A doubling of Marana's transient lodging tax from 3 to 6 percent is on the town council agenda Thursday night.
If approved, the increase in the "bed tax" could generate an additional $500,000 in the fiscal year that begins July 1, finance director Erik Montague said.
Montague said staff had "identified a series of options and opportunities" to increase revenues in light of the town's fiscal 2009-'10 budget crunch. Bed tax revenues, which reached $742,501 in fiscal 2007, flow into the town's general fund.
Marana's bed tax is lower than those of "comparable jurisdictions" such as Tucson and Oro Valley, Montague said.
According to the Arizona Department of Tourism, Oro Valley and Tucson each have 6 percent lodging tax rates. Tucson adds $1 for each night's stay. Unincorporated Pima County has a 2 percent bed tax rate that does not apply within incorporated cities, according to the state department. The state of Arizona applies a 5.5 percent bed tax. The bed tax does not affect commercial nor residential rental properties.
If the bed tax is increased from 3 to 6 percent, Marana's newest hotel, the 250-room Ritz-Carlton Dove Mountain, would be rebated a portion of its collected bed tax revenues when it opens later this year, Montague confirmed.
Marana has an agreement with Ritz-Carlton developer Cottonwood Properties that identifies an average lodging tax rate for three "benchmark" communities, Phoenix, Scottsdale and Tucson, Montague said. Phoenix and Scottsdale each have 3 percent bed taxes.
According to the agreement, if Marana increases its bed tax to "a rate in excess of the average rate for the comparable cities," it shall rebate the additional collections so the resort hotel can "maintain its competitive position in the marketplace by increasing advertising to draw more visitors to the town, enhancing the hotel facility, developing additional public infrastructure and otherwise."
The agreement recognizes the Ritz-Carlton is "competing in a statewide and a regional marketplace," and that Marana does not want to place the hotel "at a competitive disadvantage" with higher bed taxes. It is effective for 20 years after the hotel opens.
The tax break for the Ritz-Carlton drew inquiries from council members during a study session on the subject last week.
"Under the agreement, it seems like people who stay at the Super 8," as an example, are "subsidizing those who stay at the Ritz-Carlton," Councilman Russell Clanagan said.
"The tax is collected at the point of service, then remitted to the state," Montague said. In turn, the state returns revenues to the town.
"We'd be obligated to pay back that portion of revenues collected only from the Ritz-Carlton," Montague said. "It's only for taxes generated and earned by that property."
The finance director was hesitant to identify the specific rebate to the Ritz-Carlton.
"I'd have to be very careful with the actual amounts in an open forum," Montague added.
Mayor Ed Honea offered examples of other government bed tax decisions and prospects. He said the city of Tucson may increase its lodging tax to 7 percent plus $2 in an effort to balance its budget. And, until it suspended an economic development agreement earlier this year, Oro Valley has rebated one-third of collected bed taxes to the Hilton Tucson El Conquistador Golf and Tennis Resort, he added.
Staff has been "working with a combination of external organizations," among them the Marana Chamber of Commerce, to "provide information" about higher bed taxes, Montague said. A workshop on the lodging tax increase is set for 2 p.m. Thursday, May 21, at the Marana Operations Center, 5100 W. Ina Road. Business people and the public are invited.
By formal letter, "we do anticipate a direct contact to those individuals and groups of businesses that would be directly affected" by a tax increase, Montague said.
Marana must notify the Arizona Department of Revenue of its intent to increase the bed tax. Contact has been made, Montague said.
Bed tax collections, town of Marana, fiscal years 2002-'07