Business groups discuss bed tax

WASILLA — Chambers of commerce and business owners are discussing whether tourists should pay more to stay in a hotel room.

The Mat-Su Convention and Visitors Bureau (CVB) Board of Directors is pushing to increase the “transient accommodations tax,” typically known as a bed tax, as a way to fund the final phases of an estimated $5.8 million total construction cost for a new Mat-Su Valley Gateway Visitors Center. The borough currently has a 5 percent bed tax, meaning a $100 hotel room stay would produce $5 of revenue for the borough. The CVB board voted Nov. 16 to increase that amount to 8 percent, sparking discussion in the local tourism business about a possible uptick.

The increase would complement a sizable investment in the bureau. The borough assembly voted Nov. 3 to dedicate the proceeds of the sale of the property — about $1.2 million — to the project according to figures provided by the Board of Directors. The borough already acquired the former Homestead RV Park for $1 million from the Matanuska Electric Association, and awarded a design contract worth $1.2 million to Wolf Architecture. All told, the borough has already spent $3.6 million of borough and state funds on a new facility, according to the bureau’s figures.

Discussion about the tax is in the preliminary phases, said CVB executive director Bonnie Quill. Nor did the board of directors vote to increase the tax lightly, according to Quill.

“It really is a step-by-step process,” she said. “There have been times in the past that individual assembly members have brought it up and had it on an agenda to support an increase. We have always said you need support from the industry. The board has said this comes really as a last resort. This was not a decision that was easy for them.”

The bed tax typically accounts for about $1 million per year in total borough revenue, and figures provided by they Mat-Su Borough finance department show a slight increase for each of the last three years. The most recent, unaudited figures show the borough took in $1,117,249 in bed tax for Fiscal Year 2015, which ended June 30. That figure constitutes an increase of 0.3 percent over the previous year.

The borough also has the lowest rate among a group of six areas chosen by the CVB board for comparison. Anchorage, Juneau and Sitka tie for the highest at 12 percent, followed by Kodiak at 10 percent, Fairbanks at 8 percent and the Denali borough at 7 percent.

Supporters like Quill argue that tourists are willing to pay for Alaska whatever the cost. Vacations are luxury items, and people bent on laying eyes on Denali won’t change their mind and go to Seattle or Dubuque instead.

“People do not make a decision on where they’re going based on the bed tax,” she said.

Holland America Group, which owns and operates Mount McKinley Princess Wilderness Lodge, has circulated a letter opposing a bed tax increase. The lodge generates more bed tax revenue than any in the borough.

“We feel strongly that raising targeted taxes will hurt the overall goal the MSCVB is attempting to achieve,” the letter reads in part. “If the community feels that it should advocate for a brick and mortar building, then the entire community should find a way to pay for it, without resorting to targeted taxes. With the State of Alaska in a budget crisis, now is not the time to increase the cost of doing business in Alaska.”

The letter’s tone drew criticism from increase supporters. Holland America has spent their own money (roughly $1 million), and sought to obtain state funds (at least $3 million for design work as of 2012, according to the DNR website) and Native corporation lands for a South Denali Visitors Center just north of the Chulitna River Bridge, said Ralph Samuels, a spokesperson for the lodge. The project is managed in part by the Alaska Department of Natural Resources.

However, comparing the proposed office center to the CVB was apples-to-oranges, Samuels said.

“We view that differently,” he said. “We view that more as a destination.”

The tourism market has changed, and businesses don’t receive the same boost from visitors’ bureaus they once did, according to Samuels. Instead, tourists are much more likely to reach for a smart phone or click to Trip Advisor instead.

“You have so much access to it, just on your phone, it’s fundamentally changed the way people book and the way people travel,” he said.

The Talkeetna Chamber of Commerce joined Holland America’s position after a meeting last week, according to a letter on the subject.

“Although we respect and appreciate how much the Mat-SU CVB does for tourism, we encourage you not to pursue this issue further and consider searching out alternative methods of funding for the construction and ongoing maintenance of the Mat-Su Gateway Visitor Center,” the letter reads in part.

Officials with the Palmer and Wasilla chambers said boards there had not yet discussed the matter, but would be shortly.

A bed tax increase opposition extended beyond a possible tax increase to the entire idea of the new facility, and Grandview Inn and Suites general manager Sandy Joynes questioned whether the CVB should even exist.

“They do very little for us already,” she said. “For them to build this great big beautiful place, they’re going to be competition for everybody here.”

Tour buses stopping at the center, for example, were less likely to stop elsewhere because of the difficulties to rustle tourists on and off the buses, Joynes said.

“They’re our competition for every kind of meeting space, eatery, coffee shop, everything like that,” she said. ‘All the functions that go on in this town, they’re taking that business away.”

Among some local tourism business industry owners, the case for or against the tax roughly shakes out depending on size. Some smaller operators — like the Valley Hotel and Colony Inn in Palmer — generally favor the tax because the CVB provides them with an opportunity to market themselves. They’re willing to collect the tax for the borough because they would benefit from the new building.

Janet Kincaid, who owns both the Valley Hotel and the Colony Inn, said the visitor’s bureau will enhance the borough’s appeal, and boost her own business. She understand Holland America’s objection.

“The market wouldn’t be where it is without their presence,” she said. “At the same token, us little guys gotta pay our freight.”

The CVB board plans to hold an open session during an annual planning retreat to discuss the proposed increase. The session is scheduled from 1 p.m. to 2:30 p.m. on Jan. 6, 2016 at Alaska Garden Gate Bed and Breakfast.

Contact reporter Brian O’Connor at 352-2270, brian.oconnor@frontiersman.com, or on Twitter @reporterbriano.

CORRECTION: The original version of this story contained a misspelling of Janet Kincaid's first name.