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Hospitality tax heard in Senate committee

BEMIDJI – A bill giving the city authority to implement a tax on restaurant and hotel purchases for Sanford Center operations is making progress at the state Legislature.

The bill was laid over for possible inclusion in an omnibus tax bill after it was heard in the Senate taxes committee Wednesday morning. That came after Chanhassen Republican Sen. Julianne Ortmann’s motion to table the bill failed.

City manager John Chattin, along with councilors Ron Johnson and Michael Meehlhause, testified in favor of the hospitality tax bill, which is authored by Sen. Tom Saxhaug, DFL-Grand Rapids.

“I believe that this bill is good for the city of Bemidji, it's good for our region, and our council is in unanimous support,” Chattin told senators.

The tax would be for up to 1 percent of hotel and restaurant bills in the city, and would go toward operations, maintenance and capital improvements at the Sanford Center. The city council could choose to implement the tax at lower than the 1 percent level, but not higher.

The bill already had a hearing in the House local and property tax committee March 13, where it’s authored by Rep. John Persell, DFL-Bemidji.

Bemidji Area Chamber of Commerce president Lori Paris said the chamber board hasn’t taken a formal stand on the bill, but hasn’t been actively supporting it.

Chamber members had a meeting with city leaders Tuesday about the tax, which Paris described as “very positive.”

“We’ve got members on both sides of it. So the board has not wanted to move on taking a particular position one way or the other,” Paris said. “But they want to maintain a relationship with the city to try and work in tandem to advocate and to help in any way we can to support (the Sanford Center.)”

Chattin said during the committee meeting that Visit Bemidji, the area’s tourism bureau, has taken a neutral position on the bill. Denelle Hilliard, Visit Bemidji’s executive director, didn’t return a call seeking comment Wednesday.

Gary Botzek, a lobbyist for the Minnesota Association of Convention and Visitor Bureaus, testified in opposition of the lodging portion of the tax Wednesday. He suggested adding more money for tourism promotion instead in order to bring more people into the Sanford Center.

Taxes committee chairman Sen. Rod Skoe, DFL-Clearbrook, said in an interview Wednesday afternoon there may be issues with “community consensus” for the tax.

“We like to have support from people, not neutral positions,” Skoe said.

He also said the tax on lodging included in the bill is problematic, because unlike the current 3 percent local lodging tax, it would be dedicated to something other than tourism marketing.

Other cities that have a lodging tax dedicated to purposes besides tourism marketing were grandfathered into statute, Skoe said.

“This would be the first time we would allow one of the non-grandfathered communities to use lodging tax for non-promotional use,” Skoe said. Chattin said during the hearing that 80 percent of revenues generated from the hospitality tax would come from food and beverage sales, while lodging would account for the other 20 percent. 

Local hotel developer Rich Siegert testified in opposition to the bill Wednesday.

“We just don’t feel that this is a fair tax,” Siegert said. “Taxing our guests at our hotel I just think is wrong, because they do not use that Sanford Center for the most part.”

City leaders had a different take on the issue of fairness, however. Chattin said more than half of the property value in the city is exempt from paying property taxes, one of the highest levels in the state.

“And what that does, is that it leaves 49 percent of the property in our city...paying the entire deficit to a facility that hosts over 100,000 people a year,” Chattin told senators.

“We look at it as an issue of fairness,” Meehlhause, the Ward 1 councilor, added.

The city has budgeted for a $400,000 subsidy this year for the Sanford Center. Chattin has said a 1 percent hospitality tax is projected to generate $500,000 per year, more than enough to cover the subsidy and therefore lower the city’s property tax levy.

When questioned about what assurances have been given about lowering property taxes if the hospitality tax passes, Chattin acknowledged there could be other unrelated needs in the city’s budget that could increase the levy in the future.

“I think what we're saying is that we would guarantee that our levy would be reduced by $400,000 over what it would otherwise have to be,” Chattin said. “We have no other plans for that money.”

While there was evidence of some opposition during the hearing Wednesday, Johnson said people are “unifying” around the idea.

 “One-hundred percent of the people who have called me are supportive of this,” Johnson said.

John Hageman

John Hageman covers North Dakota politics from the Forum News Service bureau in Bismarck. He attended the University of Minnesota in the Twin Cities, where he studied journalism and political science, and he previously worked at the Grand Forks Herald and Bemidji Pioneer.  

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