More tourists stay in Wisconsin, but new laws take away local benefits

Today featured the release of the Economic Impact of Tourism in Wisconsin report for 2015, which featured largely positive numbers. If you take a look at the PowerPoint from the Wisconsin Department of Tourism summarizing the report you’ll see how this industry has a significant impact on Wisconsin’s economy.

Visitor spending of $11.9 billion generated $19.3 billion in total business sales in 2015 as traveler dollars flowed through the Wisconsin economy.

•Visitor activity sustained 190,717 jobs in 2015, both directly and indirectly.

•1-in-12.5 jobs in the state is sustained by tourism activity – 8.0% of total employment in Wisconsin.

In addition, the Department of Tourism notes that one of the biggest drivers of 2015’s increase was in the lodging industry, as spending went up in that area by 7.3% to more than $2.5 billion. This allowed lodging to move past retail into 2nd place for the sector with the most tourist spending in Wisconsin for 2015 (only Food and beverage had more, at just over $3 billion). Hotel room revenue especially surged in the warm-weather months last year, as the Department of Tourism says Q2 and Q3 revenues were up by 11% in each of those 3-month periods.

The Tourism Department goes on to note that local governments and entities raised just over $100 million in lodging taxes last year, an increase of 8.2% that goes beyond the increase in overall lodging spending. Ordinarily this would be a good sign, as these lodging revenues could be use to increase services and take pressure off of the property tax in the communities that these tourists are staying in, which could go a long way toward keeping the positive cycle of tourism spending going.

However, the Wisconsin GOP Legislature threw a monkey wrench into that with the 2015-17 budget, and it could hurt these local communities as they deal with next year’s budget over the coming months. The Legislative Council has a good rundown of these changes in room tax laws, and why it might cause some difficulty for the locals.

EXPENDITURE OF ROOM TAX REVENUE

·Specifies that the required percentage of room tax revenues must be spent on tourism promotion or tourism development, not municipal development generally. Under prior law, the revenues had to be spent on “tourism promotion and development.”

·Eliminates a municipality’s authority to directly spend the room tax revenues that must be spent on tourism promotion and tourism development. Under Act 55, a municipality must forward those room tax revenues to a commission, if one exists for the municipality, or to a tourism entity.

RETENTION OF ROOM TAX REVENUE
· Modifies the 1994 grandfather clause, which generally permitted municipalities that had imposed a room tax prior to May 13, 1994, to retain more than 30% of room tax revenues if they had been doing so as of that date. Beginning with the room taxes collected on January 1, 2017, Act 55 creates a cap on the amount of room tax revenues that a municipality subject to the 1994 grandfather clause may retain for purposes other than tourism promotion and tourism development. The cap will be gradually reduced over a period of five years, such that, by fiscal year 2021, an affected municipality will be able to retain only the same dollar amount of the room tax that it retained in fiscal year 2010 or 30% of its current year room tax revenues, whichever is greater.

Basically what this does is prevent certain communities from using more than 30% of the revenue that comes from room taxes on things like streets or fire protection or a number of other services (despite the need for services growing due to tourists coming into the area). It also diverts money from the local communities from doing their own tourist promotion and spending, and forces it to go to commissions like the Greater Madison Visitors and Convention Bureau. These moves that Madison Mayor Paul Soglin said would cause a $1 million budget hole to a city that sits in a county that had tourism spending grow by nearly 6.2% last year.

A similar concern about how this provision robs local governments was voiced last June by a couple of tourist-driven towns on opposite ends of the state.

The change, which was approved by the Joint Finance Committee last month, would mean communities would have to turn over 70 percent of room taxes they collect to local tourism. Bayfield Mayor Larry MacDonald said his city keeps 48 percent of the tax now, and that the proposed change would result in services getting cut.

"We will be forced by the Wisconsin Hotel and Lodging Association to damage our tourism economy because we will not have as many police officers, garbage cans, parks — you name it," said MacDonald….

Denise Pieroni is the city administrator for Delavan. She said the city currently uses 82.5 percent of room taxes collected for capital projects that improve city infrastructure. Delavan would likely increase borrowing to pay for improvements to maintain their tourist town. With the change, Pieroni said there would be no incentive to add beds because of the cost it would take to service them. She said it’s short-sighted to use all the revenues for tourism promotion.

"(Visitors are) not going to come again if you have a downtown and it’s deteriorating," she said.

But wait, maybe Governor Walker realized that this bill would hurt the town he graduated high school in, wanted to maintain local control (remember when GOPs were all about small government and local control?) and did something to fix it!

Ahh, who am I kidding? In typical Walker fashion, he made this provision even worse, as explained by the Leg Council.

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Governor’s Veto

Under SB 21, as enrolled, a municipality that would otherwise be subject to the room tax retention reduction schedule, could have delayed implementation of the reduction schedule if the municipality had entered into a contract before January 1, 2016, that depended upon room tax revenues to satisfy its terms. The Governor vetoed this provision. Therefore, under Act 55, all municipalities that had imposed a room tax as of May 13, 1994, and had retained more than 30% of room tax revenues, pursuant to the 1994 grandfather clause, will be subject to the room tax revenue retention reduction schedule beginning with the room tax collected on January 1, 2017.

So the hit is guaranteed to come starting next year, and you'll see the resulting cuts and higher property taxes as a result. How kind of the man.

Here's another example of how the Wisconsin GOP gets things backward when it comes to business development in the state. Visitors get attracted to Wisconsin due to neat little towns, great events in cities, and beautiful scenery. So what does Walker and the ALEC crew do? They reduce the ability of those cities to maintain its infrastructure to handle these tourists, and instead push those duties onto the local property taxpayer, all while claiming to "protect" those same taxpayers. In addition, these same Republicans have defunded those cities with shared revenue cuts, and couldn’t even allow a vote on a bipartisan measure that would allow these communities to impose a sales tax to pay for upkeep on their roads. This is despite the fact that tourists cause extra use and wear on those roads, and pay a sizable amount of sales and room taxes.

Then add in WisGOP’s deregulation of the environment and regressive social policies, and it makes for even more incentives to keep people from considering Wisconsin over other areas to spend their tourist dollars. After a strong 2015 for tourist spending and the hotel business in Wisconsin, we see the state Legislature and Governor Walker trying to undo all of this success, and harm the original and beautiful Wisconsin communities that got those tourists to “Escape to Wisconsin.” It’s just so dumb.