-Jan-Jun 39,790 - - - Tourism Chamber 2003-July-Dec 14,120 - 9,790 - - Tourism Chamber 2004(1274) - 32,320 26,670 32,320 32,320 Senior Western World Softball Tourn.-July 2004(1279) 5,000 3,333 5,000 5,000 Tourism-Unallocated(1270) - 39,330 - 38,330 39,330 TOTAL EXPENDITURES 65,160 76,650 31,003 76,650 76,650 ENDING PROJECT BALANCE 12,772 11,522 (0) 12,772 12,772 4 , ... SEATTLE Southside TollmFree Calls 350 300 4 250 - - - - -- 3 200 ❑ 2002 2003 150 ❑ 2004 5 100 - -- 50 -- 0 Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec t LODGING TAX ADVISORY BOARD MEETING JULY 29,2004 REPORT ON LODGING TAX WORKSHOP HANDOUT DOCUMENTS Summary Memo 1 Workshop Handout 3 Letter from State Auditor—New Audit Approach 8 Attorney General Office Opinion 2000 No. 9 9 Municipal Research"A Revenue Guide" (Partial) 15 Lead Schedule - Lodging Committee Meeting.doc LODGING TAX ADVISORY BOARD MEETING JULY 29,2004 REPORT ON LODGING TAX WORKSHOP (July 28, 2004—Tacoma Sheraton Hotel) 1. Presenters: ✓ Jan Simon, Executive Vice-President Washington State Hotel & Lodging Association ✓ Brian Sonntag, State Auditor ✓ Chuck Pfeil, Director of Audits ✓ Jan Jutte, Deputy Director of Audits 2. Statistics (Source: Jan Simon): ✓ Washington ranks no. 44 in funding tourism ✓ Every dollar spent for tourism generates $39 to the economy ✓ Lodging tax revenues represent ten times the investment in tourism than at the state level 3. Background: ✓ Chapter 67.28 RCW authorizes a"basic" 2%rate and an additional 2% rate, provided that the total sales tax rate for all purposes does not exceed 12%. Therefore, most cities in King County are limited to 1% ✓ Use of these moneys is restricted to tourism promotion and for the acquisition and/or operation of a tourism-related facility ✓ City of Kent 2003 Revenues - $120,838 4. New SAO Approach: ✓ Legislative intent was local control; therefore, focus will be on the Lodging Tax Advisory Committee process and analysis. Audit staff will also determine if the analysis is documented review to determine if expenditures appear allowable. Big red flag: If the governing body consistently acts contrary to the recommendation of the Committee. ✓ New approach communicated to SAO staff Spring 2004 ✓ Jan Jutte and Chuck Pfeil will review ALL potential lodging tax audit issues to ensure correct and consistent treatment around the state 1 Lodging Tax Advisory Board Meeting.doc ✓ SAO will no longer serve as a"gatekeeper", providing answers to specific allowability questions. Rather, advice will be more process oriented. 5. Key Current Issues: ✓ The local government must have an ownership interest in facilities funded with lodging tax revenues (see attached Attorney General Opinion 2000 No. 9) ✓ Pre-payment of expenses (e.g. festivals administered by not-for-profits) are not allowed (AGO advisory memo) Both these issues are under review by the Association of Washington Cities,the State Auditor's Office, the WSHLA,the private sector and various local governments. SAO expects official "ruling" from AGO within next six months. If AGO does not change their position; then this matter may be brought before the legislature. 2 Lodging Tax Advisory Board Meeting.doc Hotel/Motel Lodging I Taxes ICI n Cla , Washington State Auditor's Office July 28,2004 lIntroduction Today we'll talk about.... ➢Hotel-Motel Tax Rates&Intended Uses D Related Requirements Best Practices Your Questions F Hotel-Motel Tax Overview Most cities may impose a"basic"two percent tax under RCW 67.28.180. This tax is taken as a credit against the state sales tax,so that the total tax that a patron pays in retail sales tax and the hotel-motel tax combined is equal to the retail sales tax in the jurisdiction. In addition,most cities may levy an additional tax of up to two percent,for a total rate of four percent,under RCW 67.28.181(1). Hotel -Motel Taxes 1 —3— E 'I Overview Continued Hotel/Motel Tax Funds are statutorily restricted to the following activities: (1)Tourism promotion, (2)Acquisition of tourism-related facilities, (3)Operation of tourism-related facilities ,a.rmw jlVocabulary. I "Tourism promotion"means activities and expenditures designed to increase tourism, including but not limited to: 1)advertising,publicizing,or otherwise distributing information for the purpose of attracting and welcoming tourists; 2)developing strategies to expand tourism; 3)operating tourism promotion agencies;and 4)funding marketing of special events and festivals designed to attract tourists. RCW 67.28.080(6) vrsersaw s Ii I Vocabulary Continued... "Tourism-related facility"means real or tangible Personal property with a usable life of three or more years,or constructed with volunteer labor,and used to support tourism,performing arts,or to accommodate tourist activities.RCW 67.g8.080(7) "Tourist"means a person who travels from a place of residence to a different town,city,county,state,or country for purposes of business,pleasure,recreation, education,arts,heritage,or culture.RCW 67.28.080(8) vrserzoo� Hotel-Motel Taxes 2 -4- ' Vocabulary Continued... "Tourism"is defined as: Economic activity resulting from tourists,which may include sales of overnight lodging,meals, tours,gifts,or souvenirs. RCW 67.28.080(5). ,n.aoo. r Lodging Tax Advisory I Committee Cities with a population over 5,000 g T� must form a lodging tax advisory t committee and submit to them any: D Plans to impose a new hotel-motel tax or to increase the rate of an existing tax D Plans to repeal an exemption D Proposed changes to the use of the tax proceeds �rssmu - Lodging Tax Advisory Committee This committee must have at least five members,appointed by the legislative body of the municipality,including: At least two representatives of businesses that are required to collect the hotel-motel tax, D two people who are involved in activities that are authorized to be funded by this tax, and one elected official of the municipality who serves as chair of the committee. D A rit Ic rnmmittaa m inrh�_��rl��npn voting county elected official. Hotel-Motel Taxes 3 —5— I Lodging Tax Advisory Committee The number of committee members from organizations representing the hotels and motels and the number from organizations involved in activities that can be funded must be equal. Organizations representing hotels and motels and organization involved in activities that can be funded by this tax may recommend people for membership. The appointing authority shall review the membership of the committee annually. invna �u t_ IP SAO Audit Appoach ❑Legislative intent was local control ❑Focus on Lodging Tax Advisory Committee analysis ❑If no LTAC,will look to governing council analysis ❑Focus on the process and resulting analysis ❑Communicated to our staff and associations this past Spring 7RaINW tl � I Best Practices ut It in Writing-Services related to Tourismt promotion and Operation of a Tourist Related Facility should be formalized in a written u agreement. n Document Analysis—We will look to this analysis to help us decide if expenditures appear appropriate D Conflict of Interest—Be very conscientious when it comes to any appearance of conflict of interest martoa �x Hotel- Motel Taxes 4 -6- 5� 'I Questions And Answers i Hotel-Motel Taxes 5 -7- Hotel/Motel Tax Audits By Brian Sonntag, State Auditor The hotel/motel tax(or lodging tax)is a restricted revenue source that tends to generate controversy. We hope this will communicate briefly what the statute allows and the approach the State Auditor's Office is taking in auditing your use of this tax. Under RCW 67.28.1815,hotel/motel tax revenue is to be used solely for the purpose of paying all or part of the costs of tourism promotion; acquisition of tourism-related facilities;operation of tourism-related facilities; or funding a multi jurisdictional tourism- related facility. Based on extensive research,we have concluded the Legislature intended the use of this revenue to be locally controlled. One indicator of this is the establishment of the lodging tax advisory committee in RCW 67.28.1817 if a city has 5,000 or more residents. Therefore,we are changing our approach to auditing hotel/motel tax use. We will look at the process your entity has in place for deciding on the use of this money. If your municipality has 5,000 or more in population, we will see if you have a committee in place, if the membership is appropriate and whether it is operating in compliance with state law. If your entity is less than 5,000 in population,we will look to see if you have a committee even though it is not required or what other process your entity uses to distribute these funds. We also will look at the analysis prepared by either the committee or the council/commission that demonstrates that the money is being used in compliance with state law. If we are satisfied that a working process is in place and the analysis has been done, we will scan your expenditures to make sure that they are appropriate. So, please be sure you have a process in place to decide on how the money will be spent and documentation supporting approval of these expenditures. In addition, the Association of Washington Cities is currently working with cities and interested legislators to ask the Attorney General's Office to reconsider AGO 2000#9 on tourism related facility ownership and the memorandum to our Office dated September 22, 2003 on prepayment of lodging tax funds to recipients. Since the guidance we currently have may change, we will not be auditing these two issues during this current audit cycle. If you have any questions regarding this issue,please call Jan Jutte,Deputy Director of Audit, at(360) 725-5359 or email her at juttel b_sao.wa.gov. You can also submit a question to our Help Desk at www.sao.wa.gov. -e- d�/Lv� LUC4 Ul.4U Z3dbb14014 FEll�A�;'r C,f''1 F:;GE F�2 /huttxority of cttie;and towns to contract with rrongoVernmental entity to construct, lease, ... Page 1 of C> it . 41 1 ter•-rS�'" _ YCe �Ct�6°JcP!?!p7d�i .;!' - .--._...—` LREr_.OIRE �,,TC:�p1EY hEm k:11_ OF �r!ASlgl:•It,1•.'Fc :�_-��- \ �} CITIES :AND TOWNS — TAXATION — LODGING TAN - TOURISN•I — Authority of municipalities to spend lodging tax revenues on tourism-related facilities 1.. A municipality lacks authority to expend lodging tax revenues for the support of a tourism-.related facility in which the municipality has no ownership interest. 2. A municipality may expend lodging tax revenues for the support of a tourism- related facility in which the municipality has a joint interest; the degree of support must be proportional to the extent of the municipality's ownership interest in the facility. December 11, 2000 Honorable Lynn Kessler State Representative,24th District F. O. Box 40600 Cite As: Olvmpia,WA 98504-0600 AGO 2000 No.9 Dcar Representative Kessler: 13y letter previously acknowledgcd,you have requested our opinion on two questions relating to the authority in RCW 67.28 autllorizi.ng municipalities to spend lodging tax revenues for tourism-related facilities. I. have paraphrased your questions slightly to facilitate a clearer and more complete answer: (1) is a im.unicipality's authority to expend lodging tax revenues limited to tourism-related facilities in which the municipality has an ownership interest? (2) May a municipality expend funds for the acquisition or operation of a privately-owned tourism-related facility if the municipality has a joint venture or control over the facility? If yes, how does a municipality determine if there is a joint venture or sufficient control to authorize spending of lodging tax revenues? To put your questions into perspective, we .note the background materials that you provided. First,' you provided the annual report by the Municipal Research. & Services Center of Washington, which states that tourism-related Facilities "must be owned and opetated by the city, either individually or jointly with another -mun.icipality or private party". See h Cun. Research & Serv. Ctr, of Washington, A littp://www.atg.wa.gov/opinious'Qpini.on_2000_9.html 3/3i2004 xuuiVJ'1Ly ul.clues ana towns to contract with nongovernmental entity to construct, Icase, ,.. Page 2 of 6 Revenue uide for ZVashin4ton Cities and T:olvns 21 (Report No. 46, Aug. 1999). This statement is attributed to advice provided by the Attorney General's Office in 1987, when Mr. Leland Johnson advised the San Juan County Prosecuting Attorney that a municipality could not use lodging tax revenues to provide grants to nonprofit organizations whose purposes might coincide with the purposes of RCW 67.28. See Letter dated October 28, 1987 from .Leland T. Johnson, Assistant Attorney General, to the Honorable Frederick C. Canavor, Jr. Mr.Johnson's 1987 advice suggested that, although lodging tax revenues could not be givers to a private facility, expenditures would be possible in the context of a joint venture. In light of this background, we understand your questions to ask about the nature of the interest a municipality must have in a tourism.-related facility to spend lodging tax revenues for purposes of acquiring and operating the facility. BRIEF ANSWER The answer to your first question is yes, a municipality must have an ownership interest in a tourism-related facility before it can spend lodging tax revenues on the facility. This requirement reflects the connection between the spending power in RCW 67.2$.1815 and a municipality's power to acquire and operate such facilities provided. in RCW 67.28.120. A tourism-related facility may consist of real or certain tangible personal property, and we conclude that ownership would include certain leasehold interests. The answer to your second question is also yes, assuming that the joint venture agreement provides the municipality with a degree of ownership over the facility. Whcthcr there is a joint venture is a question of fact that will be unique to the particular circumstances_ Therefore,we identify no particular threshold of ownership or control, so long as the facility is one that the municipality is acquiring and operating jointly pursuant to agreement, thus reflecting the purpose of the lodging tax. The following analysis explains our answers. ANALYSIS I.Background on the Lodging Excise Tax. The Legislature adopted the first version of the present day lodging excise tax in 1967. Sce .Laws of 1967, ch. 236_ The tax and spending authority was codified as RCW 67.28. The original version of the tax supported mutjicipal authority to acquire, finance, construct, and operate sports stadiums. See generally 1967 AGO No. 31. A series of subsequent amendments expanded the permissible uses of lodging tau: revenue. In 1973, the Legislature amended the lodging excise tax as part of authorization to acquire and operate"convention center facilities". Laves of 1973,2d Ex. Sess., ch. 34, § 1. In 1979, the Legislature expanded. the chapter to authorize acquisition and operation of"performing arts center facilities and/or visual art center facilities"_ Laws of 1979, 1st Ex. Sess., ch. 222, ti 1. http:/1,Awvw_ata.wa.govJopinions/opinion 2000 9.htm' 3/3/2004 -10- .-it Z41 1 UU1 ��.-.., �.-��vc� , �.v.,r, .,� .rHUL U4 �.u[noruy of caties and towns to contract with nongovernmental entity to construct, lease, .,. Page 3 of() The 1.997 Legislature significantly amended the statutory scheme by adopting the term "tourism-related facilities" to include stadiums, convention centers, performing and visual.arts facilities, and public restrooms allowed by prior versions of the law. It is, however, also a broader term than these previously listed items. The definition statute provides that: "Toun.sm-related facility" means real or tan ;ible personal property with a usable life of tluee or more yearsu constructed with volunteer labor, anal use o ®rt toliri orrnin__ s, or to accommodate to risi aches. RCW 6128.080(7). The provisions of RCW 67.28 are focused on using the lodging tax revenues for acquisition and operation of tourism-related facilities_ First, RCW 67.28.120 authorizes a municipality to "acquire and operate" such facilities. RCW 67.28.130 authori.zes acquisition of such facilities by lease from other municipalities_ RCW 67.28.1.40 authorizes eminent domain in circumstances related to acquiring and constnactiug facilities. RCW 67.28.170 authorizes any municipality "owning or operating tourism-related facilities acquired under this chapter" to contract or lease to others for operation. of the facility. The tax itself is authorized by RCW 67.28.180 and RCW 67.28.191. Thus, the "tourism-related facilities" that arc the focus of your question,can,include a variety of different property, structures, and improvements. For purposes of answering your question, we recognize there will be significant variations on municipal approaches to such facilities,especially in the context of joint ventures and leasing arrangements. Our opinion, however, assumes that the facility meets the statutory criteria for"tourism related facility". iT.Authority to Spend the Lodging Tax Revenues. To answer your questions, we turn to the language of the statutes that authorize municipal acquisition and operation of tourism-related facilities and provide authority to spend the lodging excise tax revenues. We start with RCW 67.25.120, which authorizes the municipality to acquire and operate the Facilities. That statute provides: Any municipality is authorized either individually or jointly with any other municipality, or person, or any combination thereof, to acquire and to operate tourism-.related facilities, whether located within. or " without such municipality. RCW 67.28.1.20 (emphasis added). The power to spend lodging tax revenues is provided by RCW 67.28.1815 and uses words that refer directly to this substantive power to acquire and operate: All .revenue from taxes imposed under this chapter shall be credited to a special fund in the treasury of the municipality imposing such tax and used solely for the purpose of paying all or any part of the cost of toui.sm. promotion, acquisition of tourism-related facilities, or http://wvvw.atg.wa..c,ov'opinions/opinion_2000_9.1itm1 3/3/2(}04 -ii- - ii/G`+� L- '� ''� �� LJJ.JVI4VL`t rGV'A I"11 �.•� - �'n1lC U� ,rsuu.wnLy of cntcs ana towns to contract with nongovenimental entity to construct,lease, ... Page 4 of 6 operation of tourism-related facilities. Municipalities may, undei chapter 39.34 RC\V, agree to the utilization of .revenue from taxes imposed ' under this chapter for the purposes of funding z multijurisdictional tourism-related facility. RCW 67.28.1815 (emphasis added). Statutory construction requires that "statutes must be read together to determi.nc legislature purpose to achieve a harmonious total statutory scheme _ whicl: maintains the integrity of the respective statutes." City of Elrensburg v. State, 118 Wr 2d 709, 713, 826 P.2d 1091. (1992) (quoting ,Employco Personnel Servs., Inc. v Seattle, 11T Wn2d 606, 917 P.2d 1373 (1991)). This principle is important to oul answer,because the authority to spend for the costs of"acquisition" or"operation" it RCW 67.28.1815 is best interpreted in a manner that harmonizes with the authority it RCW 67.28.120 to "acquire and to operate tourism-related facilities". We turn now.tc your first question,which we repeat for convenience: Is a municipality's authority to expend lodging tax revenues limiter to tourism-related facilities in which the mctUMDRlity bas as ownership interest? We conclude that a municipality must have an ownership interest in a facility in order to spend lodging tax revenues. RCW 67.28.120 provides express authority to "acquirf and to operate"tourism-related facilities if a municipality is doing so "individually" of "join.tly with any other municipality, or person, or combination, thereof'. Thus o,,&,ner�,,bi.p is always involved. The spending power in RCW 67.28.1915 is designed tc serve this power and therefore allows spending for the costs contemplated by RCV4 67.N.120. Our interpretation of the statutory language is supported by the historical purpose o: the statutory scheme - to facilitate municipal acquisition of a public stadium anc other properties. That original focus on acquisition of public ownership or join ownership remains, even though municipalities may now acquire an interest in ; variety of tourism-related .facilities that may he both real and personal property. Wt note that the definition statute, RCW 67.28.080(l.), defines "acquisition" in terms tha• reflect ownership of the facility as a municipal asset: includes, but is not limited to, siting, acquisition, design, construction refurbishing, expansion., repair, and improvement, including paying of securing the payment of all or any portion of general obligation bonds u leases, revenue bonds, or other obligations issued or incurred for sucl purpose or purposes under this chapter. Finally,we constme the definition of"tourism-related facility" in RCW 67.28.080 sc that a defining characteristic of a tourism-related facility is that it is acquired. anc operated by a municipality, at least in some part. Property already owned anc operated by a private party .fvr tourism purposes cannot be a tourism-related facility for purposes of the lodging tax revenues,because a municipality is not"acquiring anc operating" that facility in the manner contemplated by RCW 67.29.120. . http://www.atg.wa.govlopi.nions/opinion_2000_9.litml 3/3l2004 -12- i/24/2004 01:40 25_6614024 FEDIAIAY CM PAGE 06 Authority of ctties and towns to contract with non govemmental entity to construct, lease, Page S of 6 This does not mean that the municipality must be acquiring some part of fee title t( real. property, because the definition. of a facility recognizes that a facility is no- limited to real properly. Instead, "tangible personal property" may be acquired ant operated. RCW 67.28.080(7), Furthermore, ac uisitiorl a ppears to interests in real property, such as a lease. See footn'ote2 include, abo e. Within ithcse relatively broad sideboards, we conclude that the municipality must have ar ownership interest before using lodging tax revenues. We recognize that our opinion necessarily requires that a municipality cannot sirrtpl) pay for the operations of a primate facility, although the private facility may be o great interest to tourists. We note that this approach to the spending power is con.sister'tt ,with the essence of Mr. Johnson's 1987 letter opinion, because i, necessarily means that a municipality cannot use the lodging tax revenues to provide grants t rtvate ro ects that attract tourists. This leads us to your second question, which concerns expenditures where municipality is involved in a joint venture or other ,joint ownership or control_ We restate the question here for convenience: Flay a municipality expend funds for the acquisition or operation o; a privately-owned tourism-.related facility if the municipality has joint venture or control over the facility? If yes, how does municipality determine if there is a joint venture or sufficient Contro to authorize spending of lodging tax revenues? We conclude that a municipality need ,not be the sole owner of a tourism-relates facility for it to spend lodging tax revenues on the facility, and therefore it may spent lodging tax revenues for a facility that it is jointly acquiring and operating. Thi: opinion is required by the plain language of RCW 67.28.120,which contemplates tha a tourism-related facility may be acquired and operated individually or"jointly". To h.e1p explain our analysis and complete our answer, we describe the natur municipality's e of interest in a "joint venture" concerning a tourism-related facility. First a joint venture is "a relationship voluntarily assumed and arising wholly out of the parties' express or implied contract". Leslie v. Midgare Center, Inc., 72 Wn.2d 977 980, 436 P.2d 201 (1967). Accordingly, it is the intentions of the parties to the join venture agreement that determine the rights and relationship of the parties to the agreement, "unless the intended relationship is prohibited by some rule of law". Id. a. 980. In addition to the necessary elermezrt of a contractual agreement, a joint venture mus have "a commrni.purpose", a "community of by an e interest", and "an equal right to a voice accompanied equal right to control". Paulson v. Pierce County, 99 Wn.2d 645 654,664 P. 2d 1202 (1983). In Paulson,the Supreme Court held that the county and t. Private residential development did not have a joint venture to construct and, locate flood, prevention structu.res on the Nisqually River. Critical to the court's ruling wat the fact that kh.e private parties did not have any control over the project.Id.at 655. It is impossible to describe the variety of situations where a municipality may jointl) acquire and operate a tourism—related .facility. Accordingly, the critical elements wil I'ttp://Wwv v,atg,,Ya.govr'opinions!opinion_2000 9.hhn1 3/3/2004 -13- ,24/2004 01:40 2536614024 FEDWAY CM PAGE 07 .H.utnonty of cities and towns to contract with nongovernmental entity to constn►ct, lease, ... Page 6 of G .remain. an agreement that describes the purpose and common interests of the municipality and its joint venturers and a description of the mutual control over the facility. We interpret the statutes to leave room Far the variety of joint acquisitions and operations that might arise under RCW 67,29.120, which might provide for different contributions to the costs of acquisition and costs of operation over time_ We trust the above will be of assistance. Very truly yours, TAX DOUGLAS GECK Senior Counsel JDG:pmd http://xv,%,\v.atg.wa.gov/opinions/opiTlion-2000-9.htmi 3/3/2004 -14- ■ A Revenue Guide for Washington Cities and Towns 1 4 , M • ll A `-- August 1999 • Report No. 46 Municipal Research & Services Center of Washington -15- A Revenue Guide • 18 *Spending the Second Quarter Percent — REET 2 This part of the real estate excise tax may only be levied by cities that are required to or choose to plan under the Growth Management Act. All cities that levy this tax face the same provisions, whether their population is greater or less than 5,000. For this quarter percent of the real estate excise tax, "capital project" means those: public works projects of a local government for planning, acquisition, construction, reconstruction, repair, replacement, rehabilitation, or improvement of streets, roads, highways, sidewalks, street and road lighting systems, traffic signals, bridges, domestic water systems, storm and sanitary sewer systems, and planning, construction, reconstruction, repair, rehabilitation, or improvement of parks"' Note that acquisition of land for parks is not a permitted use of REET 2 receipts, although it is a permitted use for street, water, and sewer projects. *What's This Either Erne-Half Percent Real Estate Excise Tax? Cities that are not levying the optional half-cent sales tax under RCW 82.14.030(2) have the option of levying an additional one-half percent real estate excise tax 106 These receipts are not designated for capital projects.They are a general fund revenue for city operating expenditures. Only one city, the City of Clarkston, has chosen to do this.107 From a financial standpoint, the optional half-cent sales tax will probably always bring in more revenue than this additional one-half percent real estate excise tax. For border cities,however,who do not feel they are able to levy the optional sales tax,this tax is a revenue option. •Accounting for These Funds Because this revenue source has a dedicated purpose, it must be accounted for separately in a capital projects fund. Those cities that are planning under GMA and levying both REET 1 and REET 2 need to keep track of each of these revenues separately because the uses to which they may be put are different.10' Hotel-Motel Tax Most cities have had the authority to levy a "hotel-motel" or lodging tax of two percent;pince 1973.109 Over the years,some cities got special interest legislation passed that increased the rate of their permitted levy and/or provided for certain uses of the tax revenue that were unique to them. In 1997,the legislature repealed much of chapter 67.28 RCW and gave most cities the same levy rate and permitted uses. 105RCW 82.46.035(5). 106RCW 82.46.010(3). 107See Clarkston Municipal Code,§3,88.010. 108RCW 82.46.035(4). 109Ch.34,Laws of 1973,2nd ex.sess. -16- A Revenue Guide • 19 •What Are the Tax Rates? Most cities may impose a "basic" two percent tax under RCW 67.28.180 on all charges for furnishing lodging at hotels,motels,and similar establishments (including bed and breakfasts and RV parks)for a continuous period of less than one month.This tax is taken as a credit against the 6.5 percent state sales tax, so that the total tax that a patron pays in retail sales tax and the hotel- motel tax combined is equal to the retail sales tax in the jurisdiction.' ° In addition,most cities may levy an additional tax of up to two percent,for a total rate of four percent,under RCW 67.28.181(1). This"special"tax is not credited against the state sales tax. Therefore,if a city levies this additional tax,the total tax on the lodging bill will increase by two percent. There are some exceptions: • RCW 67.28.181(1) stipulates that this additional two percent tax may be levied as long as the total tax under chapter 36.100 RCW (the public facilities district tax), chapter 82.08 RCW(the state sales tax), chapter 82.14 RCW (the city, county, and transit district sales tax), chapter 67.28 RCW (the hotel-motel tax chapter), and chapter°67.40 RCW (the convention and trade center tax) does not exceed 12 percent. (Note that the sales tax for the Regional Transit Authority in portions of King, Pierce, and Snohomish counties is not included in making these calculations.) This means that most cities in King County may only levy a one percent tax."' Seattle cannot levy any tax. The total hotel-motel tax in Seattle is 15.2 percent,higher than in the rest of the county,because the convention center tax is higher'12 • Cities that had authority to levy a "special'tax before July 27, 1997 that allowed a rate higher than four percent, had that rate grandfathered in by the1997 legislation"3 All the cities in Grays Harbor and Pierce counties are in this category plus Chelan, Leavenworth, Long Beach, Bellevue,Yakima, and Winthrop. • Cities located in counties that had the authority to levy a four percent tax county-wide before January 1, 1997, are limited to the"basic"two percent rate"4 This affects cities in Snohomish and Cowlitz counties. • Due to some unique circumstances,1'there was a period of time at the end of 1997 and beginning of 1998 when the outstanding taxing authority was six percent, rather than the four percent the legislature intended. During this time, Wenatchee and East Wenatchee raised their total tax to six percent. These rates were grandfathered in by the 1998 legislature."' "ORCW 67.28.1801. Ch.35,Laws of 1998, §2. "'Cities in King County,other than Seattle,have an 8.2 percent sales tax,a two percent hotel-motel tax for the Kingdome/new football stadium, and a 2.8 percent hotel-motel tax for the convention center. These add up to 13 percent. Subtracting the two percent credit against the state sales tax brings the figure down to 11 percent, leaving room for a one percent tax. 12RCW 67.40.090(2)(d). The statutes provide that the maximum rate in Seattle is 15.2 percent. RCW 67.28.181�2)(c). ' 3RCW 67.28.181(2)(a). 15RCW 67.28.181(2)(b). " See Budget Suggestions for 1998,Municipal Research and Services Center:Seattle,August 1997,pp.26-32, for a discussion of the unintended consequences of the partial veto of ch.452,Laws of 1997. 16RCW 67.28.181(2)(d). —17— A Revenue Guide • 20 *City or County Tax? Counties also have the right to levy this tax but, in most cases,the county must allow a credit for any tax levied by a city."' One exception is King County. The law provides that if any county pledged these tax revenues before June 26, 1975, to pay debt service on the construction of a "public stadium, convention center, performing arts center, or visual arts facilities,"then it could collect the tax on a county-wide basis from all lodging facilities"e In practical terms this means cities in King County are not able to levy the hotel-motel tax at rate higher than one percent, and Seattle can levy no tax at all, until the bonds issued for the new football stadium are retired in January 1, 2021.19 However,the law also has a provision for any cities that,before June 26, 1975,had pledged hotel- motel tax revenue to pay debt service for the construction of one of the facilities listed above. Those cities are able to continue to collect their hotel-motel tax until the debt is retired 120 One such city is Bellevue,where the 6.5 percent state retail sales tax on the sale of lodging is reduced by both the two percent county hotel-motel tax and the two percent city tax. The city of Yakima and Yakima County also pledged hotel-motel tax revenues for a convention center before June 26, 1975, and the state sales tax there is subject to the same"double-dipping." *How Can the Revenues Be Used? These funds may be used solely for paying for tourism promotion and for the acquisition and/or operation of tourism-related facilities.121 "Tourism promotion" is defined as: activities and expenditures designed to increase tourism, including but not limited to advertising, publicizing,or otherwise distributing information for the purpose of attracting and welcoming tourists; developing strategies to expand tourism; operating tourism promotion agencies; and funding marketing of special events.and festivals designed to attract tourists. [Emphasis added]"2 Those who recall the previous language will note that this new language is broader. Cities may still advertise and publicize using written materials,advertisement on radio or television or in other media, banners,floats,etc.However,"activities and expenditures to increase tourism"could also include the salary and benefits of a city employee for the time spent promoting tourism, or the travel expenses of an employee who staffs a city booth at a convention. Note that hotel-motel tax funds may be spent only on marketing special events and festivals. These monies may not be spent on the costs of actually putting on the special events or festivals. There is nothing in the definition that limits the marketing to city events, as long as the events are designed to attract tourists. 117RCW 67.28.181(3). If a city is levying the entire four percent tax (or more, if a higher rate has been grandfathered in),the county may not levy its tax in that city. 118RCW 67.28.180(2)(b). 119RCW 67.28.180(2)(c)(ii). 120RCW 67.28.180(2)(c)(iii). 121 RCW 67.28.1815. "Tourism"is defined as"economic activity resulting from tourists,which may include sales of overnight lodging, meals,tours, gifts, or souvenirs." RCW 67.28.080(5). There is no stipulation that the tourism promotion be of a type that attracts overnight visitors. Of course,to the extent it does not,hotel-motel tax receipts will be lower. 122RCW 67.28.080(6). —18— A Revenue Guide • 21 However, because of the state constitutional gift of public funds prohibition,123 a city should enter into a contract with any private organization providing marketing services or any other tourist promotion activity. The contract should spell out the tourism-related services to be provided in exchange for city funding and what reports will be required. Also, any organization doing promotion on behalf of the city may only spend hotel-motel tax funds on items that the city itself could fund. This prohibits, for example, any expenditures on promotional hosting. The limitation on using hotel-motel tax revenues for acquiring and/or operating tourism-related facilities is guided by the following definition: "Tourism-related facility" means: real or tangible personal property with a usable life of three or more years., or constructed with volunteer labor, and used to support tourism, performing arts, or to accommodate tourist activities.124 The prior legislation specifically mentioned certain facilities on which most cities could expend hotel-motel tax funds. These included stadiums, convention centers, performing and visual arts facilities, and public restrooms. Cities may still spend their hotel-motel funds on these facilities, but the new language allows a city to build and/or operate any facility that supports tourism or accommodates tourist activity. What kinds of facilities does this include? It depends. The guiding principle here is that the facilities should be used by tourists. So, for example, a municipal golf course,would likely be a permitted expenditure in Chelan,where it probably would not be if it were in a residential neighborhood in Spokane. Each situation is unique. We realize that is not as much guidance as many cities will want, but that is all we can give you in this publication. You are welcome, of course,to call our office or the state auditor's office to discuss a specific project. One other guiding principle is that these tourism-related facilities must be owned and operated by the city, either individually or jointly with another municipality or private party 12' A city cannot,for example,give money to a nonprofit museum,even though museums are a permitted use if owned by the city.1 ' *Lodging Tax Advisory Committee12' If a city with a population over 5,000 wishes to impose a new hotel-motel tax, raise the rate of an existing tax, repeal an exemption from the hotel-motel tax (we do not know if any cities are providing exemptions),or change the use of the tax proceeds,it must form a lodging tax advisory committee. • This committee must have at least five members, appointed by the city council. • The committee membership must include at least two representatives of businesses that are required to collect the hotel-motel tax,two people who are involved in activities that are 123Art.8,§2. 124RCW 67.28.080(7). 125RCW 67.28.120. 126See letter dated October 28,1967 from Leland T. Johnson,Assistant Attorney General, to Frederick C. Canavor,Jr.,Prosecuting Attorney,San Juan County. This point is reiterated in a letter dated June 14,1993,from Stacia Reynolds (now Hollar), General Counsel, Washington State Auditor's Office, to Paul Sullivan, Jr., City Attorney of Ellensburg ' �RCW 67.28.1817. -19- A Revenue Guide • 22 authorized to be funded by this tax,and one elected city official who serves as chairperson of the committee. • Organizations representing hotels and motels and organization involved in activities that can be funded by this tax may recommend people for membership. • The number of committee members from organizations representing the hotels and motels and the number from organizations involved in activities that can be funded must be equal. • A city's committee may include a non-voting county official. • The council shall review the membership of the committee annually. So, What Does the Committee Do? Any proposal to impose a new hotel-motel tax,raise the rate of an existing tax, repeal an exemption from the hotel-motel tax, or change the use of the tax proceeds, must be submitted to the lodging tax advisory committee for review and comment. • This submission must occur at least 45 days before final action will be taken on the city's proposal. Even if the committee finishes its work before the 45 days are up, the city still must wait 45 days. • The committee's comments shall include an analysis of the extent to which the proposal will accommodated activities for tourists or increase tourism, and of the extent to which it will affect the long-run stability of the fund to which the hotel-motel taxes are credited. • If the advisory committee does not submit comments before the time that final action is to be taken on the proposal, the city may go ahead and take final action. Each city that levies a hotel-motel tax must submit two reports to the Department of Community, Trade and Economic Development (CTED). The first report should have been submitted on October 1, 1998; the next is due on October 1, 2000. The report must contain the following information: • The total hotel-motel tax rate in the city. • The total hotel-motel tax revenue received in each of the preceding six years. • A list of projects and activities funded by this tax. • The amount of revenue expended for each project and activity. This information will be used by CTED to make a report to the legislature. -20-