The tourism industry is consistent with its stance against a hotel/motel tax increase:
- The original intent of the Hotel/Motel Tax in the City of Fairbanks was for destination marketing In 1979, initiated by the Fairbanks Convention & Visitors Bureau (FCVB) – now known as Explore Fairbanks – in cooperation with the Greater Fairbanks Chamber of Commerce, the City Council under Mayor William Wood enacted a 2% Hotel/Motel Tax with a clear intent for economic development, especially destination marketing by specifying that the tax was:
…for the purpose of and shall be limited to the funding of tourist and entertainment facilities for the general public, to promote the tourist industry, and the economic development of the City of Fairbanks.
Ordinance No. 3793 established the bed tax with 90% reinvested into FCVB and 10% into to then-called Fairbanks Industrial Development Corporation (FIDC), now known as Fairbanks Economic Development Corporation.
On October 23, 1996, Dr. William Wood wrote a guest opinion in Fairbanks Daily News-Miner entitled “Bed Tax isn’t for General Government – surcharge exists only to attract visitors, industries” in which he reconfirmed:
Bringing additional visitors to ‘Destination Fairbanks’ was to be the main thrust…It was never intended that visitors would be asked to pay directly for local governance expenditures…
- No targeted taxes for government general services One industry should not be singled out to fund government’s general services. A tax on guests of lodging facilities is a targeted tax. The State of Alaska and local governments have a track record of targeting the easiest industry when they have a budget shortfall or a perceived budget shortfall. This creates an inequitable scenario among industries when one industry is targeted to fund government’s general services. If there is a demonstrable need for increased funding for City services, the tourism industry would only support a broad-based tax imposed equitably on all industry sectors, residents and visitors.
In addition to Explore Fairbanks’ opposition to Ord. No. 6084, these other local and statewide organizations oppose the ordinance:
The Greater Fairbanks Chamber of Commerce (GFCC) opposes Ord. No. 6084. As stated in the “Oppose Targeted Taxes” Position Statement approved by the GFCC Board of Directors on October 22, 2019: “Most industries must compete against business opportunities outside of Alaska. We need to have strong industries and businesses investing and hiring in our communities. Continuing to raise the taxes/costs on the most accessible industry only makes it more difficult for these industries to survive this competition. Our governments should maintain tax policy that supports economic development. It is essential for the future of our people and our state.”
The Downtown Association of Fairbanks opposes Ord. No. 6084. As stated in the DTA Insider enews on May 7, 2019: “The Fairbanks city council is due to resume consideration of an ordinance postponed in December to increase the bed tax to spend on general government purposes. The Downtown Association opposes Ordinance #6084 as written. We agree with Explore Fairbanks that the bed tax is different and believe the visitor industry represents a vital inflow of new funds to the local economy, and increases in bed tax should be used strategically.”
The Alaska Hotel & Lodging Association (AkHLA) opposes Ord. No. 6084 stating, “Ordinance No 6084 will burden ONLY Fairbanks hoteliers and no other industries. Hoteliers nor Explore Fairbanks, requested or favored this targeted tax increase.”
The Alaska Travel Industry Association (ATIA) opposes Ord. No. 6084 stating, “ATIA opposes the creation of targeted travel industry taxes unless initiated and/or supported by the travel industry. Because tourism is seen as an industry focused on nonresident visitors, we are often targeted as an easy source of tax revenue. This unfairly puts the cost burden on individual businesses rather than balancing revenue generation across all sectors.”
- If there is ever any increase in bed tax, the Council should consider it only if it is requested by the local tourism industry for a project or marketing strategies that would benefit the industry and by extension, the economy of the community An increase of hotel/motel taxes at this juncture would essentially kill any future infrastructure project or marketing program that may be planned by the local travel industry.
An example of a hotel/motel tax advocated by a local travel industry is: the increase of Anchorage’s bed tax from 8% to 12% was specifically requested by the tourism industry and Visit Anchorage to fund the Dena’ina Convention Center and renovate the Egan Convention Center.
- Tourism already pays more than its fair share of taxes
- Of the top 50 property tax payers, excluding the pipeline, in the Fairbanks North Star Borough, ten (20%) are hotels. For example, the Westmark Hotel and Conference Center is one of the most highly assessed lodging facilities, ranking 8th of the top 50 tax payers. Of these top 50, 41 are in the City of Fairbanks and seven (17%) are hotels. The Westmark is ranked 4th overall of the City’s top 41 tax payers.
- In addition to property taxes, the travel industry pays more than a fair share into City government. The City of Fairbanks already benefits from the current 8% bed tax with 22.5% allocated for the City’s general services. Since the Great Recession, the 22.5% of the Hotel/Motel taxes received by the City has increased 43% from $531,929 in 2009 to $760,630 in 2018.
- Many of the guests at lodging facilities use on-premise and other local restaurants that sell alcohol, bars and liquor stores, therefore, they also pay alcohol taxes; and, more recently, we hear from the cannabis industry that guests are contributing to marijuana taxes.
- The proposed Ordinance No. 6084 circumvents City of Fairbanks voters in two ways regarding the tax cap The City’s proposed ordinance goes against the voters’ mandate by circumventing the tax cap through increasing taxes on the local tourism industry outside of the cap to fund government services.
- Regarding Ordinance No. 5420 in 2000, the reason that the bed tax over 1999 levels was removed by the voters from the tax cap back was to allow tourism to continue to grow without harming the City’s ability to collect taxes under the tax cap. The ordinance also specified that the City would continue to fund destination marketing at 65%. At the time, the ads that advocated for a “yes” vote to remove the bed tax from the tax cap stated, “A YES vote keeps the tax cap in place AND let’s a growing hotel-motel tax market our community – creating jobs, a strong economy, and a great quality of life.” The currently proposed ordinance is disingenuous to the intent of the voters.
- Furthermore, the voters set a tax cap which they have reconfirmed year after year with the clear intent that the City budget stays within the cap.
- Destination marketing through Explore Fairbanks is the single most effective economic development tool that the City of Fairbanks is able to leverage By reinvesting bed tax dollars into destination marketing and by preserving the bed tax for the use of destination marketing, the City is fostering the proven method worldwide whereby competing visitor industry businesses coalesce to market the destination brand.