Hotels ask City to tax them more

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Hotel owners ask city to form a tourism marketing district to fund additional marketing of Visalia as a destination for conventions, events and tourism; self-imposed assessment would try and increase bookings

By Reggie Ellis @Reggie_SGN

VISALIA – With rising minimum wage going up on Jan. 1, workers compensation rates going up every year and the uncertainty regarding health care costs, most businesses are trying to find ways to lower taxes. But not Visalia’s hotels, motels, inns and bed and breakfasts. They’re asking the Visalia City Council to add a tax.

In actuality, the city’s hospitality industry is asking for permission to tax themselves. Hotel operators and the Visalia Convention and Visitors Bureau are asking the Visalia City Council to form a tourism marketing district (TMD) in Visalia. The district would tax lodging businesses within the city limits an annual assessment rate of 2 percent of gross short-term room receipts on non-governmental rentals of less than 30 consecutive days. The money generated by the district would be used to fund marketing and sales promotion efforts to increase nightly bookings by touting Visalia as a tourism, convention and event destination.

A petition to form the district was signed by the nine largest hotels in the city in September and submitted to the City on Oct. 2. Anil Chagan, owner of the Downtown Comfort Suites and the Hampton Inn in Visalia, is chairing the Committee that is proposing the district. Also on the Committee are Samantha Rummage-Mathias of the Wyndham Inn, Carrie Groover of the Marriott and Robert Lee of the Lamp Liter Inn.

The proposed TMD would include all lodging businesses with more than 20 hotel rooms located within the city limits. Out of the 18 lodging facilities in Visalia, 15 would be included in the proposed VTMD, as Murphy’s Motel, Relax Inn and the Spaulding House Bed and Breakfast all have fewer than 20 rooms.

The City Council has to form the district because it will be responsible for collecting the tax on a monthly basis (including any delinquencies, penalties and interest) from each business. At its Nov. 7 meeting, the City Council held a public comment but no one spoke for or against the formation of the district. A public hearing on the district will be held at the Council’s Dec. 4 meeting.

If formed, the TMD will have a five-year term beginning Jan. 1, 2018 through Dec. 31, 2022. Once per year, there will be a 30-day period in which owners paying more than fifty percent (50%) of the assessment may protest and initiate a City Council hearing to terminate the district. The TMD would also create a new corporation, the Visalia Tourism Marketing District Corporation, an association of local hotel owners charged with managing funds and implementing programs in accordance with this spending plan.

The TMD is expected to raise approximately $530,000 per year with more than three-quarters (77%) of the annual budget will be spent on sales and marketing. The remaining 23% include administration and operation of the funds, a collection/processing fee to the City and to create a contingency or reserve fund. That would be in addition to the $295,000 the City currently contracts for with the Visalia Convention & Visitors Bureau.

The first TMD was formed in West Hollywood, California in 1989. Since then, over 100 California districts have followed suit. California’s TMDs — including Fresno, Stockton, Davis, and Madera Counties — collectively raise more than $250 million for local destination marketing.

“With competitors raising their budgets, and increasing rivalry for visitor dollars, it is important that Visalia lodging businesses invest in stable, lodging-specific marketing programs,” the committee wrote in its presentation to the City.

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