HomeMy WebLinkAboutCOW 2016-10-10 Item 3D - Discussion - Approval Process and Permitted Uses of Lodging Tax Fundsnitials
Meetin
,g Date
Prepared by
review ew
Cy4aq,,1 review
10/10/16
BJM
❑ Resolution
,g Date
Mt
❑ Ordinance
Mtg Date
10/17/16
BJM
❑ Other
Mtg Date
SPONSOR ❑ Council Z Mayor ❑ ER El DCD ElFinance El Fire ❑ TS E] P&R ❑ Police ❑ PV
y
SPONSOR'S The City charges a 1% special excise tax on the sale of or charge made for overnight
SUMMARY lodging. State law limits the use of these funds to tourism promotion and requires a
process for reviewing requests to use lodging tax funds. Staff is seeking input from the
City Council on the process for future applications to use lodging tax funds and will also
provide a briefing on allowable uses for lodging tax funds.
REVIEWED BY ❑ cow Mtg. ❑ CA&P Cmte Z F&S Cmte ❑ Transportation Cmte
❑ Utilities Cmte ❑ Arts Comm. ❑ Parks Comm. ❑ -1 Planning Comm.
DATE: 10/4/16 COMMITTEE CHAIR: SEAL
RECOMMENDATIONS:
SPONSOR/ADMIN. Mayor's Office/Economic Development
COMMITTEE Unanimous Approval; Forward to Committee of the Whole
COST IMPACT / FUND SOURCE
ExPENDri-uRE REQUIRED AMOUNT BUDGETED APPROPRIATION REQUIRED
$0 $0 $0
Fund Source: N/A
Comments: NIA
MTG. DATE
RECORD OF COUNCIL ACTION
10110/16
ITEM INFORMATION
ITEMNO.
51
ISTAFF SPONSOR: B. MILES
I ORIGINAI, AGENDA DATE: 10/10/16
AGENDA ITEM TITLE Lodging Tax: Approval Process and Permitted Uses of Lodging Tax Funds.
CATEGORY 0 Discussion
Mt Date 10110116
Motion
Mtg Date 10117116
❑ Resolution
,g Date
Mt
❑ Ordinance
Mtg Date
❑ Bid Award
Alt
,g Date
❑ Public Hearing
Mt g Date
❑ Other
Mtg Date
SPONSOR ❑ Council Z Mayor ❑ ER El DCD ElFinance El Fire ❑ TS E] P&R ❑ Police ❑ PV
y
SPONSOR'S The City charges a 1% special excise tax on the sale of or charge made for overnight
SUMMARY lodging. State law limits the use of these funds to tourism promotion and requires a
process for reviewing requests to use lodging tax funds. Staff is seeking input from the
City Council on the process for future applications to use lodging tax funds and will also
provide a briefing on allowable uses for lodging tax funds.
REVIEWED BY ❑ cow Mtg. ❑ CA&P Cmte Z F&S Cmte ❑ Transportation Cmte
❑ Utilities Cmte ❑ Arts Comm. ❑ Parks Comm. ❑ -1 Planning Comm.
DATE: 10/4/16 COMMITTEE CHAIR: SEAL
RECOMMENDATIONS:
SPONSOR/ADMIN. Mayor's Office/Economic Development
COMMITTEE Unanimous Approval; Forward to Committee of the Whole
COST IMPACT / FUND SOURCE
ExPENDri-uRE REQUIRED AMOUNT BUDGETED APPROPRIATION REQUIRED
$0 $0 $0
Fund Source: N/A
Comments: NIA
MTG. DATE
RECORD OF COUNCIL ACTION
10110/16
MTG. DATE
ATTACHMENTS
10110/16
Informational Memorandum "Lodging Tax Approval Process," dated 9/22/16
2016 Lodging Tax Funding Application
Informational Memorandum "Permitted Uses of Lodging Tax Funds," dated 9/23/16
Minutes from the Finance and Safety Committee meeting of 10/4/16 (Unavailable)
10/17/16
51
52
City of Tukwila
Allan Ekberg, Mayor
INFORMATIONAL MEMORANDUM
TO: Finance and Safety Committee
FROM: Brandon J. Miles, Business Relations Manager
CC: Mayor Ekberg
DATE: September 22, 2016
SUBJECT: Lodging Tax Approval Process
ISSUE
The City charges a 1 % special excise tax on the sale of or charge made for overnight lodging
stays. The use of these funds is limited to tourism promotion. The following memo outlines the
steps the City must follow in order to expend these funds, as provided by State law. Staff is
seeking input from the City Council on the process for awarding lodging tax funds in 2017 and
beyond.
BACKGROUND
As required by Revised Code of Washington (RCW) 67.28.1815, the City deposits lodging tax
funds into a special fund and uses the funds, "...solely for the purpose of paying all or any part
of the cost of tourism, promotion, acquisition of tourism related facilities, or operation of tourism -
related facilities'." These funds are used to support a variety of tourism promotion activities by
the City and third parties, such as the Museum of Flight and Starfire Sports. RCW 67.28.1816
limits the entities eligible to apply for direct lodging tax funding to the following:
1. Cities, towns, and counties of Washington State;
2. Convention and Visitors Bureaus;
3. Public Facilities Districts; and
4. Non - Profits organized as either a 501(c)(3) or 501(c)(6).
Approving lodging tax expenditures is a two -step process involving both the City's Lodging Tax
Advisory Committee (LTAC) and the City Council. As discussed below, State Law provides
considerable authority to the City's LTAC is reviewing and approving request to use lodging tax
funds.
Lodaina Tax Advisory Committee
In 1997, the legislature authorized the creation of local lodging tax advisory committees to
review and comment on any new lodging tax, increase in the tax rate, repeal of an exemption or
change in the use of the lodging tax revenue (RCW 67.28.1817). The City of Tukwila's LTAC
was created via Council Resolution No. 1381 and the membership of the committee expanded
via Council Resolution No.1533. Membership of the City's LTAC includes:
• Four businesses where the lodging tax is collected, such as hotels and motels;
• Four businesses or organizations engaged in activities eligible to be funded by the tax,
such as non - profits, entertainment destinations, retailers and restaurants; and
' See memo entitled "Permitted Use of Lodging Tax Funds," dated August 30, 2016, which provides more
details on allowable expenditures of lodging tax funds. 53
INFORMATIONAL MEMO
Page 2
• One City elected official, traditionally the Council President, who serves as the chair of the
LTAC.
In 2013, the legislature amended RCW 67.28.1816 and expanded the role of the local lodging
tax advisory committees. Now, in municipalities with a population of over 5,000, requests to use
lodging tax funds — including requests by the municipality itself — must be submitted directly to
the lodging tax advisory committee. This means that the City of Tukwila must submit an
application to the LTAC to expend lodging tax funds for City of Tukwila activities.
The lodging tax advisory committees review the applications for funding in a public meeting and
then forwards a list of candidates to the municipality for final action (RCW 67.28.1816). As part
of the application process, a requestor must provide to the City estimates on how the lodging
tax funds will result in increase in the number of people traveling for businesses or pleasure on
a trip.
Citv Council Review Process in 2016
In June of 2016, staff took funding request applications reviewed by the City's LTAC to the
Finance and Safety Committee. After Finance and Safety review, the applications were
forwarded to the Committee of the Whole for discussion and review and then forwarded to a
Regular City Council meeting for final action. Once the Council approved the funding requests,
the recipients entered into service contracts with the City.
Washington State Attorney General's Informal Opinion
As part of the 2016 applications, reviewed by the City Council in June of this year, staff informed
the City Council that the Council had two options with each application: (1) The Council could
concur with the City's LTAC and agree to fund an application as presented or (2) the City
Council could choose not to fund a specific application. Staff informed Council it could not
change the specific dollar amounts recommended by the LTAC based on interpretations of
RCW 67.28 provided by Municipal Research Service Center and the Association of Washington
Cities.
On August 17, 2016, the Washington State Attorney General's Office ( "AG's Office ") issued an
informal opinion regarding whether a municipality could change the dollar amounts
recommended by the local lodging tax advisory committee. 2 The AG's Office opined that a
municipality can change specific dollar amounts recommended by the lodging tax advisory
committee, provided the municipality waits 45 -days before taking final action and that the
lodging tax advisory committee is provided an opportunity to comment on the revised dollar
amount.3 However the AG's Office cautioned that a municipality cannot choose to fund a
funding request which was not approved by the LTAC. While an informal Attorney General
2 See AG's Informal Opinion dated August 17, 2016, available at http://mrsc.org/getmedia/0562599b-
d073-4b55- 8817 -daal b9cf39a3 /w3ag081616.aspx.
3 Specifically, the Opinion states:
When awarding lodging tax revenues pursuant to RCW 67.28.1816(2)(b)(ii), a municipality may
award amounts different from the local lodging tax advisory committee's recommended amounts,
but only after satisfying the procedural requirements of RCW 67.28.1817(2), according to which
the municipality must submit its proposed change to the advisory committee for review and
comment at least forty -five days before final action on the proposal.
54 Z: \Council Agenda Items\Mayor's Office \LTAC Businesses \Memo 1, Process for Lodging Tax Funds.docx
INFORMATIONAL MEMO
Page 3
opinion iG not binding OD the City, this opinion provides helpful guidance and would b8
considered persuasive authority should a court ever examine this issue.
DISCUSSION
Staff would like Council concurrence for approving kodging tax funding request in2017and
beyond, asoutlined below. This proposed process is consistent with adopted City Council
process for legislative items, RCW 07.18' and the /\G'S Office |nfOnn8| Opinion.
1. Applications to use lodging tax funds are made directly to the LTAC, via its designated
staff member iDthe Office. The City accepts applications ODa rolling basis in
order tO respond tO proposed activities and events, which might GhseduhOgUleyea[.
2. The LTAC reviews the applications for use of lodging tax funds at an open public
meeting or at several opening meeting, if the LTAC wants additional time to consider an
application. KLTACrecommends to the City Council that the application b8 approved it
must recommend 2specific dollar amount. Should LTAC recommend @n application not
b8 approved it will cease moving forward.
8. The application and LTAC'S approval recommendation i8 then forwarded k} Finance and
Safety for its review.
4. Finance and Safety [8vi8vvG and then fD[m/8[ds its r8COnnrn8nd@tiOn 1O the full City
Council.
5. The full Council reviews and then takes final action on the funding request. If the
Council concurs with LTAC's recommended amount, no further Council action on the
application i8 required.
6. If the Council desires to modify the amount to be provided to a specific r8qU8StOr' the
City Council rnU8t provide 45-days' notice tOthe LTAC before taking final action. [)U[iDg
this 45-day period, the LTAC will meet and consider the City Council's modification and
either provide 8 comment letter iO the City Council Or choose not to comment. After the
45-day period had concluded, the City Council could take final action, after considering
the LTAC'G comment letter.
7. The City enters into 8 service O[ sponsorship Ggrg8Dl8nivvith1h8[equestV[.|fthe
amount 0f the agreement iS over $4O'0O0it would require review by the City Council,
following the City Council's adopted process for review ofagreements.
RECOMMENDATION
Forward to the October 1O'2O1GCommittee of the Whole meeting for briefing and discussion.
Staff will bring a motion forward to the October 17, 2016 Regular Council meeting adopting a
process for approval Of lodging tax applications.
ATTACHMENTS
*2O18 Lodging Tax Fund Application.
c\Counci|Agenda ItemsWayor's0ff ice\LTAC BusinessesWernu1. Process for Lodging Tax Funds.docx
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Application to the City of Tukwila for Use of 2016 Lodging Tax Funds
Event or Activity Name (if applicable):
Amount of Lodging Tax Requested:
Applicant Organization:
Federal Tax ID Number:
Mailing Address:
Primary Contact Name:
Primary Contact Phone:
Primary Contact Email Address:
Check all the service categories that apply to this application:
Tourism promotion or marketing.
Operation of a special event or festival designed to attract tourists.
✓ Operation of a tourism - related facility owned or operated by a non - profit organization.
Operation and /or capital costs of a tourism - related facility owned by a municipality or a public
facilities district.
Check which one of the following applies to your agency:
✓ Non - Profit (Note: Attach a copy of your current non - profit corporate registration from the
Washington Secretary of State Office)
Public Agency
For Profit Agency /Business (Washington State UBI Number:
I am an authorized agent of the organization /agency applying for funding. I understand that:
• 1 am proposing a tourism - related service for 2016. If awarded, my organization intends to enter
into a services contract with the City; provide liability insurance for the duration of the contract
naming the City as additional insured and in an amount determined by the City; and file for a
permit for use of City property, if applicable.
• My agency will be required to submit a report documenting economic impact results in a
format determined by the City.
Signature:
Printed or Typed Name:
Date:
57
1) Describe your tourism - related activity or event.
2) If an event, list the event name, date(s), and projected overall attendance.
3) Is your event /activity /facility focusing on attracting overnight tourists, day tourists, or both?
4) Describe why visitors will travel to Tukwila to attend your event /activity /facility.
5) Describe the geographic target of the visitors you hope to attract (locally, regionally,
nationally, and /or internationally).
6) Describe the prior success of your event /activity /facility in attracting tourists
7) If this your first time holding the event /activity /facility provide background on why you think
it will be successful.
8) Describe the media strategy you employ to promote your event /activity /facility to attract
overnight and /or day tourists? Please list any digital or print media (newsletters, e- blasts,
social media, etc.) your agency uses or intends to use to promote your event /activity /facility.
9) Describe how you will promote lodging establishments, restaurants, retailers, and
entertainment establishments in the City of Tukwila.
10) Is the City able to use your digital and print media for collaborative marketing?
2
:
11) Measurements and Metrics
As a direct result of your proposed tourism - related service, provide an estimate of:
a. Overall attendance at your proposed event /activity /facility
b. Number of people who will travel fewer than 50 miles for your
event /activity
c. Number of people who will travel more than 50 miles for your
event /activity
d. Of the people who travel more than 50 miles, the number of people
who will travel from another country or state
e. Of the people who travel more than 50 miles, the number of people
who will stay overnight in Tukwila.
f. Of the people staying overnight, the number of people who will stay in
PAID accommodations (hotel /motel /bed- breakfast) in Tukwila [or
Southside Region].
g. Number of paid lodging room nights resulting from your proposed
event/ activity /facility (for example: 25 paid rooms on Friday and 50
paid rooms on Saturday = 75 paid lodging room nights)
12) What methodologies did you use to calculate the estimates and what methodologies will you
use to track outcomes, such as total participants, estimated visitor spending, etc?
13) Are you applying for lodging tax funds from another community? If so, which communities
and in what amounts?
14) Are you applying funding from Seattle Southside Regional Tourism Authority (SSRTA)? If so, in
what amount?
3
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15) What is the overall budget for your event /activity /facility? What percent of the budget are
you requesting from the City of Tukwila?
16) What will you cut from your proposal or do differently if full funding for your request is not
available or recommended?
• 1
n
u
City of Tukwila
Allan Ekberg, Mayor
INFORMATIONAL MEMORANDUM
TO: Finance and Safety Committee
FROM: Brandon J. Miles, Business Relations Manager
CC: Mayor Ekberg
DATE: September 23, 2016
SUBJECT: Permitted Uses of Lodging Tax Funds.
ISSUE
The City charges a 1 % special excise tax on the sale of or charge made for overnight lodging
stays. State law limits how these funds can be used. This memo outlines the limits on the use of
lodging tax and discusses permitted and prohibited use of the funds'.
BACKGROUND
Revised Code of Washington (RCW) 67.28.1815 limits the use of lodging tax funds as follows:
[A]II revenue from taxes imposed under this chapter shall be credited to a special fund in
the treasury of the municipality imposing such tax and used solely for the purpose of
paying all or any part of the cost of tourism' promotion 3, acquisition of tourism - related
facilities, or operation of tourism - related facilities.
RCW 67.28.1816 goes into further detail about permitted expenditures of lodging tax funds,
specifying:
Lodging tax revenues under this chapter may be used, directly by any municipality or
indirectly through a convention and visitors bureau or destination marketing organization
for.
(a) Tourism marketing,
' RCW 67.28 places strict limits on the type of entities eligible to receive lodging tax funds. Additionally,
approving expenditures of lodging tax funds is a two -step process, requiring review by the City's Lodging
Tax Advisory Committee and City Council. State Law gives considerable authority to the City's Lodging
Tax Advisory Committee in reviewing and approving funding requests. For more information on entities
eligible to receive funding and the process for awarding funds, see the memo dated September 22, 2016,
entitled, "Lodging Tax Approval Process."
2 RCW 67.28.080 defines "Tourism" as "economic activity resulting from tourists, which may include sales
of overnight lodging, meals, tours, gifts, or souvenirs."
3 RCW 67.28.080 (6) defines `Tourism promotion" as "...activities, operations, and expenditures designed
to 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."
4 RCW 67.28.080 (1) provides the following definition of "Acquisition" ... "includes, but is not limited to,
siting, acquisition, design, construction, refurbishing, expansion, repair, and improvement, including
paying or securing the payment of all or any portion of general obligation bonds, leases, revenue bonds,
or other obligations issued or incurred for such purpose or purposes under this chapter."
61
INFORMATIONAL MEMO
Page 2
(b) The marketing and operations of special events and festivals designed to attract
tourists;
(c) Supporting the operations and capital expenditures of tourism - related facilities5
owned or operated by a municipality or a public facilities district created under
chapters 35.57 and 36.100 RCW; or
(d) Supporting the operations of tourism - related facilities owned or operated by nonprofit
organizations described under 26 U.S.C. Sec. 501(c)(3) and 26 U.S.C. Sec.
501(c)(6) of the internal revenue code of 1986, as amended.
DISCUSSION
Several Councilmembers have inquired about permissible uses of lodging tax funds. Based
upon the limitations outlined above, staff would like to provide some guidance on the future use
of lodging tax funds.
A simple question that can be asked to help determine if lodging tax funds can be used is:
"Is the activity, operation or expenditure designed to increase tourism or welcome tourists to the
City?"
If the answer is yes, then lodging tax might be able to be used after further analysis of the
specific funding request.
Tourism could include people who travel and stay overnight in the City (overnight visitors) or
those who travel to the Tukwila for the day (day visitors). Economic activity from Tukwila
residents would not be considered tourism.
The following lists examples of activities, operations and expenditures that would likely be
eligible for lodging tax funding. This is not intended to be an exhaustive list.
• Marketing and advertising intended to bring overnight visitors to the City.
• Marketing and advertising intended to bring day visitors to the City.
• Installation of new "way finding" signs for tourists and installation of City identification
signs.
• Sponsoring, operating, and marketing of special events or festivals, either by the City or
third parties, if designed to bring tourists to the City.
• Installation of banners on street poles or across city streets if either welcoming tourists to
the City or promoting upcoming events.
• Capital improvements, such as park improvements or trail improvements, designed to be
used primarily by tourists.
• Maintenance of parks primarily used by tourists, such as Fort Dent Park or the Green
River trail.
5 RCW 67.28.080 (7) defines 'Tourism- related facility" as, "...real or tangible personal property with a
usable life of three or more years, or constructed with volunteer labor that is: (a)(i) Owned by a public
entity; (ii) owned by a nonprofit organization described under section 501(c)(3) of the federal internal
revenue code of 1986, as amended; or (iii) owned by a nonprofit organization described under section
501(c)(6) of the federal internal revenue code of 1986, as amended, a business organization, destination
marketing organization, main street organization, lodging association, or chamber of commerce and (b)
used to support tourism, performing arts, or to accommodate tourist activities."
62 Z: \Council Agenda ItemsWayoes Office \LTAC BusinessesWemo 2, Eligable Activites.docx
INFORMATIONAL MEMO
Page 3
• Supporting marketing and operations of government entities (City of Tukwila and SSRTA)
or nonprofit organizations, when activities performed are designed to attract tourists to
the City or welcome tourists to the City.
The following lists examples of activities, operations and expenditures that would likely NOT be
eligible for lodging tax funding. This list is not intended to be exhaustive.
• Funding basic general governmental operations of the City6
• Marketing and advertising directed at residents.
• Way finding signs in residential areas intended for residents.
• Sponsoring of special events or festivals intended for residents.
• Capital improvements, such as park improvements, intended for residents (such as at
parks used primarily by residents).
• Maintenance of parks primarily used by residents, such as Hazelnut Park.
• Capital expenditures for tourism related facilities owned or operated by a non - profit.
Reporting Requirements
RCW 67.28.1816 requires that entities receiving lodging tax fund report metrics back to the
municipality. Per State Law, the following is required to be submitted to the City in the project
close out for a specific funding request:
1. Actual number of people traveling for business or pleasure on a trip.
2. Number of people traveling for business and pleasure and staying in paid
accommodations in the City.
3. Visitors who traveled more than 50 miles or more from their place of residence of
businesses for the day or staying overnight.
4. Visitors who traveled from another county or state.
It is important to note that the City's Lodging Tax Advisory Committee is granted significant
authority by RCW 67.28.1816 when reviewing lodging tax requests. The City Council cannot
reverse a decision of the Committee if the Committee chooses not to approve a specific funding
application. Traditionally, the Committee has considered the metrics outlined above very
strongly when considering funding requests.
RECOMMENDATION
Information and discussion only. Forward to the October 10, 2016 Committee of the Whole
meeting for discussion by the full Council.
ATTACHMENTS
• None.
6 The City is permitted to charge special funds, like the lodging fund, for costs incurred by the general
fund to support the special funds.
ZACouncil Agenda ItemsWayoes Office \LTAC Businesses \Memo 2, Eligable Activites.docx
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