Room Tax Reform Concerns Tourism Officials

Correction Appended.

A room tax reform bill making its way through the Wisconsin Legislature could have serious repercussions for the Door County Tourism Zone.

Assembly Bill 563, co-sponsored by 1st District Assemblyman Garey Bies (R – Sister Bay), could change the way room tax dollars are split between municipalities, the Door County Visitor Bureau (DCVB), and the Door County Tourism Zone Commission (TZC), which collects and disperses the 5.5 percent countywide room tax.

In Door County, 66 percent of room tax collections go to the DCVB, 30 percent goes to the municipality in which the tax is collected, and 4 percent goes to the TZC to cover the costs of collecting, disbursing, and enforcing the tax.

Bies said the legislation was inspired by concerns coming from the lodging owners in districts where communities are using most of their room tax revenue to supplement municipal budgets, rather than for tourism promotion. The 1992 Wisconsin room tax law requires that 70 percent of room tax revenues go to the promotion of overnight stays.

Bob Kufrin, chairman of the TZC, said that the way the reform bill is currently written, it would mandate that 70 percent go to the DCVB, which would mean the 4 percent for the TZC would come out of the municipality’s share. When the tourism zone was formed, some lodging owners questioned taking that 4 percent out of the DCVB’s share, but it was determined that it was a valid cost associated with administering the marketing program.

Kufrin, who is also the Sister Bay Administrator, said that if the bill passes as is, he would recommend that the village make up for the funds it would lose by cutting about $15,000 of its support for the Sister Bay Advancement Association (SBAA). The village uses its share of the room tax funds, about $122,000 in 2011, to pay down the debt the village incurred when it purchased properties to expand its Waterfront Park.

“Cutting from SBAA would be disappointing because they’re doing a great job of marketing Sister Bay locally,” Kufrin said.

Kufrin said he doesn’t believe Door County should have to change its operations simply because other communities are misusing the funds.

“A lot of people worked really hard to get the room tax here and form an entity that works countywide,” he said. “Door County is a model, and I would hate to see that threatened by this change. There are parts of this bill that need re-thinking.”

Jeff Larson, Director of Marketing and Sales at the Landmark Resort and a member of the TZC, said he would like to see Door County be grandfathered in. “If not, that could have deeper ramifications for us.”

Bies said he is working on several possible amendments to the bill before it goes to committee next week. “This problem is unique to Door County, and we may be able to work on something there,” he said.

Fred Anderson, owner of the Ashbrooke Suites in Egg Harbor and a member of the Wisconsin Hotel and Lodging Association board, testified on the legislation at the Assembly Tourism Committee hearing Feb. 22.

Anderson supports language in the bill that would compensate innkeepers for the costs of collecting the room tax. Anderson said roughly 97 percent of hotel business is paid for with credit cards. As a result, innkeepers are paying a credit card processing fee on the portion of the lodging bill that goes to room tax. The bill would allow lodging owners to keep 3 percent of the room tax they collect at their individual property to compensate for those processing fees. That would take $98,296 out of the pot that the DCVB, TZC and municipalities share.

“I hate to see money taken away from tourism promotion,” said Bob Dickson, chairman of the DCVB Board of Directors and owner of the Shallows Resort in Egg Harbor. “However, as a member of the lodging industry, I’m happy to see innkeepers compensated for that added cost.”

That part of the bill could change, however. While credit cards are used to pay for most hotel and resort stays, they are not as common for people renting second homes. As a result, second homeowners could keep that three percent even if they aren’t processing credit cards to collect the tax. Homes, cottages and condominiums represent 22 percent of Door County’s lodging units and 81 percent of its permit-holders.

In his testimony to the Assembly Tourism Committee, Kufrin recommended room tax instead be handled like the sales tax credit. Businesses that collect sales tax get a $10 credit for up to $2,000 in sales tax collections, then 0.05 percent of collections after that.

Kufrin said that giving lodging owners 3 percent “could be a slippery slope,” because by the same logic, retailers should get the same credit for collecting sales tax.

Bies said he is looking at the idea. The modified bill could receive a hearing at the end of next week.

Correction: An earlier version of this article incorrectly identified Jeff Larson as the general manager of the Landmark Resort. He is actually the director of marketing and sales for the resort. We regret the error.