The Fairbanks City Council adopted a new way to distribute its hotel room rental tax (or bed tax) Monday night, changing a long-standing formula after months of discussion.
The adopted ordinance was originally sponsored by Councilmember Lonny Marney but postponed until May 8. The final version includes amendments from Marney and Councilmembers Crystal Tidwell and John Ringstad.
The council approved the ordinance 4-2, with Ringstad, Tidwell Marney and Councilmember Jerry Cleworth supporting it. Councilmembers June Rogers and Sue Sprinkle voted against it.
The new split
The new formula provides an increase for the city’s discretionary grant fund to $400,000 and bumps the amount Festival Fairbanks receives for its maintenance of Golden Heart Plaza to $50,000.
It also changes the amount the city and Explore Fairbanks each take from the bed tax revenue. The city’s share increases from 22.5% to 30%, with 7% set aside to offset expenses for special event safety, for public safety concerns in downtown Fairbanks and security and associated services.
Fairbanks Economic Development Corporation will continue to receive $100,000, though Ringstad said he intends to address that in the future.
Explore Fairbanks will receive up to $2.2 million to be used for tourism marketing, based on the total amount collected. Any amount that comes in over budget will be split between the city and Explore Fairbanks.
Marney called it “a perfect combination of the original ordinance.” He added 7% of the city cut will go exactly “where taxpayers and citizens want to see it for downtown security” and but provides some extra flexibility for Explore Fairbanks.
The city levies an 8% bed tax against all hotel and motel rentals. Last year, it generated just over $4.2 million in revenue, about a million dollars more that an originally projected in December 2021. The original intent of the bed tax when introduced in 1979 was to use it for economic development
The city set its projections for $4.2 million this year, and has so far collected just over $1.05 million to date.
Prior to the ordinance’s passage, Explore Fairbanks received the bulk of the amount, including any surplus above the budgeted amount outside the city’s cut.
Sprinkle, who had drafted a proposed substitute breaking allocations down into percentages, questioned a soft cap on Explore Fairbanks.
“Explore Fairbanks does a good job with this funding and I would hate to say they can’t do what they need to do with [a formula] that may be stale in five to 10 years,” Sprinkle said. “These numbers get old fast and taking 30 percent plus the split looks very greedy.”
Tidwell said the final version does “provide Explore Fairbanks with room to grow” but adheres to the city’s responsibility for its citizens and its visitors — public safety and essential services.
“Part of the tourism industry in our community means keeping people safe,” Tidwell said. “I know some of the comments say it makes the city look greedy, but taking care of people living in this community is more important than marketing tourism.”
Ringstad said progress has been made that addresses the cap and “continues to have growth.”
“We’ve gotten to a place that is workable … not everybody is happy but isn’t entirely disgusted either,” Ringstad said.
Scott McCrea, Explore Fairbanks president and CEO, said his organization objected to the changes.
“We are with some question changes to an ordinance that has been in place for 20 years,” McCrea said. “We do question the need to split the difference above $2.2 million with the city when the city is already looking at a pretty significant increase … nonetheless it allows us some opportunities.”
Previous amendments to Marney’s original ordinance placed a hard $2.2 million cap on Explore Fairbanks, some McCrea said was unacceptable and “akin to a budget reduction in the years to go and prevents our ability to grow tourism in the future.”
McCrea further stressed the role Explore Fairbanks plays in tourism marketing and economic development.
“We are the leader in this community when it comes to economic development if you define it as new money coming into this community along with jobs created and new businesses,” McCrea said.
He added that Explore Fairbanks faces an increasingly competitive market to attract visitors. Regardless of the decision, McCrea urged the council to settle on a final solution to resolve a months-long discussion.
Elizabeth Griswold, general manager of Pike’s Waterfront Lodge, called in from a New Mexico tourism conference, encouraged a percentage-based formula sponsored by Sprinkle but asked for anything other than a hard cap on Explore Fairbanks
“Don’t shoot the horse in the foot,” Griswold said. “Explore Fairbanks is out there working hard … Don’t put us in the corner, show us you mean you support what we do. We want to grow tourism in the city.”
‘Can’t throw money at a problem’
Rogers sharply criticized the amended version, noting tourism and public safety were two separate issues and the new formula distracts from the conversation.
“I’ve been frustrated for far too many years now about the circumstances of our community,” Rogers said. Rogers has long advocated that downtown concerns over public safety and instances of altercations between residents and people with substance or behavioral concerns require a more holistic approach beyond merely law enforcement.
“You can’t throw money at any problem that has to do with our people and then expect best or fast results, no matter where that money comes from,” Rogers said. “We have to have an adjusted path to that.”
Tidwell said she appreciated Rogers’ comments but added “it takes both dollars and people in the community to make a difference.”