Changes to the room-tax rate are in motion, even if they may be uncertain and a long way off.
The Town of Baileys Harbor approved a resolution Nov. 23 seeking an increase in the countywide room-tax rate and a separate filing fee for lodging operators to fund the Door County Tourism Zone Commission (DCTZC). That commission also set up two ad hoc committees to study the potential impact of a rate increase and explore sustainable funding of the commission.
Dave Eliot, chair of the Baileys Harbor Town Board and a member of the DCTZC, hopes these will trigger other changes.
“Our community association could use some help,” Eliot said. “I’m hoping and suggesting that Destination Door County [DDC] might be better suited to fund our community association and take some, if not all, the burden off of the town.”
VIDEO: DOOR COUNTY’S TOURISM HISTORY AND THE ORIGINS OF ROOM TAX
The Baileys Harbor Community Association (BHCA) recognized the potential opportunities in the proposal, but it did not formally support or oppose the resolution, citing concerns that the changes could ultimately reduce its total budget. In 2019, the BHCA had a $170,000 budget, with 25 percent ($43,000) coming from the town and 15 percent ($25,000) from DDC’s Strategic Community Partnership Program, which provides some funding to local community associations. The remainder of the BHCA’s budget ($102,000) comes from membership dues, sponsorships, events and donations.
“It is the BHCA position that the Town of BH [Baileys Harbor] vote yes only if there is the contingency that the new system will fund the BHCA at a similar combined level,” said staff and the BHCA board in a letter to the Baileys Harbor Town Board.
Eliot said he hoped the new filing fee for lodging permits would accompany a reduction or elimination in the membership fees that lodging operators pay to DDC and their local community association. DDC membership fees range between $275 and $445 annually. According to Josh VanLieshout, chair of the DCTZC, the annual lodging permit fee would likely be between $200 and $250.
Little Bit LeClair, a DCTZC member and owner of the Square Rigger Lodge in Jacksonport, said during the DCTZC’s discussion of the room-tax increase last month that she would have no qualms with paying the fee if it meant that other membership dues to DDC and local community associations were eliminated.
But neither of these conditions – reducing membership fees to offset the filing fee or requiring DDC to use the additional room-tax revenue to better support local community associations – is in the resolution that Baileys Harbor passed and will now share with other municipalities.
Eliot said those conditions are better left to the DCTZC and its separate entity agreement with DDC.
“If we put language in there today that funds our community associations, it may not be relevant five or six years from now,” Eliot said. “We have eight other community associations that all manage their budget differently. I’m not sure exactly what that language should be or can be.”
If there is language in the resolution that needed to be changed in the future, it would require another countywide campaign to get at least 13 municipalities to pass another resolution. By leaving some of the reorganization out of the resolution, Eliot said it allows for more flexibility.
The Baileys Harbor Town Board intends to send a letter along with the resolution in support of the measures that were left out of the formal resolution.
DCTZC Funding Unsustainable
The DCTZC is currently funded by 4 percent of room-tax collections, but that could be replaced with a lodging permit filing fee under the suggested restructuring. During the Nov. 19 DCTZC meeting, commissioners recognized that however things move forward, the commission needs more revenue.
In 2019, the DCTZC received approximately $205,000 from the 4 percent share of room tax, but it also had to reach into its reserves to hire an additional employee to meet changing industry demands.
VanLieshout said the additional employee is needed primarily due to administration and enforcement of vacation rentals such as Airbnb and VRBO. He said just 25 percent of total rooms are in nontraditional lodging, but they make up 80 percent of the commission’s enforcement expenses.
“Innkeepers know how to file reports and remit a tax and don’t require much hand-holding along the way, versus the folks [who] are casually in the business, and some tend to struggle with their reporting requirements,” VanLieshout said.
Commissioner Bill Weddig said the costs to administer the room tax should come out of the room-tax revenue, whether that cost is 4 percent of collections or something greater.
“I feel we should be able to take out of the total tax whatever it takes to administer it,” Weddig said. “I don’t understand why funding this organization should be such a difficult situation if we’re the one collecting the tax.”
However, the state law requiring that 70 percent of room-tax revenue be spent on tourism marketing would mean the commission’s expenses would come out of the municipalities’ 30 percent cut, offsetting one of the primary reasons for the proposed rate increase: to increase municipal revenue.
One of the DCTZC’s new ad hoc committees is tasked with developing a model of how the commission should operate, which will include an estimation of how much money the commission needs to operate sustainably. Then the DCTZC will explore the best source of that money.