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Room tax effort backfires

State Rep. Barbara Bailey’s attempt to legislatively clarify a law to allow chambers of commerce to use lodging taxes for tourism promotion has backfired on her.

After Bailey (R-Oak Harbor) introduced House Bill 1254, state senators introduced competing legislation that would expand the use of lodging taxes far beyond what she intended, possibly taking money away from chambers of commerce.

Bailey said she was disappointed that the House voted to forego her legislation Thursday in favor of Senate Bill 5647.

“It may mean less money for chambers because of more competition from other groups,” she said. “Some communities will feel great pressure to spend the money where the original 2 percent dollars were not intended for.”

She said the legislation probably would have been introduced even if she hadn’t started the ball rolling because the issue is a big one across the state, though the law change may not have much of an impact on Oak Harbor or Island County.

Senate Bill 5647, which Bailey voted against, gives local government greater discretion over how the lodging taxes can be used than is currently allowed under an Attorney General’s opinion. The bill allows for operation expenditures for tourism promotion, as well as to market and operate special events and festivals. Also, the tax could be used for tourism-related facilities owned by the public or a nonprofit group.

As originally conceived, lodging taxes were supposed to be used to promote tourism, or more specifically, overnight stays at hotels. But Bailey points out that the money has been used for very different reasons, like building sidewalks in Port Townsend.

As a Republican, Bailey is in the unusual situation of being against a bill that would increase local control.

If the bill does pass as it stands, it’s questionable whether it would have any great impact on Oak Harbor or Island County, unless local politicians make an effort to change the way the money is handed out.

The executive director of the Oak Harbor Chamber of Commerce isn’t troubled by the senate bill because she feels competition and local control is a good thing.

“We don’t have a problem with more competition for those dollars,” Jill Johnson said. “It holds everyone accountable.”

On the other hand, RoseAnn Alspektor, the tourism marketing coordinator for the countywide tourism effort, is worried about the potential for competition.

“This legislation’s potential impact could significantly reduce funding in District 10 for Island County’s second 2 percent Joint Tourism Committee to promote overnight tourism to Whidbey and Camano Islands,” she wrote in an e-mail to Bailey. “Our 2007 budget is $205,000 and that will need to grow, rather than decrease, as we are attracting more visitors, increasing our lodging and sales tax revenues on the average of 6 percent per year.”

While the tax is commonly referred to as the “2 percent tax,” Oak Harbor Finance Director Doug Merriman explained that Oak Harbor actually collects 4 percent in lodging taxes. There’s the basic 2 percent and an additional 2 percent. Each 2 percent nets about $67,000 a year.

The tax is charged when people stay at hotels or motels. A little-known fact, Merriman said, is that the state gives up collecting sales tax on hotel stays in the amount equal to the lodging tax. In other words, the customers don’t pay any additional taxes or fees. The lodging tax is essentially a sales-tax gift to local government from the state.

Of the basic 2 percent, the Oak Harbor Chamber of Commerce receives $52,000 for tourism promotion. The city and county have an agreement under which the chamber provides the tourism-boosting service.

The rest, about $15,000, is given out as grants to local groups that perform tourism-related activities, such as the Whidbey Marathon or the Lions’ car show. If the law changes, the city could relax the requirements on how the groups spend the money. The money for the car show, for example, can currently only be used for off-island advertising in the past, Merriman said.

Of the second 2 percent, half of it goes to the countywide tourism effort headed by Alspektor. The other half has been dedicated to the city’s Windjammer project to revitalize the downtown and waterfront areas.

To reduce the contribution for the countywide tourism effort, Merriman said the city would have to give a year’s notice.

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