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Home My WebLink AboutPCD 2022-09-19 Item 1A - LTAC - Tourism and Lodging Tax Update: 2023-2024 Biennial Budget and Updated 6-Year Financial PlanTO: FROM: CC: DATE: SUBJECT: City of Tukwila Allan Ekberg, Mayor INFORMATIONAL MEMORANDUM Planning and Community Development Brandon Miles, Business Relations Manager Mayor Ekberg September 13, 2022 2023/2024 101 Fund Budget (Tourism) ISSUE Review and discussion of draft budget for the 101 Fund (Tourism). BACKGROUND The City collects a 1% charge on eligible overnight stays in hotels, motels, and short-term rentals (such as Airbnb). Washington State law limits the use of these funds to tourism promotion activities. Historically, the City has used these funds to support a variety of tourism activities including sponsoring events at the Museum of Flight, assisting Starfire Sports with attracting tournaments, supporting the activities of Seattle Southside Tourism Authority, supporting smaller events, and the ongoing operations of Experience Tukwila. Attached for review are the applicable pages of the City's draft 2023/2024 101 Fund budget and the six-year financial model which is used for planning purposes DISCUSSION Revenue Collection The lodging industry was hit hard by the pandemic. The City had initially estimated the collection of approximately $820,000 in lodging tax funds for 2020; however, the pandemic caused lodging tax collections to drop significantly to only $292,358. 2021 was slightly better than 2020 with about $540,000 collected but was still significantly lower than historical actual revenues over the last ten years. Because of assumptions regarding ongoing impacts from the pandemic, the 2022 budget estimated collecting $450,000 in lodging tax funds. However, collections to date have been strong and staff is now anticipating that lodging tax collections will be closer to $700,000 for 2022. Staff is forecasting a return of historical lodging tax collections for 2023 and 2024. Expenses The 101 Fund is used to support a .5 FTE in the Office of Economic Development'. To accomplish the goals of the tourism program, the City contracts for services, provides funds for third parties, and sponsors a variety of activities and events. Nearly 85% of the forecasted budget expenditures for 2023 and 2024 go to support direct tourism activities including: • Experience Tukwila ($300,000) • Third Party Sponsorships ($260,000) o Seattle Seawolves o Starfire Sports o Others • Small Event Support ($30,000) • Art Investments ($150,000) The position is the Business Relations Manager, which is supported 50/50 by the general funds and lodging tax fund. 1 INFORMATIONAL MEMO Page 2 • Showare and City of Kent Rebate Program ($30,000) • Tukwila Pond ($400,000) • Wayfinding ($200,000) These expenditures are consistent with the guiding principles adopted by the City Council in 2020 regarding the use of lodging tax funds, which state that lodging tax funds should be used for: 1. Marketing efforts to attract visitors under other brands2 (such as Seattle and Kent Valley Way). 2. Marketing to attract day visitors from within the greater Seattle region using the "Tukwila" brand. 3. Destination Development a. Tourism infrastructure b. Events and Festivals i. Marketing ii. Development Ending Fund Balance The 101 Fund is projected to have a healthy ending fund balance for 2022 of just over $2 million. Over the next six years the City is forecasting spending down the ending fund balance as investments are made in the City's tourism infrastructure. At the end of 2027, the 101 Fund is projected to have an ending fund balance of just over $1.27 million. Six Year Financial Plan In 2020 the City began to use a six-year financial plan for planning purposes for the 101 Fund. This was done so that the City could anticipate future expenditures and plan accordingly to be able to invest in the City's tourism economy. From 2022-2027 the six-year financial model shows the City spending just over $5.087 million to market the City to visitors and invest in the City's tourism infrastructure. FINANCIAL IMPACT Total budgeted expenditures for the 101 Fund are $938,890 in 2023 and $944,668 in 2024. RECOMMENDATION Forward to the September 26 Committee of the Whole meeting for discussion. ATTACHMENTS • Draft pages from the 2023/2024 budget for the 101 Fund. • Six-year financial model. • Tourism Guiding Funding Principles. 2 As a reminder, the City Council authorized the collection of a $2 per room night Tourism Promotion Area (TPA) fee in partnership with the cities of Des Moines and SeaTac. The TPA fees is remitted by the Department of Revenue directly to Seattle Southside Regional Tourism Authority and is used to promote the region to visitors outside 50 miles from the City under the "Seattle Southside" brand. https://tukwilawa.sharepoint.com/sites/mayorsoffice/cc/Council Agenda Items/Mayor's Office/PCD, 2022.09.19/1.0 2022 and 2023 Lodging Tax Budget, PCD Memo.docx 2 Department: Mayor's Office FUND: Lodging Tax Fund RESPONSIBLE MANAGER: Brandon Miles Description FUND NUMBER: 101 POSITION: Business Relations Manager This fund consists of proceeds from a special excise tax on lodging charges and is used to promote tourism within the City (Chapter 67.28 RCW). 2021-2022 Accomplishments ♦ Worked with partners and created a Tukwila signature event for the region (Juneteenth). Strategic Goal 5 ♦ Assisted in bringing in additional events and festivals to the City. Strategic Goal 5 ♦ Supported Parks and Recreation to complete a master plan for Tukwila Pond. Strategic Goal 5 ♦ Increased the total number of followers on Experience Tukwila by over 15%. Strategic Goal 5 ♦ Managed ExperienceTukwila.com to bring more organic traffic to the site via site development and search engine optimization. Strategic Goal 5 ♦ Continued to build partnerships with the Seattle Seawolves and other rugby organizations to position Tukwila as the center of rugby in the Pacific Northwest. Strategic Goal 5 ♦ Completed first promotional videos for Experience Tukwila. Strategic Goal 5 ♦ Partnered with Seattle Southside Tourism Regional Tourism Authority on room booking tracking for events receiving City sponsorship. Strategic Goal 5 ♦ Working with the Cities of SeaTac and Des Moines, completed a comprehensive review of the Seattle Southside Tourism Promotion Area. Strategic Goal 5 2023-2024 Outcome Goals ♦ Working with community partners, build the annual Juneteenth event into a signature, regional City event. Strategic Goal 5 ♦ Identify and assist in the creation of smaller event in the Tukwila International Blvd area. Strategic Goal 5 ♦ Complete wayfinding program for tourism areas of the City. Strategic Goal 5 ♦ Increase total number of followers on all social media platforms by 15%. Strategic Goal 5 ♦ Manage and build out the Experience Tukwila website. Strategic Goal 5 ♦ Follow up on survey of 2017 that resulted in Tukwila's first net promotor score. Strategic Goal 5 ♦ Begin planning for tourism opportunities related to the 2026 World Cup. Strategic Goal 5 ♦ Identify ways to assist small, minority owned businesses in tourism promotion. Strategic Goal 5 ♦ Expand the City's relationship with the Seattle Seawolves and other rugby organizations. Strategic Goal 5 2023-2024 Indicators of Success ♦ Identification and recruitment of new activities, festivals, and events to bring to the City. Strategic Goal 5 ♦ Increased sales at hotels, restaurants, and entertainment establishments. Strategic Goal 5 ♦ More "feet on the streets" and "heads in beds." Strategic Goal 5 ♦ Increase total number of followers on all social media platforms by 15%. Strategic Goal 5 3 • Goal is to have 20,000 unique visitors on the Experience Tukwila website using organic search techniques (non -ads). Strategic Goal 5 • See improvements in the City's Net Promotor score compared to 2017 score. Strategic Goal 5 Budget by Revenue and Expenditure Summary Lodging Tax Operating Expenditures 2022 Actual 2023 Budget 2024 Budget Position Description Percent Change FTE Salaries & Wages Projected 60,695 64,713 63,732 68,766 72,432 7.9% 2020 2021 2022 2022 2023 2024 2022-2023 2023-2024 Operating Revenue 3.4% Supplies- 1,150 1,000 5,000 2,000 2,000 Hotel/Motel Tax $ 292,358 $ 540,329 $ 700,000 $ 450,000 $ 720,000 $ 750,000 60.0% 4.2% Grant Revenues 30,878 10,680 - - - - 0.0% 0.0% Investment Earnings 13,036 1,942 2,500 6,000 6,000 6,000 0.0% 0.0% Total Oprating Revenue 336,272 552,950 702,500 456,000 726,000 756,000 59.2% 4.1% Operating Expenditures 2022 2023 2023 Budget 2024 2024 Budget Position Description FTE FTE Salaries & Wages 57,622 60,695 64,713 63,732 68,766 72,432 7.9% 5.3% Benefits 19,017 19,182 16,542 19,335 22,631 23,398 17.0% 3.4% Supplies- 1,150 1,000 5,000 2,000 2,000 -60.0% 0.0% Professional Services 394,026 186,966 146,750 425,000 375,000 375,000 -11.8% 0.0% Professional Development 4,686 6,117 4,402 10,000 21,500 21,520 115.0% 0.1% Advertising 93,538 218,174 139,857 250,000 350,000 350,000 40.0% 0.0% Technology Services 572 614 885 - 2,500 2,500 0.0% 0.0% Repairs & Maintenance Services - 5,000 - - - - 0.0% 0.0% Other Expenses 205 95 (14) 218,000 70,000 70,000 -67.9% 0.0% Total Operating Expenditures 569,665 497,992 374,134 991,067 912,397 916,850 -7.9% 0.5% Indirect Cost Allocation 19,416 24,981 25,231 25,231 26,493 27,818 5.0% 5.0% Other Non Operating - - - - - - 0.0% 0.0% Total Expenses 589,081 522,973 399,365 1,016,298 938,890 944,668 -7.6% 0.6% Beginning Fund Balance 1,965,198 1,712,389 1,742,366 1,742,366 2,045,501 1,832,611 17.4% -10.4% Change in Fund Balance (252,809) 29,977 303,135 (560,298) (212,890) (188,668) -62.0% -11.4% Ending Fund Balance $ 1,712,389 $ 1,742,366 $ 2,045,501 $ 1,182,068 $ 1,832,611 $ 1,643,943 55.0% -10.3% Salary and Benefit Details Lodging Tax 4 2022 2023 2023 Budget 2024 2024 Budget Position Description FTE FTE Salaries Benefits FTE Salaries Benefits Business Relations Manager 0.5 0.5 $ 68,766 $ 22,631 0.5 $ 72,432 $ 23,398 Department Total 0.5 0.5 $ 68,766 $ 22,631 0.5 $ 72,432 $ 23,398 4 General Ledger Code Details Revenues GL Account Code Account Description Actual 2020 2021 Projected 2022 2022 Budget 2023 2024 Operating Revenues Salaries $ 57,622 $ 60,695 $ 64,713 $ 63,732 $ 68,766 $ 72,432 MR101300-313310 HoteVMotel Tax $ 292,358 $ 540,329 $ 700,000 $ 450,000 $ 720,000 $ 750,000 MR101300-333219 Dept Of Treasury -Cares Act $ 30,878 $ - $ - $ - $ - $ - MR101300-337090 Port Of Seattle -Economic Dev P - 10,680 - - - - MR101300-361110 Investment Interest 13,036 1,942 5,200 6,000 6,000 6,000 Total Operating Revenues Paid Family & Med Leave Prem $ 336,272 $ 552,950 $ 705,200 $ 456,000 $ 726,000 $ 756,000 Expenses GL Account Code Account Description Actual 2020 2021 Projected 2022 2022 Budget 2023 2024 MR101300-511000 Salaries $ 57,622 $ 60,695 $ 64,713 $ 63,732 $ 68,766 $ 72,432 Total Salaries & Wages 57,622 60,695 64,713 63,732 68,766 72,432 MR101300-521000 FICA 4,254 4,489 4,738 4,872 5,261 5,541 MR101300-523000 PERS 7,344 6,966 6,485 6,238 7,216 7,677 MR101300-524000 Industrial Insurance 162 261 146 169 172 181 MR101300-524050 Paid Family & Med Leave Prem 85 90 104 90 110 116 MR101300-525000 Medical, Dental, Life, Optical 6,299 484 4,548 522 239 251 MR101300-525095 Kaiser Medical & Dental - - - - 9,632 9,632 MR101300-525097 Self -Insured Medical & Dental 873 6,892 524 7,444 - - MR101302-524000 Industrial Insurance - - (3) - - - Total Personnel Benefits 19,017 19,182 16,542 19,335 22,631 23,398 MR101300-531000 Supplies -General - - - 5,000 - - MR101300-531001 Office Supplies - - 5 - - - MR101300-531003 Operating Supplies - 1,110 995 - 2,000 2,000 MR101300-531004 Event Food - 39 - - - - Total Supplies - 1,150 1,000 5,000 2,000 2,000 MR101300-541007 Contracted Services 19,077 5,204 140,000 - - - MR101300-543000 Professional Development - 255 - - - - MR101300-543001 Memberships 3,000 3,000 1,000 - 1,000 1,000 MR101300-543002 Registrations 370 845 750 - 2,500 2,500 MR101300-543004 Airfare 242 1,010 - - 1,500 1,500 MR101300-543007 HoteVLodging 946 835 2,000 - 2,500 2,500 MR101300-543008 Ground Transp/Parking 128 172 300 - 1,000 1,000 MR101300-543999 Other Prof Dev/Travel Expenses - - - 10,000 13,000 13,020 MR101300-544000 Advertising - - 5,000 - - - MR101300-544002 Marketing - - 17,857 - - - MR101300-544003 Sponsorships marketing - - 3,000 - - - MR101300-546001 Software Maintenance Contract 530 - - - - - MR101300-546003 Web Hosting 42 614 - - 1,500 1,500 MR101300-546004 Online Services -Subscriptions - - 885 - 1,000 1,000 MR101300-549000 Miscellaneous Expenses - - - 18,000 - - MR101300-549009 Media Subscriptions 7 - - - - - MR101300-549010 Business Meals (non Prof Dev) 199 95 (14) - - - MR101300-549999 Other Miscellaneous Expenses - - - - 15,000 15,000 MR101301-541000 Professional Services 141,810 20,000 6,750 275,000 - - MR101301-541006 Consulting Services 10,737 103,817 - - - - MR101301-543008 Ground Transp/Parking - - 12 - - - MR101301-544000 Advertising - - 5,157 100,000 50,000 50,000 MR101301-544002 Marketing 63,538 32,784 20,000 100,000 50,000 50,000 MR101301-544003 Sponsorships marketing 30,000 185,390 88,843 50,000 250,000 250,000 MR101301-548001 Repair services - 5,000 - - - - MR101302-541000 Professional Services 222,401 57,945 - - - - MR101302-541007 Contracted Services - - - 150,000 375,000 375,000 MR101302-543002 Registrations - - 325 - - - MR101302-543008 Ground Transp/Parking - - 15 - - - MR101302-549000 Miscellaneous Expenses - - - 200,000 - - MR101302-549999 Other Miscellaneous Expenses - - - - 55,000 55,000 Total Services & Passthrough Pmts 493,027 416,966 291,880 903,000 819,000 819,020 MR101300-750190 Transfer Out ICA 19,416 24,981 25,231 25,231 26,493 27,818 Total Expenditures $ 589,081 $ 522,973 $ 399,365 $ 1,016,298 $ 938,890 $ 944,668 5 6 Tourism Funding, Six Year Financial Plan DRAFT - Updated March 3, 2021 Tourism Revenue Working Draft Update Lodging Tax $ 2022 Budgeted 2022 Forecasted 450,000 Total Revenues: $ Tourism Expenses Marketing, Sales, and Sponsorships Sponsorships Small Events rience Tukwila, Branding and Marketing, Visitors World Cup Planning and Activation Business Attraction and Promotion COVID-19 Response SavingLocalKC.com SSRTA Emergency Funding Showare Sponsorship Seattle Southside Chamber of Commerce Destination Development Wayfinding Plan Development and Installation Art Investments Tukwila Pond General Administration Salary and Benefits City Overhead Charge Administrative Total Expenditures: 450,000 2023 2024 2025 2026 2027 ■ 700,000 $ 700,000 720,000 $ $ 720,000 750,000 $ 750,000 800,000 $ 800,000 $ 825,000 $ 825,000 $ 825,000 825,000 150,000 100,000 $ 15,000 $ 15,000 $ 75,000 140,000 $ 50,000 $ - $ 130,000 AM 15,000 $ 175,0;0I111111k 50,000 $ 30,000 130,000 $ 15,000 $ 175,000 $ 50,000 $ 130,000 $ 15,000 $ 175,000 $ 50,000 $ 30,00011 30,000 $ 15,000 15,000 $ 15,000 $ 150,000 75,000 200,000 79,978 25,231 $ 28,750 $ $ 863,959 Beginning Fund Balance: $ Ending Fund Balance: $ Notes This document does not bind the City to provide funds nor does it authorize any funding. All use of lodging The blue shaded cells indicate updates to what was intially approved. Salary/Benefits for Business Relations Manager is split 50/50 between general fund and lodging tax and is The City overhead charge is charged to all special funds. It recoups the cost to the general fund to support Updated: 9/9/2022 BJ M 25,231 $ 28,750 $ $ 391,238 1,742,366 I $ 1,328,407 $ 100,000 $ 75,000 $ 200,000 $ 26,493 $ 30,000 $ 2,051,128 I $ 1,827,238 $ $ 943,890 1,742,366 I $ 2,051,128 $ 100,000 75,000 200,000 27,818 30,000 949,668 1,827,238 I $ 1,627,570 $ 130,000 $ 15,000 $ 175,000 $ 50,000 $ 30,000 $ 130,000 15,000 175,000 50,000 30,000 15,000 $ 100,000 75,000 200,000 104,906 28,653 30,000 953,558 1,627,570 1,474,012 100,000 40,000 200,000 108,053 29,512 30,000 922,565 $ 1,474,012 I $ 1,376,447 $ 100,00, 40,00 200,00_ 111,29. 30,39 30,00 926,692 1,376,447 1,274,755 tax funds must be approved by LTAC and the City Council through an application process. Totals, '22-'27 estimated to increase 3% annually after 2024. the lodging tax fund. It includes facilities, technology, legal, accounting, and record keeping services and is estimated to increase 3% annually after 2024. 5,070,000 5,070,000 490,000 60,000 665,000 150,000 46,000 300,000 225,000 600,000 108,053 29,512 118,750 5,087,611 8 1. The TPA revenues should be used to attract overnight visitors from outside the 50 -mile radius using the Seattle Southside brand and focusing on state, national, and global marketing. 2. Lodging tax funds should be used for the following: a. Marketing efforts to attract visitors under other brands (such as Seattle and Kent Valley WA ). b. Marketing to attract day visitors from within the greater Seattle region using the "Tukwila" brand. c. Destination Development i. Tourism infrastructure ii. Events and Festivals 1. Operations 2. Marketing 3. Development 3. The City of Tukwila should control how its brand is used within the region. CD