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Finance Committee rejects proposal to increase hotel/motel tax

Date: 7/18/2011

July 18, 2011

By G. Michael Dobbs

Managing Editor

SPRINGFIELD — While city councilors praised Mayor Domenic Sarno’s agreement to modify the furlough program in the fiscal year 2012 (FY12) budget, the members of the Finance Committee rejected the mayor’s proposal to increase the hotel/motel tax in the city.

City Councilor Michael Fenton said, as committee chair, the measure won’t leave his committee and therefore is “dead,” unless another councilor makes a resolution to adopt it — an event that Fenton believes is highly unlikely.

Sarno put the $400,000 in estimated increased revenues from the tax into the budget without prior City Council approval and now he will have to find a way to fill that gap, Fenton said.

City Councilor Timothy Rooke called Sarno’s actions as “kind of presumptive.”

City Councilors Kateri Walsh, Fenton and Rooke were joined by City Councilor Amaad Rivera and listened to several tourism officials and hotel owners say why the increase would be a damaging move for the city’s hospitality industry.

Mary Kay Wydra, president of the Greater Springfield Convention and Visitors Bureau, said Springfield’s current rate of 12.45 percent would increase to 14.45 percent if the council had approved the proposal, putting Springfield motels at a disadvantage compared to accommodations in neighboring communities.

She also told the councilors about a recent bidding process and how a room tax affected it. Her organization participated in bidding for the 2015 National Square Dance Convention, an event that draws 5,000 visitors to the designated community. Springfield was in direct competition with Kansas City, Mo., and one of the deciding factors was that Springfield’s room tax was less than that one at Kansas City, according to Wydra.

“The tax would hinder economic development in Springfield,” she said.

Peter Rosskothen, the chair of board of the Visitors Bureau, said the increased tax impact on conventions might not be felt immediately, but in three to four years.

Greg Chiecko, sales director of the Eastern States Exposition, noted it’s not just the annual fair that creates thousands of “room nights” in area hotels, but also the 100 other events presented on the fair grounds throughout the year.

“It’s a very competitive market,” he said. While there has been some recovery in the state’s tourism industry, it is still “extremely fragile.”

The new furlough system will allow some non-union city employees to take as few as six unpaid days off a year instead of the 12 under the previous system. The new arrangement will mean the city will have to use additional stabilization money, but Fenton called it “the most fair and best thing we can do for the city.”

The implementation of the new system is fairly urgent, according to Chief Administrative and Finance Officer Lee Erdmann, as it is part of the total budget package.

Erdmann said the furlough program would be reviewed on a quarterly basis.

Fenton believes that even with the new, more costly system in place, the cuts made to the budget by the City Council would allow only a $7.8 million allocation from the stabilization fund, instead of the $10.5 million requested by Sarno.

Fenton said he was “absolutely thrilled” the mayor agreed to this compromise.

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