As Hotel Taxes Drop, Cities Hunt for Cash

Meetings & Conventions: Newsline newsline.gif (8042 bytes)   CVBS, CONVENTION CENTER PROJECTS AFFECTED
As Hotel Taxes Drop, Cities Hunt for Cash
Bucking the trend:
The Moscone Center expansion continues. Following a sharp drop in hotel occupancy tax revenue, cities are facing budget gaps, putting freezes on salaries and trimming staff. Losses in tax revenue through November totaled in the millions for some cities, including San Antonio, Texas, which saw a 33 percent drop over 2000, and Monterey, Calif., which reported a hefty $1 million loss for the second half of 2001.

The Charlotte (N.C.) Convention and Visitors Bureau cut about 20 percent of its budget in January, including 10 positions, due to shortfalls in hotel tax dollars.

“It’s safe to assume that recipients of the hotel tax will be affected by the drop in occupancy tax revenue,” said John Marks, president and CEO of the San Francisco Convention and Visitors Bureau, whose staff was cut by six people late last fall.

According to Marks, the city’s projected 15 to 18 percent drop in occupancy revenue this year has not affected the Moscone Convention Center expansion project, set to be completed this fall.

But dwindling tax revenue is further stalling the expansion of the Westin Convention Center Pittsburgh hotel. The project was redesigned and will require an additional infusion of $10 million, for a total of $28 million in public subsidies.

That money would likely come from state tax funds, said Bob Imperata, executive vice president of the Greater Pittsburgh Convention and Visitors Bureau. But now is not a good time to be asking for cash. “You can’t go to the state and say, ‘Give us more money,’ when they have to go into the rainy day fund to pay the bills,” he added.

Putting further strain on city budgets are lower room rates. The less travelers pay for rooms, the less money cities tally in hotel tax revenue, said analysts.

The end result could be tax hikes. “We’re going to see a lot of temporary tax increases,” predicted Rolph Shellenberger, a senior analyst with Rochester, Wis.-based travel consulting firm Runzheimer International.

Palm Springs, Calif., raised its occupancy tax by 1 percent to 12.5 percent for convention hotels and 11.5 percent for all others to help raise funds. This follows a drop of about $300,000 in occupancy tax revenue between 2000 and 2001.


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