by Richard Uhlhorn
Tax Increment Financing:
Bob Stowe of Stowe Development & Strategies gave City Council members, administration and staff a project analysis presentation on Tax Increment Financing (TIF) that the City is planning to implement to construct the $9 million one million gallon East Chelan Reservoir and Booster Pump Station; the $3.5 Bradley St. Water Main extension from the reservoir; and the $561,000 Isenhart Watermain extension. This TIF would potentially fund $16 million of the $18.25 million estimated costs.
“It is simply a redirection of property taxes,” said Stowe. “One way to look at it (TIFs) is that it provides funding support for infrastructure.”
TIF’s are not a new tax, but a powerful economic development tool available to cities, counties, and port districts. The taxes from the TIF Development Fund has no impact on individual property owners.
The proposed TIF will provide funding to support needed infrastructure in East Chelan that will benefit all of Chelan during emergency water shortage situations.
Prior to instigating the TIF, the City will conduct two public briefings.
City Council members had questions on the project analysis. Mark Ericks asked what happens if a development fails. “This is an issue,” said Stowe. “You need a financial backstop with the developers.”
Peter Jamtgaard remarked that he is concerned about an unstable economy. “Things could go wrong… you said we could get an extension.” Stowe stated that a mitigation plan needs to be in place on how the debt would be re-payed. “You would have to look at utility rates and general funds.”
Tim Hollingsworth asked if the City meets the requirements and Stowe stated that once the City receives enough revenue from the TIF to pay off the debt, the TIF would expire.
“When it is all said and done, you get all of your money back.” The City will go out for a bond issue based on its general resources and the TIF will presumably pay for it.
A public briefing will be held in March on this issue.
Lodging Tax Presentation:
City Finance Director Jackie Tupling opened a presentation on Lodging Taxes distributing a Revenue Guide for Washington Cities and Towns and then introduced two representatives – Steve Gross, MRSC Legal Consultant and Eric Lowell – a MRSC Finance Consultant from the Municipal Research and Services Center (MRSC) who went through a presentation webinar on what can be funded with Lodging Tax funds.
MRSC helps local governments for independent and reliable guidance on all topics of interest to cities and towns.
An emerging issue in the City of Chelan is how the City may use lodging tax funds beyond tourism marketing.
In December, the Lake Chelan Chamber of Commerce requested $700,000 from lodging tax revenues to continue marketing the Chelan tourism economy.
John Olson, a council member, has been very concerned about the City’s aging infrastructure which he says visitors and tourists affect when they visit. He requested that the Chamber give $400,000 of the requested $700,000 for infrastructure upgrades. This didn’t sit well with Michael Steele, executive director of the Chamber and a number of resort owners and service businesses who rely on visitors to help maintain a year-round profit.
With John’s request, the City Council voted to extend the Chamber’s contract by one year and to give them the $700,000, but agreed that a committee is needed to explore options and to write a new contract for the Chamber with strict reporting requirements, that up until now haven’t been adhered to.
Erin McCardle suggested that the City needs a long range plan for tourism situation. “We (the city) don’t have an economic development plan,” said McCardle. “We need to have a plan.”
Tim Hollingsworth feels that the Council needs to sit around a table and discuss how the Chamber and the City has a strategy of how funding is to be used. They need guidelines.”
The City Budget shows that beginning cash on hand from both the 2% and 3% lodging tax ended with $3,802,879 in 2022.
Lodging Tax History:
Originally, the State collected a 2% lodging tax to help pay for the Kingdome. When that debt was paid off, Cities requested that the 2% tax be allocated to them for tourism related capital projects.
In 1997, after disbursing 2% funding for City projects, including $650,000 for the construction of the Performing Art Center at Chelan High School, the City allocated 80% of the 2% collections to the Chamber in support of the Visitor Information Center to pay for a 1-800 line and postage for distribution of tourist information and community/media relation activities to help enhance the tourism industry.
In July, of 1997, the City began receiving a total of 5% on the sale of motel/resort rooms. In 2004 the Chamber and City entered into a four year agreement to provided the Chamber full use of the 3% funding.
In 2008, the agreement was extended for five years with minor modifications to set aside a portion of those funds to build a reserve fund that could be used for downturns in the economy.
Today, the Lake Chelan Chamber of Commerce is receiving $700,000 for 2023, after which a new amended contract will be proffered and an oversight committee will installed.
The argument concerning the expenditure of $700,000 in marketing is that Chelan has been discovered and is now the recipient of more visitors than it can handle. In addition, Chelan’s infrastructure is in need of updating, including tourism related amenities.
The decisions over how to market the Valley will be made in the near future. With the rules changing on how lodging tax money can be used, it will be interesting to see if some of that funding is funneled into programs directly related to the tourism industry, i.e. funding for better Marine Patrol activities.
All Things Lake Chelan 