The city of Bend plans to appeal a court ruling that prohibited the city from using about $350,000 of lodging taxes for road repairs.

The Oregon Restaurant and Lodging Association and two local hotels sued the city last fall, alleging that Bend broke a state law by redirecting about $350,000 of its tax on hotel rooms and vacation rentals to patch potholes instead of paying for tourism marketing. Deschutes County Circuit Court Judge Beth Bagley agreed, ruling last month that the city needed to allocate at least 35.4 percent of its total lodging taxes to tourism.

Now, the city wants to push its case before the Oregon Court of Appeals. The Bend City Council voted 5-0 Wednesday, with Councilor Barb Campbell abstaining and Councilor Bruce Abernethy absent, to appeal Bagley’s ruling.

At issue is how to interpret a 2003 state law on hotel taxes. That law required cities to dedicate 70 percent of any new room taxes to tourism and to avoid reducing the total percent of room tax devoted to tourism.

Bend at the time was in the middle of phasing in a 9 percent room tax and had pledged to increase the percentage of that revenue dedicated to tourism to 30 percent. City voters went on to approve increasing the tax to 10.4 percent in 2013.

Since 2013, Bend has spent 35.4 percent of its total room tax — 30 percent of the first 9 percent tax and 70 percent of the second 1.4 percent — on tourism through its contract with Visit Bend.

In May 2017, while trying to find a way to address a $91 million backlog in deferred maintenance on city streets, the City Council decided to reduce the percentage of total room tax that goes to tourism to 31.2 percent.

The city maintains the change was allowed because it kept total room tax allocations to tourism above 30 percent. The lodging lobby argued — and Bagley agreed — that state lawmakers intended to prohibit Bend from ever reducing the portion of room tax spent on tourism.

Visit Bend maintains a budget of about $3 million a year, but the city move freed up between $350,000 and $400,000 to fix roads.

That’s enough to repave 4 miles of 12-foot lanes, according to David Abbas, director of Bend’s streets and operations department. Alternatively, that money could add chip seal — a protective coating of liquid asphalt and crushed rocks — to 22 miles of lanes or coat 40 miles of lanes with slurry seal, which seals cracks and preserves existing pavement.

If the Court of Appeals upholds Bagley’s ruling, Bend will have to reallocate the money to tourism.

— Reporter: 541-633-2160; jshumway@bendbulletin.com

Editor’s note: This article has been corrected. The original version misstated which councilor was absent.

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