Some hotel tax money the city of Bend must spend on tourism marketing may be squirreled away to help the tourism industry weather an economic downturn, but a city councilor and the private company the city pays to market the area don’t agree on who should run that fund.
Visit Bend, which has a contract through June 30, 2022, is interested in a rainy day fund it would manage. Bend councilor Bill Moseley has advocated for a reserve fund maintained by the city.
The Bend Economic Development Advisory Board expects to bring suggestions to the City Council in November or December, following a series of conversations that will begin with an advocacy meeting Monday at noon in the Awbrey Butte conference room at city hall, said Ben Hemson, the city’s business advocate.
Visit Bend always has had a reserve fund, with about three months worth of money saved to wind down business if the city of Bend doesn’t renew its contract, executive director Kevney Dugan said, but it’s looking at adding a rainy day fund.
“We’re starting to see a bit of a slowdown in the travel industry,” he said.
International travel, though not a large part of Bend’s tourism industry, has been down during the Trump administration, Dugan said. Hotel occupancy and tourism tax collections were up in January and February despite a heavy winter that dumped 60 inches of snow on Bend, but February tourism may have suffered without a major cross-country meet scheduled in town.
Heavy smoke from wildfires in August and September affected tourism in the area, Dugan said. August tourism was artificially inflated by the total solar eclipse, he said, but the first three weeks in September saw a decrease in occupancy rates and average daily room prices.
“I’m really interested to see what September collections are,” Dugan said.
Economic analysts also predict that another recession could hit in 2020 or 2021.
Nearly all of Visit Bend’s money comes from Bend’s transient room tax, a 10.4 percent tax added to hotel charges.
Oregon law allows local governments to collect lodging taxes, with a requirement that a certain percent of that revenue go toward tourism marketing. A 2003 law required that 70 percent of any lodging tax increase be spent on marketing and prohibited cities from decreasing the percentage they had agreed to allocate to tourism marketing — meaning Bend’s spending on tourism marketing can’t drop below 30 percent of its total room tax collections.
Between 5 percent and 10 percent of Visit Bend’s budget comes from ad revenue, ad sales and retail sales.
That funding mechanism means if fewer people visit Bend because of weather conditions or recession, less money will be available to market the city. Having money in reserve will help Visit Bend deal with a downturn, Dugan said.
“My gut off the top of the head is that it would be something like $500,000 so you would have something to pull from,” Dugan said.
But Moseley has advocated for tying tourism spending to the city’s unemployment rate, to the point that he used campaign funds to pay to promote a Facebook post urging residents to email fellow councilors and tell them to support his plan.
Bend’s unemployment rate is about 4 percent, which economists consider full employment. Under Moseley’s plan, the city would hold back the portion of room tax used for tourism marketing when Bend is at full employment to spend more on marketing during a downturn.
“As we continue to stoke the tourism flames, we’re just encouraging more people to come here,” Moseley said.
The city, not Visit Bend, should hold that money, he said.
“Visit Bend is not entitled to these tourism dollars,” Moseley said. “The city is required to spend the money on tourism. It’s not really Visit Bend’s money.”
Visit Bend, meanwhile, wants to hold any saved money so its advisory board can decide when to use it. Stopping or significantly reducing marketing will hurt Bend, Dugan said, citing a report on Colorado, which saw spending by tourists plummet when the state ended its tourism tax in the early ’90s.
“The notion of stop marketing because things are good and people know about us, I don’t think that makes sense,” Dugan said. “Turning off the valve in the marketing world is a risky thing to do.”
Any decision changing how the city uses its tourism tax could also be challenged in court. Following the Bend City Council’s unanimous May decision to reduce the share of the room tax spent on tourism from 35.4 percent to 31.2 percent, freeing about $350,000 to use to repair Bend’s crumbling streets, the Oregon Restaurant & Lodging Association and two Bend-area hotels sued the city of Bend last month for what the association alleges is improper use of the city’s hotel tax.
Jason Brandt, president and CEO of the association, previously told The Bulletin that Moseley’s plan to hold tourism tax money in reserve would be illegal. But on Thursday, he said creating a rainy day fund would be fine, provided the money is eventually used for tourism.
“The requirement for Oregon law is how the money is spent, not how long it is held,” Brandt said.
It’s important that the community has checks and balances in place to make sure the held money is spent in the appropriate way, he said.
The threat of another lawsuit from the hospitality lobby shouldn’t stop the city from considering his plan, Moseley said.
“I guess if we shut down government every time somebody threatened to sue us, we’re not going to get anything done at all,” he said.
Bend could find a model in Lane County, where Travel Lane County’s current agreement includes building a required reserve of 20 percent. President and CEO Kari Westlund said the reserve fund helps meet a public stewardship goal while continuing to use the tourism tax for its intended purpose.
“We want to be prudent, and we don’t want to stockpile,” she said.
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