Denver’s tourism promoters are weighing whether to ask voters in November to boost by one percentage point the city’s lodger’s tax on hotel stays.
The tax hike, which would increase the levy on out-of-town visitors to 14.85 percent, would raise $3 million a year to promote the city’s recently expanded convention center.
Although the tax is levied on tourists, not residents, proponents of the move concede that selling an increase is not a slam-dunk. After all, the current tax has produced a surplus of nearly $15 million in each of the past three years.
That extra money, however, didn’t go to tourism. It went to help bridge Denver’s budget gap. And tourism officials don’t want to change that.
“Understanding that the city is under some tough economic times and the city accepted the risk of building these facilities, we chose to look at some alternatives that would not go back to the city and ask for money,” said Richard Scharf, president and chief executive of the Denver Metro Convention & Visitors Bureau.
Some of the revenues raised from the lodger’s tax are earmarked to pay off bonds from the convention center’s construction in 1990 and its recent expansion. But over the past three years, the portion of the tax designated to repay debt on the 1990 project has produced the $15 million annual surpluses.
So why not forgo raising the tax and instead assign a portion of that money to the visitors bureau? Tourism promoters and city officials offer several reasons.
First, the city, which has struggled to bridge multimillion-dollar budget gaps in recent years, needs the lodger’s tax surplus to help that effort. Second, the tax on hotel stays is mostly borne by out-of-state visitors, not Denver residents. Third, even if raised to 14.85 percent, Denver’s lodger’s tax would remain in the middle range of such taxes in U.S. cities.
Scharf estimates that boosting the lodger’s tax to 14.85 percent from its current 13.85 percent will produce $3 million in additional revenue annually for the visitors bureau. A portion of the lodger’s tax dedicated to the visitors bureau already provides the vast majority of the bureau’s $8.4 million annual budget.
The extra $3 million primarily would be used to market the 2.2 million-square-foot convention center, which completed a $310.7 million expansion in December.
Mayor John Hickenlooper supports the plan to keep the surpluses in the city general fund. His spokesman, Lindy Eichenbaum Lent, said it “would not be wise” to dip into a revenue source that helps the city balance its budget, especially when the tourism industry is willing to tax itself instead.
“The excess revenues transferred to the general fund by the lodger’s tax have played a crucial role in maintaining lower taxes for our local residents,” Eichenbaum Lent said last week. “The original intent was for any excess revenues to be used to mitigate any excess service needs, such as safety, sanitation and maintenance – all of which not only provide tremendous benefits to our citizens but to our visitors as well.”
Still, any campaign promoting a lodger’s tax increase this year or next will need to address the issue of the surplus revenue already in hand.
“That’s my gut feeling – that people are going to be asking that very question,” City Councilman Charlie Brown, a member of the visitors bureau board, said earlier this year. “And we have to answer it in this campaign. If we don’t answer it forthrightly and convincingly, the campaign will not succeed.”
The visitors bureau’s Scharf said surveys of its membership have shown that many Denver hotels are in favor of boosting the tax to market the convention center. They see it as an investment in generating more business, he said.
Denver hotel operators agreed – as long as most, if not all, of the tax increase funds promotion of tourism.
“We are still going to be competitive with some cities,” said Armel Santens, managing director of the 112-year-old Brown Palace Hotel downtown. “Some are up to 17 and 18 percent. So I don’t feel it is a big hurdle.”
“It really helps the entire state and certainly helps the convention center,” said Navin Dimond, whose Stonebridge Cos. owns two hotels under planning and construction downtown. “It imports dollars into our economy.”
Staff writer Kris Hudson can be reached at 303-820-1593 or khudson@denverpost.com.
Lodger’s tax in Denver
A breakdown of the projects funded by Denver’s 13.85 percent lodger’s tax on hotel stays.
1.75 percent pays off bonds issued to fund the Colorado Convention Center’s recent expansion.
3 percent pays off debt from the convention center’s construction in 1990.
3.25 percent goes to the city’s general fund.
1.75 percent provides most of the Denver Metro Convention & Visitors Bureau’s budget.
1 percent goes to the Regional Transportation District.
0.1 percent goes to the Scientific and Cultural Facilities District.
0.1 percent goes to the construction fund for the professional baseball and football stadiums.
2.9 percent goes to the state.
Total: 13.85 percent.
Source: Denver Metro Convention& Visitors Bureau
