Room Tax Quandary for Bend City Council

The taxes visitors pay on overnight lodging will be up for debate at the Bend City Council meeting Wednesday night where councilors are slated to decide if a two percentage point increase should be sent to voters for approval.

The issue has drawn contentious arguments on both sides – those in favor say raising taxes from 9 percent to 11 percent would help boost marketing out-of-state while opponents maintain that a tax increase would harm business during a fragile economic recovery.

Raising taxes would generate upwards of $850,000 in increased taxes for the city, according to city estimates. By state law, the city would allocate 70 percent of the TRT collections increase to tourism promotion efforts and 30 percent to the city’s general fund.

By those projections, Visit Bend, which contracts with the city to market tourism, could receive an estimated $600,000 budget increase from its current budget of $1.2 million. The visitor bureau could use the increased dollars to market Bend in San Francisco and the Puget Sound area, said Eric King, Bend’s city manager.

“This is an opportunity to expose visitors to this area which tends to lead to people wanting to relocate here and move businesses here,” King said.

Opponents dispute the city’s projections, saying that higher room taxes would deter visitors, including large groups, from Bend.

“I would argue that it will pass through to local residents in the form that it might affect tourism adversely,” said Scott Ramsay, a Bend city councilor who also owns Sun Mountain Fun Center. “In-state residents might not travel here as much. Local businesses might hire one less employee.”

Opponents, who include Ramsay and Wayne Purcell, managing partner of The Riverhouse Hotel, argue that shifting marketing efforts to attract out-of-state visitors would benefit some hotels and lodging property owners more than others.

“It’s a money shift to some degree,” Purcell said. “Customers who come from San Francisco are less likely to care about the increase in room tax. The high-end, high price properties are probably less affected by the increase and get more gain from it.”

Ben Pearle, regional vice-president of operations with the Oxford Hotel Group in Bend, disagreed.

“(Opponents) are basically placing judgment on those people from San Francisco and Seattle and what they’re willing to pay,” he said. “Is (Purcell) saying everyone from Seattle or San Francisco is going to be driving up here in a Mercedes? It could just as easily be four guys in a car, sharing a room at a B&B, and going up to the mountain for entertainment.”

The issue has significant consequences for various businesses associated with Bend’s resurgent tourism industry, which, in 2011-12, boasted its best year in room tax collections and occupancy over the past five years, according to a November report from RRC Associates, Inc., a Boulder, Colorado-based research group which produced a report on Bend’s summer tourism market last fall. The growth has largely been due to a large proportion of higher spending by visitors from outside of the State of Oregon.

In-state visitation, meanwhile, has dropped during summer from 40 percent of the total visitation to 33 percent, according to RRC.

Judith Light, a frequent visitor to Bend from Philomath, Oregon, expressed her dismay at the proposed room tax increase in a January 29 letter to the City Council.

“I do not understand the logic of asking your core visiting clientele to help fund a marketing campaign to attract a smaller out-of-state clientele,” she wrote in her letter. “Your core ‘local’ clientele will not see any benefit from paying these higher taxes other than possibly more crowded recreation venues.”

Nine out of the ten letters received by the City of Bend through Friday, however, expressed support for increasing the room tax. Many letters lauded Visit Bend’s tourism promotion efforts and cited the potential for increasing marketing efforts in San Francisco and Seattle and the increased revenues that would bring to Bend, particularly during less busy shoulder seasons.

Visit Bend, which markets tourism for the city, supports the ordinance that would raise lodging tax rates by 2 percentage points, but its board of directors wrote in a written statement that it would defer to citizens and businesses to “lead the conversation and voice their thoughts” on raising the rates.

City officials liked the idea of a tax that could boost tourism and the general fund without burdening local taxpayers. 
“Right now, I think it is a good thing to do for the community,” said Bend City Councilor Mark Capell. “The vast majority of cities are charging more for tourism than we are which means we’re leaving money on the table.”

According to data provided by Visit Bend, the city is currently charging 10 percent on overnight visitors, which includes a 1 percent state tax. The tax would increase to 12 percent under the proposed increase, second highest in the state among cities. Other cities in Oregon including Seaside, Hood River, Astoria, and Portland are charging rates of 9, 10 and 14.5 percent, respectively, according to Visit Bend’s data.

Deschutes County’s room taxes are currently 8 percent, including a 1 percent state tax, but destination resorts in Central Oregon are charging additional fees that combined with county and state taxes range from 14 percent at Eagle Crest to 23 percent at Sunriver Resort, according to Visit Bend.

The Riverhouse, in fact, charges up to 3 percent additional fees for services including Internet, free local phone calls and use of the tennis courts.

Those fees are not mandatory and many people choose not to pay them, Purcell said.

Many hotel properties charge fees for such services as parking and Internet, explained Purcell, who compared them to airport baggage handling fees now common in the airline industry.

According to Doug La Placa, Visit Bend’s executive director, the higher fees charged by The Riverhouse and Central Oregon resorts demonstrate how raising taxes would not deter visitors from coming to Bend.

“The primary argument against raising the city’s TRT rate to 12 percent is that the increased rate will discourage tourists from visiting Bend,” LaPlaca wrote in an email. “But since The Riverhouse has already been charging 13 percent and doing so successfully, doesn’t that suggest that 12 percent at other Bend lodging properties would not discourage tourists from visiting?  Another way of saying it: if guests at the Riverhouse don’t mind paying 13 percent, why would they mind paying 12 percent at other hotels?”

GETTING THE MEASURE ON THE BALLOT

Bend City Councilors will discuss the idea to increase transient room taxes assessed on all overnight lodging properties in city limits at Wednesday night’s meeting. Councilors could either pass on the idea or put the measure on the May ballot at this meeting. Or, they could wait and put the measure on the November ballot.

City Councilor Scott Ramsay, who also owns Sun Mountain Fun Center in Bend, voiced his disapproval for raising taxes to be ahead of other cities in the state. “I have a basic overall dislike to comparing our tax rate with other states,” Ramsay said. “I don’t think we should look at this issue like we have room to improve (the taxes we levy). We should be as efficient as we can and pass those savings along to visitors who would spend on other businesses while they are here.”

Councilor Marc Capell sees the room tax as an opportunity because he believes it will bring more people to Bend than will be steered away by small tax increase.

“If we spend more money on marketing, will we be able to bring even more tourists here,” he said. “That would mean more people spending money on restaurants and other services. It is a tax that locals don’t have to pay that would improve the local economy. If you believe in marketing, it’s a great deal.”

Councilor Jodie Barram is in support of the increased room tax, but would like to discuss the timing of the ballot measure that already includes a possible School Board measure and a Deschutes County 911 operating levy. “My question is, are we going to overload this ballot with a variety of tax questions?” she asked. “Will this confuse voters?”