I am once again amazed at the power of our democratic system to produce wise solutions for difficult issues. Following much debate, the Salida City Council approved setting the Occupational Lodging Tax (OLT) at $2.50.
Setting the OLT at $2.50 will allow the city to transform the Hot Spring Pool into the first- class facility that Salidaʼs residents deserve, without placing an unreasonable burden on the lodging industry.
However, some lodgers have filed a petition to repeal the OLT through the referendum powers reserved to the voters in the Colorado Constitution. The lodgers advocating the repeal of the OLT have stated that the tax was not well-considered, was changed since the election, and places an unreasonable burden on the lodging industry.
As the author of the plan that led to the OLT being placed on the ballot, I am in a good position to answer this criticism.
The OLT was first discussed at a public work session on April 30, 2008 as a way to provide the funds necessary to upgrade the hot spring pool. To say that the pool is not fulfilling its potential is an understatement.
Council had three options for how to address the pool’s problems: 1) maintain the status quo, 2) close or sell the facility, or 3) develop and implement an improvement plan.
I would rather close or sell the facility than maintain the current state of disrepair.
Selling or closing the facility was given serious consideration. However, city residents have overwhelmingly stated that they wanted the facility fixed.
Unfortunately, the problems are daunting. Fixing the pool requires lots of money. Through much consideration and careful planning, the council decided to implement a three-pronged approach.
First, council increased user fees, and thus revenue, by approximately $90,000 per year. Sound economic policy dictates that those using the facility should pay the majority of the costs.
Second, the City applied for and received a $442,000 grant to repair the hot water line and begin planning for the renovation of the inadequate portions of the facility. These projects are well under way.
Third, the city placed the OLT on the November ballot. Councilʼs goal was to have visitors contribute a fair share of the costs of upgrading and operating the pool.
If the city could levy a lodging tax, we would have chosen that option. However, the Occupation Tax is the only tool that Salida can legally use, in this case indirectly, to produce revenue from visitors. The bottom-line impact on the lodger is the same with either tax.
It is fair to ask visitors to contribute to the cost of upgrading the pool. Salida needs to maximize the benefits that all residents realize from its status as a tourist destination. Every dollar in tax revenue raised from a visitor is one less dollar that needs to be levied from a resident.
In addition, local residents bear the impacts of a tourism-based economy. Local residents should also reap benefits such as access to a first-class hot spring pool.
Finally, many visitors are drawn to Salida by its recreational opportunities. They come to play and are willing to pay for amenities such as the Hot Spring Pool. A first-class facility will increase Salidaʼs attractiveness and thus profits for the business community.
Asking visitors to contribute provides a balanced allocation of the costs of providing the pool: users pay for the pool through user fees, local residents pay for the facility through that portion of the sales taxes that are allocated to subsidize the pool, and visitors pay for the pool through the OLT.
Council did mistakenly pass an ordinance that contained improper language for an Occupation Tax. I accept responsibility for this error. I had been involved in the plan from the beginning, I knew better, and it was careless of me to allow this to happen. When I informed council of the error, we acted openly and swiftly to correct the mistake.
In summary, council carefully considered the available tax options and developed a good plan, the OLT did not change in form since it was first proposed by council in April, and setting the tax at $2.50 is a reasonable way to generate the additional revenue necessary to fix the pool.
Also, please remember that the lodgers will certainly benefit from upgrading the pool and they were a primary beneficiary of a substantial tax cut when the voters repealed the city property tax.
I hope this information will help you conclude that repealing the OLT is a step in the wrong direction. Please help us move forward with improving the pool by supporting the OLT.
Hugh Young
Hugh Young is a member of the Salida City Council
A woman came to my store two days ago and asked me to sign the lodger’s petition. She said the tax was coming out of the lodge owners pocket, not the guest. Is she misinformed or badly in need of signatures?
Ms. Dubia,
I do agree that this is a confusing issue.
In Mr. Young’s posting he states,
“If the city could levy a lodging tax, we would have chosen that option. However, the Occupation Tax is the only tool that Salida can legally use, in this case indirectly, to produce revenue from visitors.”
Indirectly meaning by taxing the lodging property owners they in effect are taxing the visitors. That might be like charging the owner of the restaurant for the number of dinners that they serve, the retailer for the number of packages that leave his shop, the real estate agent for the number of listings, or the attorney and accountant for the number of clients he bills each month. These and similar ordinances may be allowable under the only option that the city can use, the occupational tax.
Mr. Young states,”The bottom-line impact on the lodger is the same with either tax”. We have asked for clarification. We want to know how the State of Colorado will handle the sales tax and how Franchise hotel properties will handle the fees that they pay to Holiday Inn, Super 8, Days Inn etc. This is a decision we are still waiting on. It seems strange to me that it is not allowable for the city to tax the visitor but they can direct the lodging establishment to tax the visitor. It may very well be true, we have all seen stranger issues. We need clarification.
A Brief Recap
*In December the city passed an ordinance that said the tax was paid by the visitor and not the owner of the lodging property.
*Later that month the ordinance was delayed and changed to to clarify that it was a tax paid by the lodging property.
*The tax is clearly a tax on the occupation of lodging currently set at $2.50. The ordinance can be increased to $4.82 buy majority decision of the city council.
*The city attorney has provided the lodgers with a letter that instructs us how to handle the tax. We have asked for a letter from the Department of Revenue agreeing with the attorney’s methods. It is important that this is verified so that we do not have any tax liability in the future. It is my understanding that the attorney has requested this letter from the State.
*The Referendum Petition has only 30 days (ending February 24, 2009) to obtain the required signatures to have the amendment reconsidered.
*A successful Referendum Petition would remove the amendment from the ordinance and restore the original language in the ordinance to the tax being paid by the visitor.
*We are opposed to a tax on the occupation of lodging, as we oppose any tax on one business segment.
*We agreed to support the tax in the fall when it was a tax on the visitor but would not have supported any tax that was just on the lodging properties.
As to your question as to whether we are badly in need of signatures. I mentioned above the time line that we are under. We are simply working hard to obtain the required number of signatures in the time frame required.
We believed that it was a tax on the visitor from the beginning. It has become abundantly clear through the process of gathering these signatures that there was no confusion as to who was paying the tax. Almost without exception everyone we have talked to believed that the tax was a tax on the visitor. Almost no one believed that it was a tax on the occupation of lodging or on the lodging property owners.
Emile – The net effect is a tax on the visitor. The tax is only assessed when the room is occupied. This occupational lodging tax is not an income tax.
It is a pass-through tax just like when retailers collect and pass through sales tax or as the lodgers currently collect and pass through the county’s 1.9 percent lodging tax.
Salida voters approved the measure in November.
I feel obligated to paraphrase Thomas Paine: “He that would make his own income secure, must guard even his neighbor from taxation; for if he violates this duty he establishes a precedent that will reach himself.” :)
Although I admit I’ve been remiss in following the dispute that broke out after the vote, I’m a bit disappointed at how cavalier some people appear about taxing the minority’s occupations – and how dismissive they seem about that minority’s concerns. It’s as if some people can’t imagine the gall it must take for our neighbors to speak out in defense of their own livelihoods.
I might be inclined to agree that a lodging tax for the pool is a good solution. However, if the pool really attracts visitors, I’d think the lodge owners would readily support this tax. I personally
can’t morally support forcing additional taxes on them (or their guests) over their protests.
It’s easy for those not facing additional taxation to urge those being singled out to “work together” or to endure quietly simply because “majority rules” (no doubt historically a source of comfort to the victims of lynch mobs).
I am also perplexed as to how in 20 meetings with the City Council, none of the lodge owners realized this was an occupational tax. I don’t believe that I have seen that explanation articulated from the perspective of the lodge owners.
Are the results of the exploratory work done on selling the facility available? I’m curious why the letter above implies that selling the facility and seeing it repaired are mutually exclusive. Is there data available on visitor usage of the facility or a breakdown on what visitors state attracted them to the area?
Why is such a relatively large project being undertaken now, given the dismal state of the economy?
Please forgive me if this information is freely available and I’ve managed to miss it. I appreciate anyone willing to indulge my natural curiosity on this issue.
@Cott
Trish Bews at the pool told me that their numbers for 2008 show that roughly 50% of the users of the pool are visitors, based on their zip codes.
I don’t have the exact language in front of me, but the OLT will fund more than just the pool; trails, parks and artistic or cultural projects are also on the list.
Thanks for you response. This piece addresses your concerns and questions point by point.
I agree with TP and respect each individual’s right to earn a living free of unreasonable government interference. However, the only thing worse than too much government is too little. What is worse, repressive tyranny or the anarchy we see in areas of the world where government non-existent?
The goal I strive for is good government; government that provides necessary services and protects the health, safety, and welfare of the people, without undue intervention into the lives of the people.
I reject the assertion that I have been “cavalier” or “dismissive.”
I’m paid $150.00 per month for my service on council. I spend many hours per week and take my responsibilities seriously. These are hours that could be used working, playing, or with family. The OLT was the result of many hours dedicated to finding a fair, reasonable, and well-considered solutions to a difficult problem.
In addressing the question of whether the OLT threatens the lodger’s livelihood, I stated the following in a Mountain Mail Guest Opinion: “The idea posed by some that the amount of the tax makes no difference to the lodgers is nonsense. A foundation of economics is that price affects behavior: the higher the price, the lower the sales.”
“The lodgers will experience a negative impact from the tax in lost sales and the increased overhead of tracking and paying the tax. The only real question is how much?”
My goal from the beginning was to improve business profitability, not harm it. I believe that $2.50 strikes a reasonable balance; the benefits to the lodgers of a first-class hot spring pool, along with other recreational improvements, will outweigh the negative impact that the OLT might have on sales.
I have been a strong advocate for using care and consideration in setting the amount of the OLT. For example, in the MM guest opinion cited earlier, I stated, “Because this one segment of the community is being forced to shoulder this burden, the Council needs to be extremely judicious in how it sets this tax.”
I thoroughly reject your comparison of the city council to a “lynch mob.” Every member of council acted with concern and integrity to improve the quality of life in our town. In the end, council reached a reasonable consensus and set the tax at $2.50, the amount agreed to by the lodgers in pre and post election negotiations.
I cannot speak to what the lodging owners knew or why. However, I have found that municipal law is complex. Few people are willing to undertake the study necessary to understand the workings of local government. Those who are often find that the information they seek is not always readily available.
The OLT was first proposed by the city attorney in an April 8, 2008 email to council. The OLT was included in the revenue plan following the April 30, 2008 public work session on this issue.
The June 5 update included the following description: “An Occupation Tax is a tax imposed for the privilege of operating a business or practicing an occupation or profession within the City jurisdiction. One common type of Occupation Tax is a fee applied to hotel/motel/lodging type businesses based on the number of rental accommodations available.”
The consideration given to selling the hot spring pool took the form of discussions among council and staff, and informal polling of city residents. A formal study of selling the facility has not been undertaken at this time.
One reason is that the obstacles to selling the facility are formidable. As an elected official, I respond to my perception of the political will of the community. A significant segment of residents regularly use the facility. Many others view the pool as a Salida landmark and an important part of our tourist economy.
The majority of the input that I have received on this issue is that the voters don’t want the city to sell the facility. This is significant since a sale would have to begin with approval by a majority of the voters. I don’t believe that spending money for a formal study of selling the pool would be a wise investment.
My letter does not imply that selling the facility and repairing it are exclusive. I certainly acknowledge that a private concern could purchase the property and improve it.
The city does track visitor usage of the facility. The CCVB and other local government entities have undertaken studies of area tourism.
The first phase of upgrading the pool is to fix the hot water line. The majority of this project will be funded by the $325,000 settlement with the company that engineered the faulty line, and a $442,000 grant received from the DOLA.
The current state of the economy is a good reason to undertake this project now. This money is in the bank and the project is close to being ready to build. Using this money to build this project will do more good for the local economy, now and into the future, than allowing this money to sit in the bank.
Sincerely,
Hugh Young
Hugh,
Thanks for your response. You have answered several of my questions and I appreciate that. I suspect you felt that my entire response was aimed at you personally. It was not. Rather, I was responding in general to you, other contributors here, and the many letters I’ve skimmed in the Mountain Mail.
As for what is worse, repressive tyranny or anarchy, I’ll pick anarchy over a concentration camp every time. If we’re going to compare an extreme, let’s compare two extremes. I’m not sure many would consider not passing a lodging tax as bordering on anarchy.
I can appreciate that you had laudable goals for the project, but as the old cliché goes, a certain road is paved with good intentions. My point was not to question your (or anyone’s) intent, but instead asking why so many are attempting to override the lodge owner’s opinions on their own livelihood?
I was not singling you out as cavalier or dismissive, it’s the general vibe I get from most of the proponents of the tax. I sense from your original post that you’re extremely frustrated with this situation, which is understandable given the amount of work you’ve put into this.
I am not comparing the city council to a lynch mob, but I am comparing those that seem to be piling on this issue and telling the lodge owners to ‘suck it up’ because we voted on it.
I also wasn’t expecting you to respond for the lodge owners, I’d like to hear from them why this was acceptable until some time after the vote. I don’t see how they reasonably could not have fully grasped the situation in 20 meetings with the city council.
I’d like to hope you’re correct, and spending all that money on this project will help the local economy. However, this came only a few paragraphs after explaining that there was no study and this direction was chosen by intuition. An overwhelming majority of the people of Salida certainly may think the pool is an important part of the tourist economy, but they might be incorrect and of a different opinion if research indicated to the contrary.
I am sorry you took my post personally. At least we can agree on Thomas Paine. :)
Cott