This past week, I appeared before the City Council in a study session and expressed my concerns that the city was diverting lodgers tax revenue away from tourism marketing. I indicated that this action presents several problems for the city, both current and future.
I reminded city councilors that tourism is a major economic driver in La Plata County. In fact, it is the economic driver in the county, responsible for one in four jobs (6,000 jobs). Because of tourism dollars, most Main Avenue businesses make more income in four months than the remaining eight months of the year. Luckily, our economy is not totally dependent on tourism. We are more balanced, hence the speedy recovery from the 416 Fire in a few short months.
I also pointed out that we are being outspent by comparable towns. Our tiny neighbor to the east, Pagosa Springs, spends more on tourism marketing than Durango does. Pagosa is one-tenth our size! What’s wrong with this picture? It turns out that Pagosa’s city ordinance mandates that all of the lodgers tax revenue be used for tourism marketing and our ordinance does not. Hence, over the years, the city of Durango has been siphoning off an ever-greater percentage of the lodgers tax revenue for needs they consider to be more important.
The major beneficiary has been the transit fund, which hasn’t supported itself, as most enterprise funds are designed to do. This seems odd to me since, by the city’s own study, less than one in 20 riders on the transit are visitors. Why are visitor dollars spent on non-visitor services?
Let’s look into these numbers a little deeper. Visitors are responsible for about a third of sales tax revenue created in Durango, or about $7.8 million in 2017. Since our total city sales tax is 3 percent, this means that visitors spent about $260 million in purchases. Think about that. Visitors also produce more than $1 million in lodgers tax revenue for the city. This means that they actually spend about $50 million in hotel room charges in the city alone. If this weren’t enough of a motivation to support the tourism industry, I also pointed out to the council that for every tax dollar spent on tourism marketing, $8.75 is returned to their coffers. This is an amazing return on the city’s investment of tax revenue.
Another way of looking at this is, by diverting $475,000 away from tourism marketing as the city is doing, the city is losing more than $4 million in future tax revenue. For a council concerned about revenue shortages, this move is especially short-sighted.
A clear remedy to these competing uses of the lodgers tax revenue is to fix the ordinance to eliminate the apparent ambiguity on how the revenue is spent. Many other municipalities have faced this problem and have developed clear percentages of where the revenue is spent and to what extent.
Our ordinance mandates that the city council make these same determinations, but apparently our council leaves this responsibility up to the city staff and simply votes yea or nay on what the staff recommends without detailing its purpose and extent, as mandated by the ordinance.
Finally, the council spent the majority of my time with them discussing the possibility of increasing the lodgers tax to bring in more tax revenue. While this may be a great idea for the future, it ignores the current challenges presented to us from the pervasive negative publicity Durango received from the 416 Fire. It also ignores the fact that no lodgers tax increase will be supported by the lodger industry until the current ordinance language is fixed to no longer allow the city unfettered discretion to divert revenue away from tourism marketing.
Contact Durango Area Tourism Office Executive Director Frank Lockwood at frank@durango.org.
