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Room Tax Changes Inserted in Budget

In what has been described by an official with the Wisconsin League of Municipalities as a “backroom proposal,” the Joint Finance Committee on May 28 passed a motion inserted into the biennial budget that, if approved by the governor, will change aspects of the state’s room tax legislation.

Some municipalities that have used room tax collections as municipal revenue – such as Bayfield in northern Wisconsin, which uses 48 percent of collections for municipal services – are worried that their operating budgets will suffer from the changes.

“What is happening in Madison with hotel room tax law changes being inserted in the state budget bill is shameful,” said an opinion piece in the Milwaukee Journal-Sentinel that was signed by a dozen community leaders from around the state. “It is an abuse of the legislative process that will lead to the misallocation of scarce local government resources to the benefit of one special interest.”

Jerry Deschane, executive director of the League of Wisconsin Municipalities, has said if the motion does make it to Walker’s desk, “we’ll ask for a veto.”

While the Door County Tourism Zone Commission is not concerned about an economic impact from the changes because it is following room tax rules by using 70 percent on tourism promotion and development, there are other concerns, not the least of which is concern about the process of introducing changes as part of the budget, rather than going through public hearings and a normal legislative route.

“The chairman is a little frustrated with the process this go round. And that you can quote me on,” said Door County Tourism Zone Commission Chair Josh Van Lieshout.

“The fact that this was a part of the budget was completely unbeknownst to me until I saw something come through the League of Wisconsin Municipalities. So it’s a little frustrating,” Van Lieshout said. “Door County is a player in tourism in Wisconsin. I think the tourism zone does an outstanding job of collections and disbursement and reporting. It would be nice if we would have been at the table. There are a few changes that we would like as well. There are a few things we see that would make collections, easier, more efficient and more cost-effective. The governor will likely sign it and the changes won’t be as complete as they could be.”

Van Lieshout said the members of the tourism zone understand why the Wisconsin Hotel and Lodging Association (WHLA) pushed for the changes.

“I think one of pillars of WHLA in these arguments is that some of these municipalities are keeping a lot of money and it’s not all going to marketing. I think that’s their principle concern,” he said, but added, “We’re just concerned that there’s also the law of unintended consequences and that we’re going to fall into that. We want to make sure that how we do room tax collection and disbursement in Door County isn’t affected by the proposed legislative changes that will be part of the budget.”

“The municipalities in Door County should see no financial impact. They are all set,” said Trisha Pugal, president and CEO of the Wisconsin Hotel & Lodging Association.

She took exception to the idea that the budget motion was a “backroom proposal.”

“The concepts that the Joint Finance Committee approved were addressed in previous legislation, so there was a public hearing. There is registered comments from different municipalities from around the state,” Pugal said. “I happened to be at that hearing, so I heard from many as well. The process was followed. People did have an opportunity and were heard. So from that perspective, personally, I don’t see much of an issue.”

Pugal said the proposed JFC legislation makes improvements to the room tax law, but does not get rid of the grandfather clause that was added in 1994 to allow municipalities that were already collecting room taxes to use collections for things other than tourism, while those that began collecting room tax after 1994 must spend 70 percent of collections on tourism promotion and development.

“I think they did pretty good,” she said of the JFC motion. “We would love to have the grandfather clause removed, but that’s not what went through, so I think they did some pretty good compromising.”

As to the changes the Door County Tourism Zone would like to see to make collections more efficient, Pugal said, “I think this wasn’t intended to fix all the challenges in the room tax law. There’s a whole bunch we would like to see changed that isn’t touched here. I’m guessing that wasn’t the intent, to fix all things. This doesn’t mean that nothing will ever happen again. For the future, like everyone else that has an idea, they certainly can seek sponsors and things like that to support the concepts and advance them as they wish.”