PED 2020-03-02 Item 1A - Review - Lodging Tax 6-Year Financial Model

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City of Tukwila Allan Ekberg, Mayor TO: Planning and Economic Development FROM: Brandon Miles, Business Relations Manager CC: *Mayor Ekberg DATE: February 24,2020 SUBJECT: Lodging Tax Six Year Financial Model and Ending Fund Balance Goal. ISSUE Discussion and review of the Lodging Tax Six Year Financial Model and ending fund balance goals. BACKGROUND The City collects a 196 lodging tax on certain qualifying overnight stays in paid accommodations /hote|s/nlote|s/Airbnb\ in the City. State |axx limits the use of these funds to tVuhorn promotion'. There iscurrently just over $1.9million inlodging tax funds available for use. Lodging tax funds are collected in order to be invested in the City's tourism economy. The goal is to drive economic activity by bringing visitors tothe City, both day and overnight visitors. State Law provides strict guidance on how lodging tax funds be used. The funds cannot be used for basic governmental operations. DISCUSSION In 2019 staff identified that by 2024 the ending fund balance would be near $2.5 million based onthe previous expenditure history. Working with the Lodging Tax Advisory Committee (LTAC) staff prepared a six -financial model. The goal of using a financial model is to ensure the funds are used inostrategic manner and that funds are set aside for future activities that could be funded with lodging tax funds. The activities listed inthe attached excel spreadsheet are "big bucket" items and were developed by staff, LTAC, with review bylast year's Community Development and Neighborhoods Committee. The attached excel spreadsheet has been updated toreflect actual expenditures and revenue for 2O19. Additionally, staff realized that the ending fund balance for 2D18was higher than initially assumed. The model has not yet been built out tV2O25. Lodging Tax has yet to review the revised information regarding added funds. This will occur at a future LTAC meeting. In 2019 LTAC highlighted several projects it would like tosee funds allocated for iD the future: 1. Tukwila Pond Tukwila Pond provides @nopportunity for the City tmdevelop a centerpiece park within the City' Southo8Ote[ District. Not only would the development begood for residents, but the Pond could also tie in the City'8 tourist experience. A bmondvv8|h could be developed for hotel guests to zK[VVG7.Z8.O8O(6)defines "tourism promotion" os° .act)v}iies,ope/ations,ondexpendituresdesi8nedtn increase tourism, including but not limited to advertising, publicizing, or otherwise distributing information for the purpose of attracting and welcoming tourists; developing strategies to expand tourism; operating tourism promotion agencies; and funding the marketing of or the operation of special events and festivals designed to attract tourists."