HomeMy WebLinkAbout11122024 Randy Wells Laydown 1 to Bed Tax increaseIntroduction of Ordinance 2024-014: Revising Seward City Code Section 5.45.015(A) Hotel/Motel
Room Tax – Levy of Tax, to Increase the Hotel/Motel Tax Rate from Four Percent to Eight Percent,
Effective January 1, 2025
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To : Seward residents, Alaskan residents, Seward business owners, & Seward visitors
From: Randy C. Wells, City of Seward City Council Member
Date: November 9, 2024
Subject: City of Seward Administration, Proposed Bed Tax Increase
As an entrepreneur since the age of 19 and throughout my professional career, I have
consistently advocated for minimizing tax burdens on individuals and businesses. When
approached to run for Seward City Council, I initially expressed reservations about my
electability due to my involvement in a controversial industry and my outspoken fiscally
conservative yet socially liberal views. Despite these potential obstacles, I currently hold
a seat on the Seward City Council, though it is likely to be my final term.
When the Seward City Manager approached me regarding a proposed bed tax
increase, they did so knowing my background as a lodging business owner and my
general opposition to new taxes. Initially, I strongly opposed the proposal. However,
recognizing my responsibility as a council member to remain open-minded, I conducted
extensive research from both opposing and supportive perspectives.
In my role as a Seward City Council member, I have prioritized thorough research,
careful consideration, and active listening to local citizens' concerns before casting
votes or supporting proposals. This commitment to due diligence ensures that my
decisions are well-informed and align with the best interests of our community.
To provide a comprehensive overview, I have compiled historical and recent bed tax
discussions from both the State of Alaska and the Kenai Peninsula Borough (KPB).
Additionally, I've gathered current bed tax information from Alaska and various states in
the lower 48, including both politically conservative and liberal-leaning states. Lastly,
I've considered potential viewpoints from business owners and city governments.
This comparative analysis reveals that the City of Seward administration's suggestion
for a bed tax increase is well within the range of other popular tourist destinations.
However, I remain fully receptive to additional input from citizens and business owners,
regardless of their stance on increasing the City of Seward Bed Tax. It is crucial to
consider all perspectives before making a final decision on this important matter.
Introduction of Ordinance 2024-014: Revising Seward City Code Section 5.45.015(A) Hotel/Motel
Room Tax – Levy of Tax, to Increase the Hotel/Motel Tax Rate from Four Percent to Eight Percent,
Effective January 1, 2025
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In October 1995, a 4% bed tax was approved By Seward City Council
In spring 2024: www.alaskasnewssource.com/2024/04/03/lawmaker-proposes-new-bed-tax-alaskas-tourists/
•Rep. Andrew Gray, D-Anchorage, is proposing Alaska adopt a 6% tax for tourists who rent a room
in the state under 30 days
•Gray says Alaska sees roughly 2.5 million tourists annually, and a 6% percent bed tax could
generate a minimum of $18 million annually for the state.
•Gray said he is considering amending the bill to add a tax cap of 15%, considering some
municipalities like Anchorage already collect bed taxes.
On June 18th, 2024, The KPB had public discussions on:
•“Up for consideration was a resolution that would have put a question on voter’s ballots this fall:
should the borough collect a tax of up to 12% on short-term lodging and overnight camping
accommodations?” -www.kbbi.org
On Oct 22nd, 2024, the KPB approved a “tourism working group” to discuss the pros
and cons of a bed tax on the KPB. A full recording of the Oct. 22 meeting can be found at kpb.legistar.com.
Reach reporter Jake Dye at jacob.dye@peninsulaclarion.com.
•This winter the working group will explore the benefits and impacts of tourism on borough revenue,
costs and services — including the effects of a potential bed tax. The group is made up of seven
voting members, four of whom are members of the public and three are representatives of the
tourism industry.
•Representing the tourism industry will be Carol Fraser, of Aspen Hotels; Duane Bannock, of
Uptown Motel; and Tom Tougas, of Major Marine Tours. Jon Faulkner, who owns Land’s End
Resort, will serve as an alternative.
•Denis Hippert of Sterling; Donna Hall of Homer; Larry Opperman of Soldotna; and Sargeant
Truesdell of Soldotna will sit in the public seats. Donald St. John, of Kenai, is an alternate.
•The resolution creating the group, adopted by the assembly in September, says that the group will
evaluate “tourism benefits and impacts” on the borough; discuss options to ensure “visitors are
paying their fair share for the services they use”; and assess the effects of a potential bed tax.
•Creation of the group came after the assembly considered in June a resolution that would have
added a question to the October ballot asking borough voters whether the borough should levy
such a tax. After roughly 80 minutes of testimony largely in opposition and largely by
representatives of Kenai Peninsula lodging operations, the resolution was tabled.
•Fraser, Bannock and Faulkner were among those who spoke against that resolution at a June
assembly meeting.
Introduction of Ordinance 2024-014: Revising Seward City Code Section 5.45.015(A) Hotel/Motel
Room Tax – Levy of Tax, to Increase the Hotel/Motel Tax Rate from Four Percent to Eight Percent,
Effective January 1, 2025
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Comparative Analysis of Lodging Tax Rates Across the United States:
States with Favorable Lodging Tax Rates:
1.Alaska: Implements a decentralized approach with no statewide lodging tax.
Local governments have the authority to impose their own taxes, resulting in
regional variations. For example, Anchorage enacted a 12% tax on short-term
room rental transactions on August 20, 2019, as per Anchorage Municipal Code
(AMC) Chapter 12.20.
2.Florida: Maintains a relatively low state-level lodging tax rate of 6%. However,
local jurisdictions can levy additional taxes, potentially increasing the overall rate
for accommodation.
3.Wyoming: Known for its natural beauty, Wyoming offers an attractive lodging tax
rate of approximately 4%.
4.New Hampshire: Consistent with its reputation for having no sales tax, New
Hampshire also refrains from imposing a state-level lodging tax.
5.South Dakota: Aligning with its generally business-friendly policies, South
Dakota maintains a low overall tax burden, including a favorable lodging tax rate
of 1.5%.
6.Tennessee: The Volunteer State imposes a modest lodging tax rate of 4%.
States with Higher Lodging Tax Rates:
1.Illinois: Particularly in Chicago, lodging taxes can reach up to 17.4%, making it
one of the highest in the nation.
2.Connecticut: Imposes a high lodging tax rate of 15% and prohibits local
authorities from levying additional taxes.
3.Hawaii: A popular travel destination, especially for Alaskans, Hawaii increased
its lodging tax in 2023 from 14.962% to 17.962%.
4.Maine: While lower than some of the highest rates in the country, Maine has a
relatively high lodging tax of approximately 9%.
5.New York: In New York City, the combined lodging tax can be as high as
14.75%, reflecting the premium placed on accommodations in one of the world's
most visited cities.
6.California: While there is no statewide lodging tax, many cities impose high
transient occupancy taxes, which can vary significantly across the state.
7.Texas: Often referred to as Alaska's "little sister" and known for its conservative
leanings, Texas has a 6% statewide bed tax. However, local additions can
significantly increase this rate. For instance, El Paso, TX has a total combined
bed tax of 17.5%.
Introduction of Ordinance 2024-014: Revising Seward City Code Section 5.45.015(A) Hotel/Motel
Room Tax – Levy of Tax, to Increase the Hotel/Motel Tax Rate from Four Percent to Eight Percent,
Effective January 1, 2025
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Possible Lodging Business Concerns
Lodging businesses often oppose lodging taxes for several compelling reasons:
1.Increased Operational Costs: A lodging tax can significantly elevate
operational expenses, potentially leading to higher room rates. This price
increase could deter budget-conscious travelers and negatively impact
occupancy rates, ultimately affecting the business's bottom line. Small
establishments, in particular, may find it challenging to absorb these additional
costs without compromising their profitability.
2.Competitive Disadvantage: If lodging businesses in one area are subject to
taxes while those in neighboring regions are not, it creates an uneven playing
field. This disparity can make it challenging for taxed establishments to maintain
competitive pricing and attract guests, potentially leading to a loss of market
share and reduced profitability. This effect can be especially pronounced in
border areas where guests can easily choose accommodation in a nearby tax-
free jurisdiction.
3.Negative Impact on Tourism: Higher lodging costs due to taxes can discourage
tourism, particularly in price-sensitive markets. This reduction in visitors can lead
to decreased revenue not only for lodging establishments but also for other
tourism-dependent businesses in the area, potentially affecting the entire local
economy. The ripple effect can be substantial, impacting restaurants, retail
shops, and attractions that rely on tourist traffic, potentially leading to job losses
and reduced economic growth in the region.
4.Administrative Burden: Managing and complying with additional tax regulations
can be complex, time-consuming, and costly. This added responsibility often
requires businesses to allocate resources away from core operations, potentially
impacting service quality and overall guest experience. Small businesses may
struggle with the increased administrative workload, as they may lack the
resources to efficiently manage these additional requirements without
compromising other aspects of their operations.
5.Economic Uncertainty: Lodging businesses may argue that such taxes can
lead to economic instability in the region. The potential decrease in tourism and
subsequent reduction in spending can have far-reaching consequences,
impacting not just the hospitality industry but also related sectors. This
uncertainty can discourage investment and hinder long-term growth in the
tourism sector, potentially leading to a cycle of reduced development and
diminished attractiveness of the destination.
Introduction of Ordinance 2024-014: Revising Seward City Code Section 5.45.015(A) Hotel/Motel
Room Tax – Levy of Tax, to Increase the Hotel/Motel Tax Rate from Four Percent to Eight Percent,
Effective January 1, 2025
5 | Page
6.Perception of Unfairness: Many lodging operators feel that these taxes unfairly
target their industry while not addressing other sectors that may also contribute
to local infrastructure wear or environmental concerns. This perceived inequity
can lead to resentment and resistance from the hospitality sector, potentially
straining relationships between businesses and local governments. It may also
create a sense of distrust and lack of cooperation between the industry and
policymakers, hindering future collaborative efforts.
Understanding these concerns is crucial for the City of Seward and industry
stakeholders to develop balanced approaches that support both local revenue needs
and the sustainability of the lodging industry.
Possible City Government Perspective
Conversely, city governments often implement lodging taxes for several key reasons:
1.Revenue Generation: Lodging taxes provide a significant source of revenue for
local governments, helping to fund essential services and infrastructure projects.
This additional income can be particularly valuable for cities with limited tax
bases or those facing budget constraints. The revenue generated can be used to
improve public services, enhance city amenities, and support various community
initiatives without placing an additional burden on local residents.
2.Tourism Promotion: These taxes are frequently allocated to marketing
campaigns aimed at attracting tourists, which can boost the local economy. By
reinvesting a portion of the tax revenue into tourism promotion, cities can create
a self-sustaining cycle of growth in the hospitality sector. This targeted marketing
can help increase visitor numbers, extend the average length of stay, and
encourage repeat visits, all of which contribute to a thriving tourism industry.
3.Infrastructure Development: Funds from lodging taxes can be used to improve
local infrastructure, such as roads, public transportation, and facilities that
support tourism. These improvements benefit both visitors and residents,
enhancing the overall quality of life in the city. Upgraded infrastructure can also
make the destination more attractive to potential investors and businesses,
further stimulating economic growth.
4.Support for Local Attractions: Revenue can help maintain and promote local
attractions, parks, and cultural sites, enhancing the overall visitor experience.
This support can be crucial for preserving historical landmarks and cultural
heritage, which are often key draws for tourists. By investing in these assets,
cities can differentiate themselves from other destinations and create unique
experiences that attract a diverse range of visitors.
Introduction of Ordinance 2024-014: Revising Seward City Code Section 5.45.015(A) Hotel/Motel
Room Tax – Levy of Tax, to Increase the Hotel/Motel Tax Rate from Four Percent to Eight Percent,
Effective January 1, 2025
6 | Page
5.Economic Development: By investing in tourism and related infrastructure,
cities can stimulate economic growth and create jobs in the hospitality and
service sectors. This can lead to a more diverse and resilient local economy. The
multiplier effect of tourism spending can benefit a wide range of businesses, from
restaurants and retail shops to transportation services and entertainment venues,
creating a robust economic ecosystem.
6.Event Hosting: Lodging taxes can help fund convention centers and events that
draw visitors further supporting the local economy. Large-scale events can bring
significant economic benefits, including increased spending at local businesses
and heightened visibility for the city. These events can also help to fill hotel
rooms during off-peak seasons, providing a more stable year-round income for
the lodging industry.
7.Community Projects: Some cities use lodging tax revenue to support
community initiatives, such as arts programs or public events, benefiting both
residents and visitors. These projects can enhance the city's cultural offerings
and quality of life, making it a more attractive destination for tourists and potential
residents alike. By improving the overall livability of the city, these initiatives can
also help attract and retain a skilled workforce, further supporting economic
growth.
While the implementation of lodging taxes can be controversial, they represent a
balancing act between generating necessary revenue for city development and
maintaining a thriving tourism industry. Successful implementation often involves
transparent communication about how the funds are used and ongoing collaboration
with the lodging industry to address concerns and maximize benefits for all
stakeholders.
Introduction of Ordinance 2024-014: Revising Seward City Code Section 5.45.015(A) Hotel/Motel
Room Tax – Levy of Tax, to Increase the Hotel/Motel Tax Rate from Four Percent to Eight Percent,
Effective January 1, 2025
7 | Page
Finding Common Ground
Here are several ways lodging businesses and city governments can find common
ground on lodging taxes:
1.Transparent Communication: Establish open lines of communication to discuss
the purpose and benefits of the lodging tax, helping businesses understand how
the revenue will be used. Regular meetings between city officials and lodging
industry representatives can foster trust and ensure that all parties are informed
about tax-related decisions and their impacts.
2.Revenue Allocation: Agree on specific allocations of the tax revenue, such as
funding for tourism promotion, infrastructure improvements, or community
projects that directly benefit both visitors and local residents. Creating a detailed
plan for revenue distribution can help lodging businesses see the tangible
benefits of the tax and how it contributes to the overall growth of the tourism
sector.
3.Tax Rate Negotiation: Work together to set a reasonable tax rate that balances
the need for revenue with the economic realities of the lodging industry, ensuring
it remains competitive. Consider implementing a tiered system based on room
rates or occupancy levels to make the tax more equitable across different types
of establishments.
4.Incentives for Compliance: Create incentives for lodging businesses to comply
with tax regulations, such as streamlined reporting processes or reduced rates
for early compliance. Offering training sessions or digital tools to simplify tax
collection and reporting can help reduce the administrative burden on
businesses.
5.Regular Reviews: Implement periodic reviews of the tax structure and its impact
on both the lodging industry and the local economy, allowing for adjustments
based on changing conditions. These reviews should involve input from both
government officials and industry representatives to ensure a balanced
perspective.
6.Joint Marketing Efforts: Collaborate on marketing initiatives that promote both
the city and local lodging businesses, using tax revenue to enhance visibility and
attract more visitors. This could include co-branded campaigns, participation in
travel trade shows, or the development of a comprehensive destination
marketing strategy.
7.Support for Local Events: Use lodging tax funds to support local events and
festivals that can drive tourism, benefiting both the city and lodging
establishments. Involve lodging businesses in the planning and promotion of
these events to ensure they align with the industry's needs and capabilities.
Introduction of Ordinance 2024-014: Revising Seward City Code Section 5.45.015(A) Hotel/Motel
Room Tax – Levy of Tax, to Increase the Hotel/Motel Tax Rate from Four Percent to Eight Percent,
Effective January 1, 2025
8 | Page
8.Feedback Mechanisms: Establish channels for lodging businesses to provide
feedback on tax policies, ensuring their concerns are heard and considered in
future decisions. This could include regular surveys, focus groups, or an advisory
board comprising industry representatives to provide ongoing input on tax-related
matters.
9.Phased Implementation: When introducing new taxes or increasing existing
ones, consider a phased approach that allows businesses to adjust gradually.
This can help mitigate the immediate financial impact and give establishments
time to adapt their pricing and operational strategies.
10. Education and Transparency: Develop educational materials for both lodging
businesses and visitors explaining how the tax is used to benefit the community
and enhance the tourist experience. Clear signage or informational brochures
can help guests understand the purpose of the tax and its role in supporting local
amenities and services.
By implementing these strategies, the City of Seward and local lodging businesses can
work together to create a tax structure that supports both municipal needs and the
continued growth of the tourism industry. This collaborative approach can lead to a
more vibrant, sustainable, and economically robust community that benefits all
stakeholders.
Introduction of Ordinance 2024-014: Revising Seward City Code Section 5.45.015(A) Hotel/Motel
Room Tax – Levy of Tax, to Increase the Hotel/Motel Tax Rate from Four Percent to Eight Percent,
Effective January 1, 2025
9 | Page
Moreover, Cities with higher bed taxes, such as those proposed by Alaska state
lawmakers, Kenai Peninsula Borough officials, and the Seward city administration, can
maintain and even grow tourism by implementing several key strategies:
1.Investment in Tourism Infrastructure: Revenue generated from lodging taxes
is often reinvested into local tourism infrastructure. This includes improving public
transportation, enhancing attractions, and maintaining public spaces. Such
investments make the destination more appealing to visitors, potentially offsetting
the impact of higher lodging costs.
2.Marketing and Promotion: A portion of lodging tax revenues funds marketing
campaigns that showcase local events, festivals, and attractions. These
promotional efforts have proven effective in attracting tourists despite higher
overall costs by highlighting the unique experiences that Seward has to offer.
3.Unique Attractions and Experiences: Seward boasts an abundance of outdoor
attractions and experiences. The city's commitment to the Seward Chamber is
commendable, as it focuses not only on maintaining and growing traditional
tourism during the spring-summer season but has also implemented and
expanded winter tourism opportunities. This year-round approach diversifies the
city's appeal and helps mitigate the impact of seasonal fluctuations.
4.Enhanced Quality of Service: Higher lodging taxes often lead to improved
services and amenities in hotels and other accommodations. Visitors are more
likely to accept higher costs if they perceive they are receiving superior value
through enhanced services, luxurious amenities, or exceptional customer care.
This focus on quality can help justify the increased expenses for tourists.
5.Sustainable Tourism Practices: Many cities implement sustainable tourism
initiatives funded by these taxes, attracting environmentally conscious travelers.
These practices may include conservation efforts, eco-friendly transportation
options, and programs aimed at preserving local culture and natural resources.
Such initiatives appeal to the growing segment of eco-friendly tourists who
prioritize responsible travel, potentially opening new market segments for
Seward.
6.Competitive Pricing Strategies: While lodging taxes increase overall costs,
cities and businesses often implement competitive pricing strategies to mitigate
the impact. These may include discounts for longer stays, package deals that
bundle accommodation with attractions, or off-season promotions. Such
strategies help make the overall experience more affordable and attractive to
potential visitors, encouraging extended stays and repeat visits.
Introduction of Ordinance 2024-014: Revising Seward City Code Section 5.45.015(A) Hotel/Motel
Room Tax – Levy of Tax, to Increase the Hotel/Motel Tax Rate from Four Percent to Eight Percent,
Effective January 1, 2025
10 | Page
After careful consideration, I have come to understand and support the City Manager's
rationale for proposing the bed tax increase. This proactive measure is particularly
important given the likelihood that either the Kenai Peninsula Borough (KPB) or the
State of Alaska will implement a bed tax in the future.
To illustrate the significance of this preemptive action, consider the following scenario:
If the KPB had approved a 12% Bed Tax in November, lodging businesses within
Seward's city limits would have been collecting additional tax revenue for the KPB,
effectively diverting funds away from our city. By implementing this Bed Tax increase
now, Seward secures this vital revenue stream for itself. These funds can then be
strategically allocated to create fair and competitive salaries for our City of Seward
employees, addressing a crucial need in our municipal workforce.
While new taxes are often met with resistance, this proposed Bed Tax increase
represents a strategic opportunity for Seward. The City Manager's forward-thinking
approach not only protects Seward's financial interests but also ensures a stable source
of funding for essential city services and employee compensation. By acting decisively
now, Seward positions itself to maintain control over its tax revenue and invest in its
workforce, ultimately benefiting the entire community.
This proactive stance demonstrates fiscal responsibility and a commitment to the long-
term prosperity of our city, ensuring that Seward remains a thriving and attractive
destination for years to come. It also aligns with strategies employed by other cities to
balance the impact of higher lodging taxes while still attracting and retaining visitors.
The key lies in creating a value proposition that justifies the higher costs through
enhanced experiences, improved infrastructure, and a commitment to sustainability.
Therefore, I am in favor of enacting a resolution that would raise the bed tax either in
2024 or at any time ahead of potential KPB or State of Alaska implementation. My
support stems from a desire to keep as much revenue generated within Seward City
limits in our community, ensuring that these funds directly contribute to the improvement
and sustainability of our local economy and services.
Randy C. Wells