Is Sioux Falls Mayor Mike Huether on another power trip? Earlier this month, Mayor Huether ordered a review of the Convention and Visitors Bureau Business Improvement District. The Convention and Visitors Bureau operates independently from the City of Sioux Falls. Its hotelier members asked the city to create a $2/room tax in 2011 to be used in promoting conventions and tourism. Somehow, the CVB membership retained the right to ask for this tax to be repealed if they decide they no longer want it. (Tea Party friends, why can’t we get a deal like that from Pierre on our sales tax?)
Anyway, the CVS-BID tax appears to be working well… maybe too well, in Mayor Huether’s eyes:
The CVB BID was created in 2011 to collect a $2-per-night tax from hotel guests on each room rented. Since then, revenues have dramatically increased and by next year are expected to reach $2.3 million, or nearly double the initial estimates. During that same time, revenues from the city’s 1 percent lodging tax, which also go to fund the CVB, are expected to double to around $1.2 million per year, bringing the total tax funding for the CVB to more than $3 million.
“With revenues growing far beyond expectations and a bevy of visitor industry needs and wants, it is a prudent time to evaluate how the money can be most effectivity utilized,” says Mayor Mike Huether. “In Sioux Falls, our citizens expect us to continually evaluate how to get the biggest bang for the taxpayer buck” [City of Sioux Falls, press release, 2015.08.10].
Note that no one in the Sioux Falls hospitality industry appears to be complaining about the use of the CVB-BID dollars. Interestingly, Mayor Huether hasn’t appointed any of those content hoteliers to the review board he has empaneled:
Paul Hegg, whose group owns The Courtyard by Marriott, Spring Hill suites, and 2 Hilton properties says the review is fine, but is concerned in the way it was brought about.
“You know I’m not sure I agree with how the process is being handled in that the committee was announced at the last minute without us being aware this was happening, or the BID board being aware it was happening. Closed door meetings on top of it all allows me to be a bit suspicious. It will be ‘wait and see what the results are.’ We’re all for trying to drive (business) to Sioux Falls and put more heads in beds, more individuals on the streets visiting restaurants and spending money at retail locations. That’s what the BID is for, but if it goes toward other things that are not going to drive that business, I think we’re going to have some pretty grave concerns at that point.”
Shailesh Patel, who owns 4 hotels including the Hampton Inn, Baymont Inn, and Microtel asked to be on the committee, but was told it had already been formed. He is concerned that there are no hotel owners on the committee [Beth Warden, “Hotel Owners Concerned Over City Review Committee of Convention and Visitors Bureau BID Program,” KSOO Radio, 2015.08.11].
Mayor Huether did pick the managers of the downtown Holiday Inn and the Ramada for the review board, but no owners. Huether named those two managers to the CVB BID board in March 2014 when he canned six of the nine board members in apparent retaliation for failing to approve CVB BID money for his wife’s tennis facility project.
My Madison upbringing requires that I adopt a skeptical position toward all economic development corporation/Chamber of Commerce-type outfits. Their facilitation of Republican South Dakota’s contradictory addiction to corporate welfare warrants close scrutiny.
But the CVB-BID feels less like corporate welfare and more like Sioux Falls hoteliers using money they raise in the normal course of their business to promote their business. They aren’t raiding other people’s pockets; they’re charging their customers a price the market apparently will bear and re-investing that money in their own industry. Not that they have to work very hard: the biggest city in South Dakota is naturally going to draw lots of visitors and events. But they’re doing fine.
Yet Mayor Huether feels that this apparently successful, problem-free fund needs review. Hmmm… why do I smell a cash-grab coming on?
Is this the South DaCola blog? The DakotaPressReleaseBlog?
Mayor Huether is doing a fine job. He’s the best mayor SF has had in my memory.
As to these hotel taxes, if they are producing a windfall beyond what the Convention and Visitor’s Bureau needed and expected then there are two options: 1) reduce the taxes; or 2) re-evaluate how the excess is used.
Mayor Huether is doing the latter. Our room taxes are not excessive in comparison to other large cities in the region. They may be on the low side. This post, in PP-like fashion, suggests that this tax money is raised by hotel owners and belongs to them. Wrong! They can set room rates at whatever level they want and that money belongs to them, but this tax money belongs to the City of Sioux Falls. The fact the taxes were suggested by someone doesn’t give that someone ownership of the money that’s raised. It is proper for city officials to evaluate and determine how this city tax revenue is spent.
By the way, the hotel owners are free to give as much of their own money to the CVB as they want for the purpose of promoting conventions and tourism. They don’t need anybody’s permission for this.
The voluntary nature of the tax does puzzle me, R. Why don’t the hoteliers just charge everyone $2 extra per room, hand that money to their own CVB, and do their own promotions? That would seem to keep the Mayor’s mitts off the money and leave him powerless to conduct any review.