The room tax flap with the CVB…

Today’s Wausau Daily Herald includes coverage of last night’s Wausau City Council meeting in which there was a discussion of the room tax allocations for 2010.  Normally, these decisions would have been done in the course of the budget discussions that concluded last fall, but it has been a particularly thorny issue this time around.  Room tax revenues are down because of lower occupancy and possibly average room rates, due to the state of the economy over the past year.

There are indications that travel could be rebounding in some sectors. For example, passenger enplanements at Central Wisconsin Airport were up 16 percent in January 2010 compared to the same month a year earlier. Still, the city can’t allocate money that it doesn’t have good reason to believe will be there. Upside surprises can be dealt with easily, but having revenues come in lower creates a far more difficult problem.

The Wausau/Central Wisconsin Convention & Visitors Bureau (CVB) has been supported by a 2.5 percent room tax in all of the participating communities. Wausau is not required to be a member, but I am a supporter of the CVB and when I came into office in 1998, one of my first priorities was to have the City of Wausau join with the other member communities in this effort. For years, Wausau was the single largest contributor to the CVB and we remain one of the largest funding sources today.

 
We’ve had issues over the years with the CVB that we worked through, including a slow entry into online marketing in the early years.  Frankly, it’s still pretty weak: www.visitwausau.com . There was also a period of time when the CVB was receiving double-digit formula-driven increases in funding while other areas of the city’s budget were extremely tight. After a number of discussions, we decided to stay the course and not cap the large increases that were going to the CVB. “We shouldn’t be punished for doing a great job,” said the CVB. But such formulas are a two-edged sword. There is a certain “shoot at everything that flies and claim everything that falls” aspect to the work of the CVB. They didn’t deserve all of the credit when revenues were rising any more than they deserve the blame for things heading south.
 
 
By agreement with the member communities, the Badger State Games added another half percent to the room tax contribution toward CVB. For reasons that may have had little or nothing to do with the CVB, the Badger State Games started out as a major event, but they have steadily declined in their local impact over the years. CVB member communities were coughing up tens of thousands of dollars in annual host rights fees, but high-participation events that were formerly part of the program here were being shunted off to other communities. As a result, the Badger State Games in recent years have been a very expensive and severely under-performing venture that has cost the City of Wausau and our other CVB partners hundreds of thousands of dollars. These disappointing outcomes were evident long before the recession.
 
In terms of comparable value, Wausau has been paying far more for the Badger State Games than it contributed to ArtsBlock or the Leah Yawkey Woodson Art Museum. Both are year-around operations that contribute a great deal to our appeal as a destination for visitors. With room taxes down, both would have their city contributions slashed if we were to decide to continue providing the additional half percent room tax to CVB that is no longer required for the Badger State Games. I’m happy that the CVB has moved on from the Badger State Games, but it was the only reasonable conclusion that its board could have reached, looking at the return on investment.
 
As chair of the Finance Committee for the City of Wausau, I am well aware of the challenges that the current economic situation entails for everyone. To make this year’s budget, the city eliminated five positions. These were not just numbers in spreadsheet, but involved real people who lost their jobs. Likewise, I know that ArtsBlock cut their payroll and there were reductions in other non-profits, too. For those who think that there should be more of that so that we can help fund a new venture into sports marketing with the CVB, I vehemently disagree. Critics don’t say where that money should be made up, but if it’s the vague “cut something else” approach, it could be more jobs loss.
Some are saying that the half percent no longer required for Badger State Games is being diverted into the city’s general fund. This is not true. The city has always taken a share of the 8 percent total room tax to use toward general expenses.  (Interestingly, nobody seems to wonder what the other CVB communities do with their room taxes beyond what they are required to pony up for the CVB.)

The City of Wausau runs a comprehensive program of room tax grants, which supports a number of events and activities, some of which directly support tourism and quality of life. No other CVB member community does what Wausau does in this regard and it is targeted directly to the constituency that Wausau City Council members are elected to serve.

Under the proposal passed by the Finance Committee and now being sent back for review, the CVB would receive $181,250 this year. This is more than the city’s contribution to Wausau Area Events, Main Street, the Performing Arts Foundation, the Leigh Yawkey Woodson Art Museum, and the Center for Visuals Arts combined.

The City of Wausau isn’t just a member or a customer of the Wausau Area Convention & Visitors Bureau. It’s essentially one of the owners. Either the CVB needs to work within the original agreement between the member communities for a 2.5 percent room tax, or other sources of revenue must be found. Having the contribution remain at 3 percent with the end of the Badger State Games obligation is not really a very reasonable option, given all the factors we have. The purpose for which the additional half percent was being assessed no longer exists. Creating a new reason to assess it – which is exactly what the sports marketing initiative is designed to do — doesn’t seem timely or prudent.

JR

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