HomeMy WebLinkAboutCDN 2019-09-24 Item 2B - LTAC - Lodging Tax Six-Year Funding Model and Ending Fund BalanceCity of Tukwila
Allan Ekberg, Mayor
INFORMATIONAL MEMORANDUM
TO:
FROM: Brandon Miles, Business Relations Manager
CC: Mayor Ekberg
DATE: September 17, 2019
SUBJECT: Lodging Tax Six Year Funding Model
ISSUE
Discussion and review of Lodging Tax Six Year Financial Model and ending fund balance goals.
BACKGROUND
Community Development and Neighborhoods
The City collects a 1% lodging tax on certain qualifying overnight stays in paid accommodations
(hotels/motels/Airbnb) in the City. State law limits the use of these funds to tourism promotion'.
There is currently just over $1 million in lodging tax funds available for use. By 2024 the ending
fund balance is expected to be near $2.5 million based on current expenditures.
Lodging tax funds are collected in order to be invested in the community to invest in the City's
tourism economy. The goal is drive economic activity by bring visitors to the City, both day and
overnight visitors. State Law provides strict guidance on how lodging tax funds can be used.
The funds cannot be used for basic governmental operations.
DISCUSSION
The City's Lodging Tax Advisory Committee (LTAC) has worked on a proposed financial model
for the City's lodging tax fund. In the past, the City reviewed lodging tax applications and,
assuming they met the applicable criteria, approved request, provided funding was available.
The goal of using a financial model is to ensure the funds are used in a strategic manner and
that funds are set aside for possible future activities that could be funded with lodging tax funds.
The activities listed in the attached excel spreadsheet are "big bucket" items and were
developed by staff and LTAC. The list can be updated on a regular basis and staff is seeking
additional guidance on the list.
There are several projects worth highlighting:
1 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."
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INFORMATIONAL MEMO
Page 2
1. Tukwila Pond
Tukwila Pond provides an opportunity for the City to develop a centerpiece park within
the City's Southcenter District. Not only would the development be good for residents,
but the Pond could also tie into the City's tourist experience. A boardwalk could be
developed for hotel guests to utilize for exercise; areas could be developed as gathering
spaces; and the Pond could attract small scale festivals and events. The City Council,
with a recommendation from LTAC, has allocated $100,000 of lodging tax funds to
develop a master plan for the Pond.
The financial model proposes $950,000 of lodging tax funds be allocated to the Pond
through 2024. Additional funds would have to be secured for construction and lodging
tax funds could be used as matching funds for the City to obtain grants.
2. Southcenter Art Investment
Art can be used to improve the overall visual appearance of a tourist destination.
Additionally, art can be used as a draw for a place and used for branding purposes (think
the Fremont Troll). Parks and Recreation is currently working on an art installation and
art plan for Baker Blvd in the Southcenter District, funded by lodging tax. Staff envisions
art could be extended to other areas of the Southcenter District.
The financial model is envisioning that $415,000 be allocated to art installation in
Southcenter over the next six years.
3. Small Event Development and Support
The financial model is budgeting $90,000 over the next six years to support small event
development and support citywide. Staff's goal is to provide an avenue for groups to get
access to small lodging tax grants for small scale activities that could be used to develop
authentic, Tukwila experiences.
FINANCIAL IMPACT
N/A. The financial model does not authorize any expenditure. All expenditures of lodging tax
funds are required to go through the City's formal application process, with review by LTAC and
the City Council. LTAC and staff are proposing that the City strive to never let the ending fund
balance go below $400,000 in any year.
RECOMMENDATION
Discussion Only.
ATTACHMENTS
A. Lodging Tax, Guiding Principle #1
B. Lodging Tax Six Year Financial Model
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Topic:
Lodging Tax Advisory Committee
Guiding Principle #1
Six Year Financial and Ending Fund Balance
Guidance on financial modeling and ending fund balance.
Tkwik
Background: The City of Tukwila (the "City") collects a 1% charge on eligible lodging stays at area
hotels, motels and Airbnbs. Under Washington State law these funds can only be used
for tourism promotion activities. Any request to lodging tax funds is reviewed by the
Lodging Tax Advisory Committee (LTAC) and, if LTAC recommends approval, is forward
to the Tukwila City Council for final review and action.
The City is projecting a significant ending fund balance for 2019 and 2020. In order to
provide strategic direction on the use of funds, LTAC is proposing that a six -year
funding model be maintained showing possible future uses of lodging tax funds. The
goal is to ensure that as applications come in the LTAC consider the request in a
strategic context of the City's overall goals and ensure the funds are available in future
years for the City's priorities.
Principle: LTAC will maintain a six -year financial model outlining anticipated revenue and
anticipated expenditures. The expenditures are concept only and at a very high level.
The model provides no approval to expend any of the funds listed. Any request to use
funds require going through the formal application process.
Furthermore, the financial model will strive to ensure that the forecasted ending fund
balance in any year not be below $400,000. The goal with keeping this minimum
ending fund balance is to provide significant amount of funds that could be used
during an economic downturn or to take advantage of a major opportunity.
City of Tukwila
6200 Southcenter Blvd.
Tukwila, WA 98188
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DRAFT, DISCUSSION ONLY
Lodging Tax Six Year Financial Plan
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