HomeMy WebLinkAboutPED 2020-03-02 Item 1A - Review - Lodging Tax 6-Year Financial ModelCity 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."
INFORMATIONAL MEMO
Page 2
utilize for exercise; areas could be developed as a gathering space; and the Pond could attract
small scale festivals and events. The City Council with a recommendation from LTAC, has
allocated $125,000 of lodging tax funds to develop a master plan for the Pond.
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 in the
Southcenter District, funded by lodging tax. Staff envisions art could be extended to other areas
of the Southcenter District.
3. Small Event Development and Support
The financial model is budgeting $85,000 over the next five 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.
Staff would also like to have conversations with LTAC and Council about other possible funding
opportunities for the lodging tax funds. For example:
• Promoting and encouraging entertainment businesses to locate to the City; and
• Improving the user experience along the pond.
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
2 https://tukwilawa.sharepoint.com/sites/mayorsoffice/cc/CC Site Council Agenda/Informational Memorandum (Info Memo).doc
Lodging Tax Advisory Committee
Guiding Principle #1
Six Year Financial and Ending Fund Balance
Topic: Guidance on financial modeling and ending fund balance.
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
K
sl
DRAFT, DISCUSSION ONLY
Lodging Tax Six Year Financial Plan
Revenue
Approved Applications
Year 2019
Lodging Tax Collection
Expenses
Marketing, Sales, Major Sponsorships
Contracted DMO Services $
Major Sponsorships $
Small Event Development and Support $
Digital Development and Website
Destination Development
Wayfinding Plan Development and Installation $
Southcenter Art Investements $
Tukwila Pond $
World Cup Planning and Activiation $
Adminstration/Operations
Salary $
Benefits $
City Overhead Charge $
Adminstration Expenses $
Total Expenditures: $
Starting Year Balance:
Ending Fund Balance:
775000
202,500
144,000
12,500
40,000
100,000
55,457
17,1147
18,741
35,000
626,045 1
Forecasted
Actuals
2019 2020 2021 2022 2023
2024 Totals
$ 819,095 $ 800,000 $ 840,000 $ 882,000 $ 926,100 $ 972,405 $5,239,600
$ 202,500
$
202,500
$
202,500
$
202,500
$
202,500
$
202,500
$1,215,000
$ 150,000
$
150,000
$
150,000
$
150,000
$
150,000
$
150,000
$ 900,000
$ 10,000
$
15,000
$
15,000
$
15,000
$
15,000
$
15,000
$ 85,000
$ -
$
65,000
$
50,000
$
50,000
$
50,000
$
50,000
$ 265,000
$
- $
100,000 $
150,000
$
100,000
$
100,000
$
100,000
$
550,000
$
600 $
39,400 $
75,000
$
75,000
$
75,000
$
75,000
$
340,000
$
- $
125,000 $
200,000
$
200,000
$
200,000
$
200,000
$
925,000
$
- $
- $
40,000
$
40,000
$
50,000
$
50,000
$
180,000
$ 58,040
$
56,586
$
58,284
$
60,032
$
61,833
$
63,688
$
358,463
$ 18,124
$
18,411
$
18,963
$
19,532
$
20,118
$
20,722
$
115,870
$ 18,741
$
19,416
$
19,998
$
20,598
$
21,216
$
21,853
$
121,823
$ 21,385
$
30,000
$
30,000
$
30,000
$
30,000
$
30,000
$
171,385
$ 479,390 $ 821,313 $ 1,009,745 $ 962,663 $ 975,668 $ 978,763 $5,227,541
$1,617,625 $ 1,957,330 $ 1,936,017 $ 1,766,272 $ 1,685,609 $ 1,636,041
$1,957,330 $ 1,936,017 $ 1,766,272 $ 1,685,609 $ 1,636,041 $ 1,629,684
Notes
Revenue for 2019 and 2020 is from the adopted budget.
Revenue Increase (2021-2024) 0.05
Salary is assumed to rise 3% per year. 0.03
Benefits are assuemd to rise 3% per year. 0.03
Indirect Cost Allocation is assumed to increase 3% per year. 0.03
This document does not bind the City to provide funds nor does it authorize any funding. All use of lodging tax funds must be approved by LTAC and the City Council through an application process.
Overhead charge is charged to all special accounts and recoups the cost of the general fund to support the lodging tax fund. This include facilities, IT services, legal, and accounting.
Cells in yellow were updated following April, 2019 meeting.
Updated:
2/24/2020
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