HomeMy WebLinkAbout#04 - Lodging TaxSTAFF REPORT
DATE: November 14, 2017
AGENDA ITEM: Lodging Tax Follow Up from 10/10/17
TO: Mayor and Council
SUBMITTED BY: Kristina Handt, City Administrator
BACKGROUND: The Council discussed the lodging tax at the October work session. State Statute allows cities to
impose a local lodging tax up to 3% on the gross receipts of lodging in the city. 95% of those
funds must be used to fund a local convention or tourism bureau for the purposes of marketing and promoting the city. Staff was asked to look further into how to set up a Convention and Visitors Bureau and if
working with the Chambers of Commerce was an option. It was also noted that Woodbury
recently discussed this issue and more information was requested about their position. ISSUE BEFORE COUNCIL: Should the city proceed with establishing a lodging tax? PROPOSAL DETAILS/ANALYSIS: Staff has the following additional background information to provide to the Council after further research and speaking with the staff from the City of Woodbury, The Lakeville Area Chamber of Commerce, and Lakeville Convention and Visitors Bureau:
1) Would the Chamber qualify as a CVB? - No, it would need to establish an entity under MN Statute, Section 469.190, create a separate CVB Board, separate financial processes, insurance, staffing and
internal controls. The CVB could then be a division of the Chamber once set up, to then allow for one audit, one IRS Form 990 to be filed each year under IRS guideline 501(c)(6), and to create efficiencies. They would have to pay the Chamber a fee for rent, IT, payroll, if applicable, etc. to qualify under the
guidelines. Then, the City of Lake Elmo would be able to collect 5% of the 3% tax placed on the hoteliers within the CVB area. 2) Can the 95% of the 3% go to more multiple chambers? - If more than one Chamber would want to participate, then each would need to set up a CVB division, and those CVB areas cannot overlap when imposing the 3% tax on hoteliers. 3) Would the City of Lake Elmo need to create its own CVB? - If the City and Chamber chose not to create a division under the Chamber, then yes, it would need to create its own stand-alone Lake Elmo CVB or work with other communities to create a regional CVB. The latter would create less of a competitive disadvantage, but create significant more complexities involving other jurisdictions. Creation
of a CVB would take at least 1-2 years depending on the structure and devotion of staffing resources compared to other competing priorities.
The City of Woodbury has done extensive research on this, which the latest report is attached outlining
many facets of a CVB, considerations and recommendations based on their City business. Also, as a key point, the City noted a 60% occupancy rate at $100/night. The Holiday Inn in Lake Elmo has 99 rooms and spot checking a few weekday, weekend and non-Super Bowl weekend rates, $140/night may be
reasonable. Using that amount and a 60% occupancy rate, the amount of revenues estimated would be as follows:
Gross revenue of room nights: $3,035,340 3% Hotel Tax: $91,060 95% of Hotel Tax Must go to CVB: $86,507 5% of 3% Hotel Tax to City: $4,553 Woodbury has not moved forward with creating a lodging tax. Some reasons are provided in the attached article. OPTIONS: Discuss information and provide direction on any next steps
ATTACHMENT:
• Woodbury Info
• “Woodbury council lukewarm to idea of convention and visitors bureau”