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Why it pays to pay hotel room tax
By Valeria Davis Humphrey,
Suburban reporter FITCHBURG - The huge brightly lit snowflakes on the street lights along McKee and South Fish Hatchery roads are a little tax gift from one of the city's growing industries - hotels, motels and inns. The decorative holiday lights make Fitchburg's main boulevards more festive and inviting, so local hotel owners don't mind paying a 5 percent room tax, said Mike Zimmerman, Fitchburg economic development director. Wisconsin municipalities can charge a room tax of up to 8 percent of gross receipts. The money visitors pump into Dane County's economy through room taxes provides money for marketing, perks that visitors and residents find attractive and a financial boost for local budgets, said Deb Archer, president of the Greater Madison Convention and Visitors Bureau. Since 1994, municipalities have been required by state law to reinvest 70 percent of any room tax they charge to promote local tourism, Archer said. The remaining 30 percent can go into the community's general budget. Those that charged room tax prior to 1994 aren't bound by the regulation. Edward Bieno, administrator for the Stoughton Chamber of Commerce, has asked tourism specialist Bill Geist to meet with city officials at 7 tonight at the Stoughton Public Safety Building, 321 S. Fourth St., about charging a local room tax to help promote Stoughton, which has two hotels and a bed-and-breakfast inn. "We're the only community in Dane County that hasn't looked at or instituted a room tax," said Bieno. Stoughton could use a funding boost to promote The Opera House, lakefront and Downtown, he said, although a target percentage or funding level hasn't yet been discussed. Madison first began charging a 3 percent room tax in 1969, said city comptroller Dean Brasser. The tax rose to 6 percent in 1970, 7 percent in 1972 and has been 8 percent since 1996, he said. For the past three years, annual collections have been around $6 million. In Madison, the bulk of room taxes support Monona Terrace. Communities like Fitchburg need to make visitors aware that their hotels exist, Zimmerman said. Fitchburg has three lodgings: a Quality Inn and Suites on South Fish Hatchery Road, the Nine Springs Motel off Highway 14, and the Hickory Knoll Bed and Breakfast on Highway M near Oregon. A 54-unit AmericInn Hotel will open on Nesbitt Road next year, Zimmerman said. In 2001, room tax revenue was reinvested in attracting more people to its hotels, restaurants and retail centers, he said. Thirty percent of Fitchburg's room tax income goes to support the local chamber of commerce Web site and fund festivals that attract visitors, Zimmerman said. The city also has invested in seasonal banners, brochures and maps. "Where in the past we never had any of these marketing materials, we really have a pretty nice portfolio now, not only for local use, but for visitors as well," Zimmerman said. Some municipalities have had small local inns for years, but many are just getting commercial hotels and eateries. But few communities have any problems figuring out what to do with the additional income. Verona's Grandview Hotel was its lone establishment for years until the former Road Star Inn, now a Super 8 Motel, was built in 1997. The city started collecting in 1996, said city administrator Larry Saeger. Seventy percent goes to the Verona Chamber of Commerce, and the rest is spent on downtown, he said. Monona spends $5,000 on community development and about $180,000 goes to the general fund. Middleton enacted its tax in 1995, said treasurer Tim Studer. The city created a tourism bureau and supports local festivals. Officials also buy into the Greater Madison Convention and Visitors Bureau marketing pool. Large-scale and national marketing is expensive, Zimmerman said. Fitchburg also plans to invest 10 percent of its marketing budget, or about $4,000 on better market exposure through the Greater Madison Convention and Visitors Bureau. "By our making this investment, our hotel will get a better exposure and additional benefits," he said. "We cannot replicate the services that they provide." As the county's largest tourism agency, the Greater Madison Convention and Visitors Bureau has about 650 members who pool funds to buy direct marketing, run a Web site with online room booking and exhibit at major trade shows, Archer said. "We really represent the destination which is Dane County," Archer said.
"The best use of the room tax is to reinvest it to grow more room tax."
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