Sunday, March 29, 2009

Visit Bend Wants "All" Its Money

A couple of months ago the Bulletin published the article "Visit Bend seeks new funding structure" detailing a proposal from the local tourism council Visit Bend to ask the City to change their funding formula. Currently 30% of the 9% room tax is earmarked for tourism promotion. About 5% goes towards related items, such as paying the debt service on the former visitor info center on the north side and to help promote major events like BendFilm, while 25% goes to Visit Bend.

Currently, the annual budget sets the level of overall tourism promotion funding at 30% of expected room tax revenues, and Visit Bend receives its share, in twelve equal monthly payments. The proposal is to simply pay Visit Bend the full 30% on a monthly basis, from actual revenues. The city will have to fund the old visitor center debt service and any other tourism promotion it wishes to do from some other source, like the general fund.

City staff and Visit Bend are promoting this proposal as a way to reduce financial risk if revenues do not reach the anticipated level, like is happening this fiscal year. The reasoning goes that in down times the general fund must make up the difference between expected and actual revenues, an amount that is anticipated to be up to $150,000.

As stated in the Bulletin:
“The percentage of funding from the city would go up, but overall, the amount of transient room-tax collections will likely go down,” La Placa said. “The end result should be pretty stable funding over time.”

For the fiscal year 2007-08, the city collected about $3.4 million in room taxes. Its funding for Visit Bend was $852,000, or about 25 percent of the room-tax collections, according to La Placa. If the city had allocated 30 percent, funding would have exceeded $1 million, giving the visitor bureau more money to attract visitors, he said.

If room-tax collections dropped 15 percent last fiscal year, using the new formula, the city still would have received $870,000 in funding, he said.

This simply doesn't make much sense-I think the writer meant that Visit Bend would still have received $870,000 in funding if revenues dropped 15%. There are a few other quotes from this article that ring some bells, like:
Under the new system, the onus of managing funding during slower room-tax collection periods would fall on Visit Bend, taking the pressure off the city if room-tax collections were less than anticipated, La Placa said.

“This would take the financial risk off the city and also satisfy the tourism and business community that the city is reinvesting 30 percent of the (transient room tax) collections back into the promotion of tourism — as stipulated by city code and state law,” La Placa said...

The new method of determining Visit Bend’s budget would give Visit Bend greater reason to promote tourism because higher room-tax collections would mean more funding, Bend City Manager Eric King said at Tuesday’s meeting.

Does Visit Bend need greater incentive to simply do their job? If so, perhaps we should find someone else to do the job. And I'm not clear on how providing a higher percentage of the actual revenues to Visit Bend takes any pressure off the City.

The council is taking up this issue in the April 1st Work Session. The proposal from Visit Bend states:
Consistent with Oregon House Bill 2267 and Bend City Code 7.012, the City of Bend currently allocates 30% of transient room tax (TRT) collections to the Tourism Fund to be used for the promotion of tourism as defined in Oregon House Bill 2934. The majority of these funds are transferred to the Bend Visitor & Convention Bureau (d.b.a., Visit Bend) through a pre-fixed budget that is established by the City prior to the beginning of each fiscal year and paid to Visit Bend in 12 equal monthly installments.

Since the budget is pre-fixed, the City carries the financial risk created by fluctuations in TRT collections throughout the year. Meaning, if the established budget for Visit Bend is greater than 30% of actual TRT collections over the ensuing year, the City absorbs the difference creating an unnecessary financial burden for the city.

Additionally, the current funding system does not allocate the full 30% of TRT collections to Visit Bend, but rather withholds a percentage of the Tourism Fund for internal City projects and expenses that the tourism industry and business community have argued do not fit the State’s definition of tourism promotion as defined in HB2934.

Proposed Solution
To resolve the negative impacts created by the current funding system, Visit Bend on behalf of the Bend tourism industry, is proposing that the current pre-fixed budget system is replaced by a percentage-based system, whereby 30% of TRT collections on a monthly basis are directed to Visit Bend for the promotion of tourism (minus the City’s pre-determined administrative and audit expenses). In this proposed system, the financial risk created by fluctuations in TRT collections is shifted from the City to Visit Bend.

In addition to removing the financial risk from the City, the tourism industry and business community receive the full 30% reinvestment into the Bend economy that they believe they are legislatively entitled to.

An additional benefit of this proposed system, is that is de-politicizes the allocation of the Tourism Fund. By allocating the full 30% to Visit Bend, the City is empowering Visit Bend to maximize the return on investment for the local economy, and holding them accountable to do so.

Additional benefits resulting from the proposed system are the following:
- The proposed system supports the legislative intent of City code 7.012 and Oregon House Bill 2267.
- The proposed system maximizes the positive economic impact of tourism in Bend, for area businesses and the City’s general fund.
- The proposed system fosters a strong and mutually beneficial relationship between the City of Bend and the Bend Business Community.

Proposed Contract Amendment
The proposed contract amendment will stipulate that City Council’s approval of Visit Bend’s business plan each year will activate a one year renewal of the contract (as it does currently), and a one year commitment to fund Visit Bend with 30% of the monthly TRT collections during the following fiscal year (minus City administrative and auditing expenses that will amount to approximately $25,000 in FY09/10).

Additional Note
In order to initiate the 2009/2010 fiscal year with a deficit-free Tourism Fund, Visit Bend will reimburse the City an amount equal to the 2008/2009 year-end deficit in the City’s Tourism Fund. This amount will be between $50,000 and $80,000 and will be paid by Visit Bend to the City at the end of the 08/09 fiscal year. If Visit Bend does not have sufficient funds to pay-off the deficit at the end of FY08/09, the City will withhold one-twelfth on the remaining deficit amount each month of FY09/10.

Note that there is no mention of where the 5% Visit Bend doesn't currently get goes, just that it goes to something that some people don't think promotes tourism. Yet, the Bulletin stated that this 5% goes to grants for ads for events like BendFilm and for debt service on a building that was used to promote tourism.

The controlling law from ORS 320.300 defines:
(7) “Tourism promotion” means any of the following activities:
(a) Advertising, publicizing or distributing information for the purpose of attracting and welcoming tourists;
(b) Conducting strategic planning and research necessary to stimulate future tourism development;
(c) Operating tourism promotion agencies; and
(d) Marketing special events and festivals designed to attract tourists.

(8) “Tourism promotion agency” includes:
(a) An incorporated nonprofit organization or governmental unit that is responsible for the tourism promotion of a destination on a year-round basis.
(b) A nonprofit entity that manages tourism-related economic development plans, programs and projects.
(c) A regional or statewide association that represents entities that rely on tourism-related business for more than 50 percent of their total income.

(9) “Tourism-related facility”:
(a) Means a conference center, convention center or visitor information center; and
(b) Means other improved real property that has a useful life of 10 or more years and has a substantial purpose of supporting tourism or accommodating tourist activities.
From the 2008 VCB Funding Memo we see that the only entity funded is Visit Bend. Grants to BendFilm, etc. were stopped in 08/09. The funds not going to Visit Bend now are used to repay the general fund for earlier shortfalls, city overhead, debt service on the Visitor Information Center, and for motel audits. These items totaled $231,000, while Visit Bend received $809,000 (not the $830,000 listed) after the council vote.

In its proposal Visit Bend wants all the tourism promotion money, a full 30% of room tax revenues instead of the 25% it currently receives, and full control of how the city promotes tourism. Event planners will have to go hat in hand to Doug LaPlaca at Visit Bend rather than approach the council for advertising funding. In return, Visit Bend pledges to pay any shortfall in the current years' revenues, but immediately backtracks by saying that if it doesn't have the cash at the end of June, it will simply agree to receive less of the monies it would be now entitled to next year. Note that it states this will make the current tourism fund deficit free, but the Issue Summary from staff states:
Based on current trends in room tax revenues, the Tourism Fund is expected to end the year with a cash shortfall of $100,000 to $130,000. This Visit Bend proposal provides for a reimbursement to the City of $50,000 to $80,000 (depending on level of reserves Visit Bend has) to cover the year-end deficit in the City’s Tourism Fund. The remaining cash shortfall will need to be covered by a loan from the General Fund and repaid with the following year’s room tax receipts.
The current overhead, debt service, and motel audit expenses would also have to be funded by another source, i.e. the general fund.

In any case, I have seen no evidence that the city must make up any shortfall. In fact according the contract with Visit Bend, more than funds actually received can NOT be spent:
2. Public sector funding will be limited to those sources set forth in Section IV. (Note: currently 30% of transient room taxes) The annual budget will be based upon a percent of tourism related taxes mutually agreed upon by February 1st of the proceeding year by CONTRACTOR and the CITY, and the annual budget will contain a reserve fund in an amount up to fifteen percent (10%) of the public funded portion of the annual budget. The reserve fund, if such is deemed to be necessary, may be used in the case of actual revenues being less than forecast revenues and in support of activities included in the approved Business Plan. CONTRACTOR may access the reserve fund upon request and approval by the CITY. In no case will expenditures exceed actual funds available for CONTRACTOR operations. Actual funds available shall consist of those funds provided in accordance with Section IV above (NOTE:"...shall be no less than 27%of the transient room tax revenues."), and any funds provided from private sector contributions. However, if CONTRACTOR assumes additional event sponsorships that are not funded by tourism related taxes, then CONTRACTOR may request additional funding from the CITY to support these additional events.
So the reality is that the the city not only does not have to make up room tax shortfalls, the contract itself specifically addresses the issue, stating that only the agreed percentage of room tax funds actually collected can be spent.

It is not up to city taxpayers to make up funding shortfalls, it is up to Visit Bend to adjust their budget.

And there is an element of Bend City Code that may render any such changes in VIsit Bend funding a moot point at this time, specifically:
7.036(1)(b) Amendment to Tourist Promotion Fund. A decrease in the percentage of the monies to the Tourist Promotion Fund, or a change in the definition of the Tourist Promotion Fund, shall require a vote of the people as provided in Section ___ of the Bend Charter.
The Code earier defines the "Tourist Fund" as:
A special fund called a Tourist Fund shall be established for the purpose of promoting tourism within the City of Bend...30% of the money shall be paid into the fund. The Tourist Fund shall be used for the promotion of tourism as defined in Section 1 of HB 2934 (Oregon Laws, 2001)(NOTE: Same as definition from ORS 320.300 quoted above), and the city is authorized to enter into contracts with the Bend Visitor & Convention Bureau, the Central Oregon Visitor’s Association or other entities deemed worthy by the City Council to carry out this purpose.

An argument could very well be made that such changes in revenue distribution constitutes a change in the definition of toursim fund, namely that the only defined use of tourism promotion funds is to finance Visit Bend. This is a significant restriction from current practice.

That is irrelavant in this case, as the current contract clearly shows that the "change" requested, to a percentage of the actual revenues, is already in force.

It just hasn't been enforced to date.

1 comment:

  1. Your great interest in this item is appreciated, but you are incredibly irresponsible with your "facts". If you're that interested in tourism why don't you contact Visit Bend directly and get the right information before recklessly pontificate.