Tax revenue from tourists who stay in hotels is a critical resource for Washington state’s cities and towns, which often rely on that income to promote and expand events that attract visitors, according to those who testified on bills introduced this legislative session in Olympia.
The proposals relate to the state’s hotel and motel tax, also known as the lodging tax.
Individual counties and cities may choose to levy a fee of up to 2 percent on charges to customers by hotels and motels. Lodging-tax proceeds are used in most cases for tourism promotion, such as advertising, and for tourism-related facilities, such as convention centers, museums and fairgrounds.
The tax also applies to other types of lodging such as private campgrounds and R.V. parks.
In 2007 the Legislature broadened the permitted uses of lodging-tax revenue to include the operation of festivals and tourism-related facilities that are owned either publicly or by a non-profit organization. The language that made those changes is set to expire June 30.
Several local events depend on the hotel/motel taxes, including the Festival of America over the Fourth of July holiday and others, both for advertising and actual event funding. The town of Coulee Dam uses it to pay for live entertainment during the event. A new fishing derby on Banks Lake next month is expected to boost motel and camping stays in the area. If the language in the law sunsets, the chamber of commerce would not be able to use the funds to help put the derby on, only to advertise it next year.
HB 1253, sponsored by Rep. Brian Blake (D-19, Longview), and SB 5262, sponsored by Sen. Karen Fraser (D-22, Olympia), would make the 2007 law’s changes permanent and define what qualifies a visitor as a tourist: one who travels 50 or more miles to reach an overnight destination.
The House bill has passed that chamber and is scheduled for a hearing in the Senate’s Trade and Economic Development Committee at 8 a.m. March 21.
Fraser, the Senate bill’s primary sponsor, said the proposal is about giving local governments flexibility in how they promote and encourage tourism.
The bills would also change procedures for applying for tourism-related grants and reporting requirements for cities and counties that collect the tax.
Sequim Mayor Ken Hays said small cities such as his depend on special events and festivals to attract visitors, and that the flexibility the current law allows local elected officials to decide what’s right for their communities.
“We don’t subsidize festivals just to be nice,” Hayes noted at a hearing before the Senate Trade and Economic Development Committee. “We want visitors who spend money, which brings tax revenue into our cities.”
He added: “It’s like priming the pump.”
Craig Ritchie, Sequim’s city attorney, said hotels fill up every year during the city’s lavender festival to the point of overflowing into nearby Port Angeles.
Ritchie raised concerns about the bill’s definition of “tourist,” however. Many who visit Sequim, he explained, come from Victoria, British Columbia, which is about 28 miles northwest of Sequim across the Strait of Juan de Fuca. The terms of the bill assumes those visitors wouldn’t qualify as tourists and wouldn’t bring lodging-tax income to Sequim.
Representatives from Lewis and Kittitas counties also testified in support of the bill and emphasized that the ability to use lodging-tax revenue for the festivals themselves, not just advertising, generated more income.
Hotel-industry representatives who testified at the Feb. 14 hearing opposed the bill.
Korean-American Hotel Association President Sang Chae explained that his members rely on summer tourism to make ends meet.
“Our winters are cold and rainy and long,” he said. “We lose money during winter and spring, and we make money in the summer.”
Chae, who owns the Inn at Port Gardner in Everett, said that increasing tourism is vital for his business and that lodging-tax dollars should be spent on promotion, not operations.
“Tom Hanks’ ‘Sleepless in Seattle’ is no longer enough to compete with the other 49 states,” he said.
Other lodging-tax-related bills on the legislature’s agenda include HB 1695 and its Senate companion, SB 5741. Both would allow cities in King County to use lodging-tax revenue to pay off loans to organizations that provide housing for low-income workers.
Currently, much of the lodging-tax income in King County goes toward paying off bonds from the Kingdome, which was built in 1976 and demolished in 2000 to be replaced by Qwest Field, now known as CenturyLink Field.
The Kingdome is expected to be paid off in 2015 and CenturyLink Field in 2020.
The bills, sponsored by Rep. Joe Fitzgibbon (D-34, Burien) and Sen. Joe Fain (R-47, Auburn), respectively, would also broaden the permitted uses for King County lodging-tax revenue starting in 2021, after the Kingdome and CenturyLink Field bonds are retired.
The bills have broad support from King County city leaders.
HB 1695 is awaiting a hearing on the House floor. The Senate bill, however, has not been passed out of its committee.
Two additional lodging tax bills have not yet received a committee vote. SB 5049 would allow lodging-tax income to be used to hire new police officers and SB 5468 would modify the definition of “tourist” similarly to SB 5262. Neither bill is expected to move forward this session.