Changes in law and budgets driving new look at room tax
It has become difficult for McMinnville to continue its long tradition of opposing a transient room tax and giving up the resulting revenue stream. That time, it appears, is coming to an end, with two very important details remaining for the City Council to decide.
How high should we set the tax, and what process should be adopted for deciding how to spend the money?
Four recent changes are driving McMinnville City Council’s apparent turnaround on the idea of a local lodging tax following decades of opposition:
First, Oregon’s enactment of a statewide 1 percent room tax has eliminated the argument that a local ordinance would create new regulatory requirements for lodging establishments. Now, it will only change the percentage collected by those establishments and distributed to government.
Second, expansion of room tax laws across the state has left McMinnville virtually alone among major Oregon cities with no lodging fee. Local people pay the tax wherever they travel, but visitors to this area are exempted from any such add-on.
Third, the budget crunch of recent years forces local government to consider revenue streams wherever they might flow, and a local lodging tax would bolster the city’s budget while providing funds for visitor-related services.
Finally, a new state law more clearly defines how lodging taxes must be spent, giving confidence to those worried that local government might incorporate all the additional money into its general fund.
With that background, McMinnville City Council will address the topic once again on Tuesday, March 26. There are suggestions by some that the 6 percent tax request made by a local coalition may be too low. We’ve heard conversations ranging from 9 to 10.5 percent, about the state average.
Our suggestion would be no higher than 9 percent for the city. For one thing, adding 9 percent to the existing 1 percent state tax would produce an easy 10 percent calculation, and it simply doesn’t seem necessary to exceed that barrier.
The 1 percent state tax in 2011 raised about $65,000 in McMinnville’s 97128 zip area. Another 9 percent tax would add nearly $600,000 to the revenue total, of which about $180,000 could be allocated to any part of the city budget. The remaining $400,000-plus would be devoted to tourism marketing and facilities.
The path, it appears, is set for city officials to decide the rate, establish a process for spending decisions and approve the legal language of a city ordinance. At that point, the tradition would end.