When finalizing the town's fiscal year 2008-2009 budget last week -- after reducing a tax hike and creating a $45,000 hole in the budget, and then filling it with dollars from a "rainy day" reserve account -- Town Council shifted their attention to tourism.
On June 3, a consensus for capping Tourism Development Council (TDC) contributions at $100,000 was immediately apparent. While council also agreed to audit how TDC funds had been used, there was no discussion on how that unbudgeted audit expense would be paid. Perhaps it will come out of lodging taxes? Or maybe there is enough held in reserves? Or there may be fat in other areas of the budget this can be rendered from.
Putting a limit on town contributions for developing regional tourism was first discussed during a regular council meeting on May 19th. A suggestion to cap these funds at $70,000 was made, instead of the contracted 1% of all lodging tax receipts. Other council members seemed amenable, so the town's attorney was directed to review the contract between the town and the TDC. There was some discussion by council members about having assurance these withheld funds would be used only to develop tourism in Christiansburg. This lead to discussion about the current lack of any business plan for the aquatic center (reportedly conceived as a community pool during development of a ten-year plan, back in the 90s) and the hiring of an aquatics director.
These issues are valid and worthy of further examination and discussion.
First, if you presumed that for fiscal years 2005-06, 2006-07 and 2007-08 the TDC received an average of $125,000 a year, then the town has already allocated at least $375,000 to support regional tourism initiatives. That's a significant chunk of change, and it's reasonable to question whether a return on investment has been or will be realized.
Second, some portion of lodging operators in and around Montgomery County, Blacksburg and Christiansburg sought this 1% tax increase from each locality specifically to support regional tourism initiatives. It was a tax they were willing to collect and pass on to their customers, as they saw direct benefit in having this additional marketing paid for by visitors. It is notable there wasn't 100% consensus for this increase within the local lodging industry, but changing how these funds are used will be a concern for all hospitality related businesses.
Third, when this 1% increase was requested, the Christiansburg Town Council instead elected to increase its lodging tax by 2% (from 5% to 7%). Contrast this with neighboring Blacksburg which, during this same time period, has been collecting 6% in lodging taxes. Christiansburg granted itself an additional 1% tax for their general budget, rather than dedicating any funds as a match for regional contributions and marketing Christiansburg itself. Using the same formula as above, this represents about $375,000 in additional tax collections for the town, too, on top of the original lodging tax.
Fourth, when the concept of a regional tourism initiative was initially floated, town council minutes indicate a commitment to this would happen only if Virginia Tech was a participant. That never happened, and VT still won't collect meals, sales or lodging taxes for any of the "businesses" it operates on campus and in direct competition with adjacent private business owners.
A distinction needs to be made between the town using lodging taxes (and portions of other tourism related revenues) for tourism development instead of as a subsidy for town enterprizes.
Town Council should insist on business plans detailing how each recreational facility can (a) generate revenue to offset expenses and, (b) how this isn't a shift from private businesses to competing town enterprizes (which would reduce tax revenues if the town doesn't charge its customers taxes, as seen at VT). Without these numbers or plans, no one -- citizens nor council members -- can grasp the true cost of having these amenities. If such plans exist, they need to be made public.
The bottom line is the bottom line: these facilities need to provide residents with a direct benefit, keeping taxes as low as possible by charging user fees while also developing and increasing tourism related tax sources both within its borders and regionally. To realize and sustain economic development, visitors need to be spending dollars in both the town's licensed businesses as well as recreational facilities managed by the town. It is notable that several council members are on record for preferring user fees over general tax increases.
As the town manager now moves forward and reviews options for renegotiating or canceling the TDC contract, council needs to ensure development and funding of comprehensive economic and tourism plans.
Town residents have been subsidizing a basic necessity for years now, tapping into general funds to cover water and sewer services. Citizens and businesses alike can can scarce afford to start subsidizing other town enterprizes which, unlike indoor plumbing, not everyone wants or needs.