Proposed bed tax cut worrisome

In this atmosphere of cutting spending on the state and national levels, two bills in the Montana legislature are getting a lot of attention.

House Bill 316, sponsored by Rob Cook, R-Conrad, seeks to redistribute certain revenue and income to the state general fund. The bill takes aim at 72 separate programs, skimming off as much as 10 percent for the state’s coffers.

Nursing facilities and hospitals could feel the hit; the bill may take 10 percent of those facilities’ bed taxes. A tax may also be imposed on each barrel of 31 gallons of beer sold in Montana by wholesalers. The bill may take 10 percent from oil and gas revenues — counties and schools would feel the sting of that decision.

This bill reduces the allocation of many tax types to state special revenue accounts and redistributes the funds to the general fund. It will increase general fund deposits by $27-$29 million per year and decrease deposits to many state special revenue accounts by a total of $28-$30 million per year.

In Flathead County, another component of the bill would hit home: the bed tax. This county relies heavily on the tourism industry for revenue. The bed tax in Montana, which is at 7 percent, provides funding for marketing ventures to promote the state nation- and world-wide. The 2010 “Get Lost” campaign is one such use of the money.

The bed tax was self-imposed by the Montana Innkeepers Association in the 1980s on lodging stays. Four percent of the tax — about $16 million — currently goes toward advertising. The other three percent — $12 million — heads to the state general fund.

House Bill 317 proposes to sunset many state programs. For Rob Cook, it provides a means of investigating where the money is going and making sure it’s spent appropriately.

“The effect from 317 is a process by which these appropriations are reviewed and renewed on an eight-year cycle,” Cook said. “It establishes a procedure. In the legislative session prior to sunset, the appropriation is reviewed. Any legislator can write a bill to extend the sunset. Most of these (programs) are good spending. This is an opportunity every eight years to look at the appropriations off the books.”

However, both bills have local hoteliers worried.

“It’s imperative that we as a community market ourselves,” said Doug Woehler, owner and proprietor of Historic Tamarack Lodge in Hungry Horse. “(The bed tax) is not hindering people coming to visit. It increased Montana’s ability to market itself. Tourists are used to it.”

Woehler argues that the advertising paid for by the bed tax is vital to the state economy.

“All communities should be scared of this,” he said.

Racine Friede, the executive director of Glacier Country Regional Tourism Commission, feels that placing the sort of checks and balances on a number of statutory appropriations programs around the state is unnecessary.

“If in a recession, if someone feels the state funds shouldn’t be spent on marketing, someone can sweep (bed tax revenues) away into the general fund,” Friede said. “We would have to go to the legislature and request funding.”

Friede cited Colorado’s mid-1990s tale of woe when the state did away with its bed tax entirely. When the $12 million promotion budget plunged to zero, the state’s domestic market share also dropped an alarming 30 percent, representing an annual $1.4 billion loss.

“Colorado has inherent tourism attractions, namely professional sports. People are Broncos fans, Rockies fans,” Friede said. “We don’t have that kind of popular attraction.”

Friede said using Yellowstone and Glacier National parks as a branding component has been enormously successful. Advertisements such as “There’s nothing here,” ran in numerous national publications, with photos of the two parks. Friede said the two bills aim to review programs that don’t need an official process of review.

“It would be incredibly detrimental,” Friede said. “House Bill 317 leaves too much up to chance. I get the philosophy and I respect that, but a legislator can request a review of public appropriations any day of the week. We just don’t feel that it’s a practical bill. It impacts so many different groups. It demolishes decades of work.”

Cook, representative for House District 27, argues an opposite perspective.

“It’s not unnecessary — nobody proposes to terminate them but nobody reviews them,” Cook said. “It’s unlikely 316 will affect all programs at a 10 percent level. I have a soft spot for the bed tax. I do believe its appropriately spent.”

Cook said the state would only reduce statutory appropriations if there were a compelling need, but he added that it would take a decent argument to pull funds away from the bed tax.

“The principle behind 316 is to look at everybody,” Cook said. “I can understand their angst. We do have some budget issues that need to be resolved. In regards to the bed tax, I don’t believe it’s necessary to do (an eight-year review), but it has to be on the table like every other. (Lodging industry professionals) are no more or less exposed than before. This is a system for routine, cyclic review.”

House District 3 representative Jerry O’Neil said he supports the bed tax but he also supports a zero-based budgeting approach.

“I like the bed tax,” the Republican said. “I don’t like that other agencies have dug into the bed tax. There are a lot of things in the cracks we don’t see everyday. We need to see where the spending is.”

O’Neil added that he did think bed tax revenue would be safer in a special appropriations fund than the general fund.

Sally Thompson, who co-owns Glacier Outdoor Center in West Glacier said this sort of bill comes forward every two years, but that doesn’t lessen her anxiety.

“It’d be horrible,” she said if a bed tax were reduced or removed. “It would be disaster. I speak from many years of experience when we didn’t have a bed tax. It frightens me that every two years this happens. It’s like defending your right arm. It’s very important not only for our area but for the state.”

Thompson feels that a cyclic review is unnecessary and there are already enough checks on statutory appropriations.

“The bed tax in Montana was developed by the Montana Innkeepers Association in the early ‘80s to tax themselves to promote themselves and keep up with other states and Canada,” she said. “The 4 percent that’s there has to stay there. It hasn’t been wasted, it’s been used for promotion.”

Former House District 3 representative and Canyon RV and Campground owner Dee Brown said the bed tax has worked to promote a world-wide audience.

“(The bed tax revenue) gets thrown into the general fund for what? It’s the black hole,” Brown said. “We as hoteliers, bed and breakfast, campground owners say this is not a good idea.”

Brown feels that Cook and others might be trying to accomplish too much.

“You come in as a freshman legislator and you’re gung-ho and you’re going to change the world,” she said. “Some of these changes are not in the best interest of people in the state. (Tourism promotion funding) is a great program and I want it to stay this way. This doesn’t just help by business, this promotes the state in general to the advantage of anyone who deals with tourists.”

Alicia Thompson, director of marketing and business relations for heavyweight Glacier Park Inc. agrees with other local hoteliers.

“Without the collaborative efforts between private tourism businesses and the bed-tax funded organizations in the state, Montana’s tourism industry cannot and will not be able to sustain our high level of advertising and promotion market share that grows future visitation and visitor spending,” she said. “Tourism is a growing and thriving industry, employing Montana residents with livable wages. The tourism industry is successfully and responsibly promoting the state as a vacation destination — let us not take a step back and cut back or take away our funding just to enhance the general fund. Let us not forget that the general fund already takes 3 percent of the 7 percent bed tax collected leaving the tourism industry with only 4 percent.

 Tourism is an industry that attracts high value, low impact visitors to the state enhancing the authenticity of place - flora, fauna, geography, culture, and history. Our trepidation is that if the existing model of Montana’s bed tax funding is modified or taken away, businesses such as ours and ancillary industries that depend upon tourism promotion for revenue generation and employment will not thrive, but instead wither.”

For more information, visit www.tourismmattersmt.org.