Levy contributes to tourism marketing elsewhere, but not yet on peninsula

Bed tax no help for ailing industry

Posted: Friday, March 29, 2002

While some tourist destinations around the country, and even in Alaska, benefit from room tax revenue, the Kenai Peninsula is not included on this list.

Despite being among the minority in the state not to collect a transient occupancy tax, or bed tax, Kenai Peninsula Borough officials said they don't foresee one any time in the near future.

"It hasn't been brought before my attention since I've been on the assembly," said Pete Sprague, who represents Soldotna on the Kenai Peninsula Borough Assembly. "I don't really see it being an option at this time."

Kenai assembly member Bill Popp holds a similar opinion.

"I think we're a long way away from a boroughwide bed tax," Popp said. "We need to understand what it is, what the issues are, and even what is the appropriate tax rate."

A bed tax, a tax levied on lodging rates, can be used to fund tourism marketing and to pay for other projects as the government involved sees fit. Anchorage has an 8 percent bed tax, which is split for tourism and general city use, said Jim Lottsfeldt, executive director of the Anchorage Civic and Convention Center "Yes" Corporation.

"There is a civic ordinance that says that half of that goes to tourism," he said. "The other half, the city puts into a civic fund and gets mingled with everything else. Roads, schools. It's used for a little of everything."

According to a 2001 bed tax comparison chart compiled by the Western Association of Convention and Visitors Bureaus, Anchorage is among seven Alaska municipalities or boroughs that charged a bed tax on rooms last year. Anchorage received total revenues of $11.3 million. Other communities include Juneau, Fairbanks, Ketchikan, Valdez, Sitka and Matanuska-Susitna.

Teresa Stephenson, WACVB executive director, said cities Outside have been using a bed tax for years.

"Selected cities in California enacted bed tax in the '50's," she said.

Action to bring a bed tax to the borough is in its beginning stages, and could take some time, said Kenai Convention and Visitors Bureau Director Ricky Gease. He said the first step would be an economic survey to fan out certain issues that would be involved.

"We need to have baseline numbers," Gease said. "How long does the average person stay? What type of patterns do they have when they travel? We have to do a needs assessment of visitor and community facilities.

"It's difficult to do analysis because we don't have baseline numbers of nights in rooms," Gease said. "There's no agency collecting that data."

But Kenai Mayor John Williams, whose city had an active bed tax from 1991 to 1996, said there is a way to find that information.

"(Lodging businesses) still have to report their sales tax to the city," Williams said. "By computing their sales tax versus gross income, they can figure what effect bed tax could have on the revenue system."

Another significant concern Gease pointed out is how to fairly redistribute incoming tax dollars among the different cities in the borough.

"We need to figure out how those moneys would be divvied up between organizations," Gease said. "And for the smaller communities, there needs to be ways to figure out how to allocate (the) money."

Popp, a member of the KCVB board of directors, has been on the assembly for six years and said the issue of a bed tax has not come up.

"I don't think there's unified support," he said. "Not that there's unified opposition, either."

Gease said peninsula convention and visitors bureaus won't present the subject to the assembly until all the unanswered questions have been addressed.

"In order to put the pieces together, we need to figure out what the pieces are," he said.

But Gease said the peninsula is competing against other tourism markets on an uneven playing field.

"If you total up all the money there is to promote the Kenai Peninsula, we're at a disadvantage," Gease said. "We don't spend as much on promotion as these other areas. Homer, Soldotna and Kenai use charitable gaming to underwrite some of our operational costs."

Kenai established a 5 percent bed tax in 1991, but let a "sunset clause" eliminate the tax five years later, "until such time as council directs otherwise," according to city records.

City records showed nearly $300,000 in bed tax revenue between 1993 and 1996.

"It started generating funds in 1993," said Kenai Finance Director Larry Semmens. "The city made (about) $8,000. That was a partial year."

The three following years earned the city $108,000, $83,000 and $108,000, respectively.

City Attorney Carey Graves said the tax presented a dilemma for Kenai hotels.

"There was a perception that it gave hotels around Kenai and in Soldotna an advantage because they did not have the 5 percent bed tax," Carey said.

Borough Mayor Dale Bagley said any pursuit of a bed tax in the area would have to come on a combined front.

"If it happens, it should happen boroughwide, so that the cities won't feel penalized," he said.

Gease said the potential of a statewide sales tax could foil any prospects for a peninsula bed tax, however. He said any efforts to further investigate feasibility would have to wait until after the state Legislature adjourns in May.

Williams said he believes people would approve a boroughwide room tax if it went to the ballot.

"I don't see that the voters would have an objection, because they're not the ones that use the hotels or pay that fee," he said.

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