Support grows for raising lodging and auto rental tax

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A movement to boost the Lodging and Automobile Rental Tax is gaining momentum in Colorado Springs, but there is no indication yet whether a tax increase will appear on the Nov. 6 ballot.

“We have been talking about it for a while,” said City Councilor Jill Gaebler, who serves as an ex officio member of the LART advisory committee. “The city is working with several organizations to undertake polling in the community to see if people understand what LART is and who pays it… . Part of the polling would determine if and when a ballot measure would be presented to taxpayers.”

The Colorado Springs Chamber & EDC will conduct the survey. Gaebler said she hoped polling would commence within the next month.

If the tax were increased, “we would have more funds to advertise our region as a great tourist destination,” Gaebler said. “We would also do a better job of maintaining the amazing tourism attractions we have. Garden of the Gods, our No. 1 city park, is being loved to death, and we would have funds to maintain it better for tourists and residents.”

The city currently collects a 2 percent lodging tax and a 1 percent car rental tax. The goal is to increase the lodging tax to 4 percent and the car rental tax to 2 percent.

Two-thirds of the revenue goes to the Convention and Visitors Bureau, the city’s destination marketing organization. The rest supports other marketing organizations and tourist and community events.

Although voters would have to approve an increase in the tax, it is paid primarily by visitors.

“It’s my strong belief that we ought to put the burden on tourists to pay the major portion of the costs to promote tourism,” Mayor John Suthers said. “To the extent that we have legacy events [like the Labor Day Lift Off balloon festival and the Fourth of July celebration] and events that attract people nationally like the Pikes Peak Hill Climb, I think it’s only right to have tourists contribute to those.”

Suthers said he “does not personally believe citizens should pay for arts and culture events; I don’t think it’s a function of government. I do think a tourism tax could promote those things.”

Citizens advise on spending

The Colorado Springs City Council administers the Lodgers and Automobile Rental Tax fund, with guidance from the LART Citizens Advisory Committee. The council-appointed LART committee makes recommendations on LART funding, which council can then approve, change or modify.

LART funds provide dollars for marketing and other qualified expenses to support special events that attract visitors to the region, provide economic and cultural benefit, enhance residents’ quality of life, engage the community and encourage tourist activity.

Funds are allocated each fall for the following year.

Last November, city council worked with an estimated budget of about $6.88 million, including $6.6 million in anticipated revenues.

This year’s LART funds went to 11 “Resolution” events ($553,550) designated by council for city sponsorship; four tourist promotion organizations ($4,562,600); 28 tourism and community events ($673,700); and six capital improvement projects ($691,000), for a total of $6,480,850.

Another $250,000 was placed in a contingency fund, and $66,219 went toward TABOR reserve.

Those allocations left $79,986 available to be appropriated this year.

The Resolution events include the Hill Climb, Veterans Day Parade, Labor Day Lift Off, Pikes Peak or Bust Rodeo and Festival of Lights.

“Council has designated these events through the years as events that should have city support through LART,” said LART committee member Fred Veitch, vice president of Nor’wood Development Group.

Besides the CVB, the Cultural Office of the Pikes Peak Region, the Chamber and the Colorado Springs Sports Corp. received LART funding this year for tourism development.

The 28 tourism and community events received allocations ranging from $700 for the Grand Prix of Running Classic 10K Run to $150,000 for the Regional Air Service Task Force.

Colorado Springs Sports Corporation also received $40,000 for the PyeongChang Olympics Downtown Celebration and $15,000 to support The Broadmoor Pikes Peak Cycling Hill Climb and the USA Cycling Hill Climb National Championship.

Other events that won LART support include the Pikes Peak Ascent and Marathon, the Pikes Peak Celtic Festival, the St. Patrick’s Day parade, the 43rd Annual Territory Days and the Rocky Mountain Athletic Conference’s 2018 Wrestling Championship.

Capital improvement projects supported by LART funds included PikeRide, the city’s upcoming bike share program; the U.S. Olympic Museum; and Colorado Springs Parks, Recreation and Cultural Services for trail projects and restrooms.

“In the past, there has been criticism that LART did not have a good application process and was not well administered,” Veitch said. “We now have a matrix to see if it is spent effectively. We audit the LART and expect an ROI. It is being run as a business decision. The hotels that collect LART funds have a reasonable expectation that LART is being spent profitably.”

An example is the Pikes Peak International Hill Climb.

“We fund the cost of the road rental for the Hill Climb, which brings in literally millions,” Veitch said. “It gets lots of coverage in auto magazines; you couldn’t buy that kind of coverage.”

The LART tax also funds airport marketing.

“The more flights we can add, the better for all businesses,” Veitch said.

The Fourth of July celebration, although it doesn’t directly bring in tourists, “is important for the fabric of the community and helps define who we are,” he said.

The committee also wants to add shoulder- and off-season events, Veitch said.

Study confirms need

A study of tourism funding sponsored by the CVB and other organizations and released in 2015 analyzed Colorado Springs as compared with 19 other tourist destinations.

The study by Tourism Economics, a company that provides clients with analysis of tourism’s economic impacts and marketing assessments, “determined that destination marketing in the Colorado Springs/Pikes Peak region is underfunded” and concluded that funding should be increased.

Colorado Springs’ visitor economy is diverse, including hotels, restaurants, retail stores, transportation and attractions, many of which are operated as small businesses that need help with marketing. That means the role of destination promotion is vital to both individual businesses and the region’s economy, the consultants’ report stated.

The 19 cities the consultants used as benchmarks included four other Colorado cities — Denver, Fort Collins, Estes Park and Boulder — as well as cities in other states ranging from Albuquerque, N.M., to Yakima Valley, Calif.

Lodging taxes in those cities ranged from a high of 10.75 percent in Denver to 1.3 percent in Spokane, Wash., with an average rate of 5.79 percent.

When total taxes and assessments on lodging are considered, Colorado Springs’ rate of 9.63 percent ranked 19th among the 20 cities. Seattle posted the highest total rate of 16.93 percent; only Billings, Mont., with a total rate of 7.67 percent, was lower than Colorado Springs.

Colorado Springs’ lodging tax of 2 percent had not been revisited since 1979, the report noted.

The report also found that:

• Colorado Springs ranks 19th of the 20 cities for tourism promotion funding per hotel room ($282).

• The city ranks 14th out of 18 for tourism promotion funding per tourism job ($86).

• The optimal funding level for tourism promotion of the Pikes Peak region is $8.2 million.

The consultants recommended increasing the lodging tax rate to 4 percent, which they estimated would raise $6.8 million at 2014 levels of visitor activity — about $7.2 million in 2018 dollars. The higher rate also would substantially grow the number of visitors to the area and boost tourism industry and related jobs, the report said.

Community benefits

Advocates say raising the LART tax would allow better marketing of Colorado Springs against other cities, bring in more tourism and create more jobs.

“Most of the industry people we’ve talked with would be happy to see a LART increase if it is thoughtfully dispersed and spent so that it does increase tourism,” Veitch said.

Ed Okvath, general manager of Hotel Eleganté, said he thinks it’s time to increase the tax.

“What we spend is less than many cities our size,” Okvath said. “I’ve been in town a long time; it’s a beautiful city, and people are going to come visit, but it seems like we haven’t paid attention to making it an experience.”

Additional funds could be spent on efforts such as better traffic control around events such as the Labor Day Lift Off.

Although doubling the tax might generate some complaints, Okvath said it would still be lower than in many cities.

“When I travel, I see occupancy taxes much higher — up to 13 percent on top of the bill,” he said.

It isn’t just the tourism industry that would benefit from more LART funding, Veitch said.

“Because some of the funds go to community events, the community as a whole gets benefits they’re not paying for,” he said. “The entire economy gets a boost through an increased LART.”

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