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1b Lodging Tax CITY OF CHANHASSEN 7700 Market Boulevard PO Box 147 Chanhassen, MN 55317 Administration Phone: 952.227.1100 Fax: 952.227.1110 Building Inspections Phone: 952.227.1180 Fax: 952.227.1190 Engineering Phone: 952.227.1160 Fax 952.227.1170 Finance Phone: 952.227.1140 Fax: 952.227.1110 Park & Recreation Phone: 952.227.1120 Fax: 952.227.1110 Recreation Center 2310 Coulter Boulevard Phone: 952.227.1400 Fax: 952.227.1404 Planning & Natural Resources Phone: 952.227.1130 Fax: 952,227.1110 Public Works 1591 Park Road Phone: 952.227.1300 Fax: 952.227.1310 Senior Center Phone 952.227.1125 Fax: 952.227.1110 Web Site www.ci.chanhassen.mn.us 1b To: Todd Gerhardt, City Manager From: Laurie Hokkanen, Assistant City Manage~ Date: May 23, 2007 02Y' Re: Lodging Tax BACKGROUND The Chanhassen Chamber of Commerce was present at the May 9 worksession to discuss implementing a citywide 3% Lodging Tax. At that meeting, Linda Walton (President) and Mark Halla (Board member) presented various items which are attached. . Letter from Linda Walton explaining the proposal . MN Statute authorizing the City to implement such a tax . Survey of other metro communities with lodging tax in place . Projected Annual Marketing Budget The Chamber has met with all area hotels, and with the exception of one hotel, each has said they support the Lodging Tax. The one hotel that is not in favor of the Lodging Tax has said that they will not oppose the efforts to implement the Tax. The Lodging Tax applies a 3% tax to hotel stays. This tax mainly applies to visitors of the community. Residents would be affected only if they stayed in a Chanhassen hotel. Under this agreement, 95% (5% retained by city for administration efforts and costs) of the proceeds of the tax would be used to fund the Chanhassen Are Chamber of Commerce and Visitors Bureau (CVB). The CVB would be required to do the following: . Maintain a member of city staff as a voting member of the governing body . Provide the city with a copy of the annual budget and marketing plan · Provide the city with an executive summary of funds received and expended within 60 days of the end of the fiscal year If approved, this tax would go into effect beginning on August 1, 2007. RECOMMENDATION In order for the Lodging Tax to be implemented, the City Council must adopt the attached Ordinance. Staff recommends approval of this item. This item requires a majority vote for approval. The City ot Chanhassen · A growing community with clean lakes, Quality schools, a channing downtown, thriving businesses, winding trails, and beautiful parks. A great place to live, work, and play, G:\Admin\LH\Chamber of Commerce\Lodging Tax Ordinance Staff Report.doc CITY OF CHANHASSEN CARVER AND HENNEPIN COUNTIES, MINNESOTA ORDINANCE NO. AN ORDINANCE AMENDING THE CHANHASSEN CITY CODE CONCERNING THE IMPLEMENTATION OF A LODGING TAX THE CITY COUNCIL OF THE CITY OF CHANHASSEN, MINNESOTA ORDAINS: SECTION 1. DEFINITIONS: Unless otherwise expressly stated, wherever used in the Chapter, the following works shall have the meanings given to them by the Section. LODGING: The furnishing for the consideration of lodging at a hotel, motel, rooming house, bed and breakfast, tourist court, or resort, other than the renting or leasing of it for a continuous period of thirty (30) days or more. OPERATOR: A person who provides lodging to others, or any office, agent or employee of such person. SECTION 2. IMPOSITION OF TAX: There is hereby imposed a tax of three percent (3%) on the gross receipts from the furnishing for consideration of lodging, effective beginning August 1,2007. SECTION 3. COLLECTION: Each operator shall collect the tax imposed by this Chapter at the time rent is paid. The operator shall hold the tax collections in trust to the benefit of the City. The amount of tax shall be separately stated from the rent charged for the lodging. SECTION 4. PAYMENT AND RETURNS: The taxes imposed by this Chapter shall be paid by the operator to the City not later than twenty-five (25) days after the end of the month in which the taxes were collected. At the time of payment the operator shall submit a return upon such forms and containing such information as the City may require. The return shall contain the following minimum information: (A) The total amount of rent collected for lodging during the period covered by the return. (8) The amount of tax required to be collected and due for the period. (C) The signature of the person filing the return or that of his agent duly authorized in writing. (D) The period covered by the return (E) The amount of uncollectible rental charges subject to the lodging tax. The operator may offset against the taxes payable with respect to any reporting period, 107770.02 RNK:08/27/2003 the amount of taxes imposed by this Chapter previously paid as a result of any transaction the consideration for which became uncollectible during such reporting period, but only in proportion to the portion of such consideration which became uncollectible. SECTION 5. EXAMINATION OF RETURN, ADJUSTMENTS, NOTICES AND DEMANDS: After the return is filed, the City shall examine it and make any investigation or examination of the records and accounts of the person making the return deemed necessary for determining its correctness. The tax computed on the basis of such examination shall be the tax to be paid. If the tax due is found to be greater than that paid, such excess shall be paid to the City within ten (10) days after receipt of the notice thereof given either personally or sent by registered mail to the address shown on the return. If the tax paid is greater than the tax found to be due, the excess shall be refunded to the person who paid the tax to the City within ten (10) days after determination of such refund. SECTION 6. REFUNDS: Any person may apply to the City for a refund of taxes paid for a prescribed period in excess of the amount legally due for that period, provided that no application for refund shall be considered unless filed within one year after such tax was paid, or within one year from the filing of the return, whichever period is longer. The City shall examine the claim and make and file written findings thereon denying or allowing the claim in whole or in part and shall mail a notice thereof by registered mail to such person at the address state upon the return. If such claim is allowed in whole or in part, the City shall credit the amount of the allowance against any taxes due under this Chapter from the claimant and the balance of the allowance, if any, shall be paid by the City to the claimant. SECTION 7. FAILURE TO FILE A RETURN: If any operator required by the Chapter to file a return shall fail to do so within the time prescribed, or shall make, willfully or otherwise, an incorrect, false, or fraudulent return, the operator shall, upon written notice and demand, file such return or corrected return within five (50 days of receipt of such written notice and shall at the same time pay any tax due on the basis thereof. If such person shall fail to file such return or corrected return, the City shall make a return or corrected return, for such person from such knowledge and information as the City can obtain, and assess a tax on the basis thereof, which tax (less any payments theretofore made on account of the tax for the taxable period covered by such return) shall be paid within five (5) days of the receipt of written notice and demand for such payment. Any such return or assessment made by the City shall be prima facie correct and valid, and such person shall have the burden of establishing its incorrectness or invalidity in any action or proceeding in respect thereto. If any portion of a tax imposed by this Chapter, including penalties thereon, is not paid within thirty (30) days after it is required to be paid, the City Attorney may institute such legal action as may be necessary to recover the amount due plus interest, penalties, the costs and disbursements of any action. Upon a showing of good cause, the City may grant an operator one thirty (30) day extension of time within which to file a return and make payment of taxes as required by this Chapter provided that interest during such period of extension shall be added to the taxes due at the rate of ten percent (10%) per 107770.02 RNK:08/2712003 annum. SECTION 8. PENALlTIES: if any tax imposed by this Chapter is not paid within the time therein specified for the payment, or an extension thereof, there shall be added thereto a specific penalty equal to ten percent (10%) of the amount remaining unpaid. The amount of tax not timely paid, together with any penalty provided by this Section, shall bear interest at the rate of eight percent (8%) per annum from the time such tax should have been paid until paid. Any interest and penalty shall be added to the tax and be collected as part thereof. SECTION 9. VIOLATIONS: Any person who shall willfully fail to make a return required by this Chapter; or who shall fail to pay the tax after written demand for payment, or who shall fail to remit the taxes collected or any penalty or interest imposed by this Chapter after written demand for such payment or who shall refuse to permit the City to examine the books, records and papers under his or her control, or who shall willfully make any incomplete, false or fraudulent return shall be guilty of a misdemeanor. SECTION 10. USE OF PROCEEDS: Ninety five percent (95%) of the proceeds obtained from the collection of taxes pursuant to this Chapter shall be transferred to the Chanhassen Area Chamber of Commerce & Visitors Bureau, CVB Fund, to be used in accordance with Minnesota Statutes, section 469.190 as the same may be amended from time to time, to fund a local convention or tourism bureau for the purpose of marketing and promoting the City as a tourist or convention center. The CVB shall be obligated to (1) maintain a member of City staff as a voting member of its governing body, (2) to provide the City with the annual CVB budget and marketing plan prior to first day of the fiscal year, and (3) to provide an executive summary describing funds received and expended for the fiscal year within 60 days of the end of the fiscal year. In the event that an audit of the CVB is performed, the city will be provided with a copy of said audit within 30 days of receipt by the CVB. Five percent (5%) of the proceeds obtained from the collection of taxes pursuant to the Chapter shall be retained by the City of Chanhassen for the administration thereof. SECTION 11. APPEALS: Any operator aggrieved by any notice, order or determination made by the City under this Chapter may file a petition for review of such notice, order or determination detailing the operator's reasons for contesting the notice, order or determination. The petition shall contain the name of the petitioner, the petitioner's address and the location of the lodging subject to the order, notice or determination. The petition for review shall be filed with the city Manager within ten days (10) days after the notice, order or determination for which review is sought has been mailed or serves upon the person requesting review. Upon receipt of the petition the City Manager, or the Manger's designee, shall set a date for a hearing and give the petitioner at least five (5) day's prior written notice of the date, time and place of the hearing. At the hearing, the petitioner shall be given an opportunity to show just cause why the notice, order or determination should be modified or withdrawn. Counsel of petitioner's choosing at petitioner's own expense ma represent the petitioner. The hearing shall be conducted by the City Manager or the Manager's designee, provided only that the person conduction the hearing shall not have participated in the drafting of the order, notice or determination for which review is sought. The person conducting 107770.02 RNK:0812712003 the hearing shall make written findings of fact and conclusions based upon the applicable sections of this Chapter and the evidence presented. The person conducting the hearing may affirm, reverse or modify the notice, order or determination made by the City. Any decision rendered by the City Manager pursuant to this subdivision may be appealed to the City Council. A petitioner seeking to appeal a decision must file a written notice of appeal with the City Manager within ten (10) days after the decision has been mailed to the petitioner. The matter will thereupon be placed on the Council agenda as soon as is practical. The Council shall then review the findings of fact and conclusions to determine whether they were correct. Upon a determination by the Council that the findings and conclusions were incorrect, the Council may modify, reverse or affirm the decision of the City Manager or his designee upon the same standards as set forth in this subdivision. ATTEST: Todd Gerhardt, City Manager Thomas A. Furlong, Mayor 107nO.02 RNK:08/27/2003 ~\ CHANHA55EN~IPllE! ~R OF CoMMERCE & VISITORS BmAll Date: May 4, 2007 To: Chanhassen City Council From: Linda Walton, President Chanhassen Area Chamber of Commerce & Visitors Bureau RE: Proposal for your consideration: Implementation of a citywide lodging tax The Chanhassen Area Chamber of Commerce & Visitors Bureau hereby proposes that the City of Chanhassen adopt a citywide lodging tax of 3% as allowed by Minnesota statue to establish a source of funds to be used for advertising and promoting the community as a visitor destination. Minnesota Statute 469.190 authorizes Cities to" impose a tax on the gross receipts of the furnishings of certain lodgings (Lodging Tax)," of which "95% of the gross proceeds from any tax imposed...fund a local convention or tourism bureau for the purpose of marketing and promoting" (refer to the included copy of Statute 469.190). The Chanhassen Area Chamber of Commerce and Visitors Bureau is willing and able to receive such funds to carry out activities to advance the economic impact of tourism in the Chanhassen area. Of the Lodging Tax collected by the City of Chanhassen, 5% would be retained by the City for administrative purposes. All money received by the Chanhassen Area Chamber of Commerce & Visitors Bureau would be placed in a segregated fund and designated for the operation and activities of marketing and promotion. Separate books and records for the operation and activities would be maintained. The travel and tourism industry provides a major economic impact overall to communities, not just the hotel industry. This economic impact benefits the entire community. According to the most recent statistics available from the Minnesota Department of Tourism, the travelers spending by expenditure breaks down as shown below: . Shopping 25% . Recreation 25% . Food 24% . Lodging 14% . Transportation 11 % . Travelers in Minnesota spend in excess of $32 million a day which supports a variety of businesses and adds to the total economic strength of our communities. According to Gayle Junnila, metro regional manager with the Minnesota Department of Tourism, "people are traveling regionally and according to the Travel Industry Association of America, the growing trends in the u.s. are Cultural Heritage and OutdoorlWildlife Tourism". Chanhassen has both the cultural draw of the Chanhassen Dinner Theatres and the outdoor/wildlife draw with the University of MN Landscape Arboretum, as well as the close proximity with Lake Minnetonka and the west metro area parks and lakes. The most recent data provided by the Minnesota Department of Tourism shows that between June 2005 and May 2006, the DIRECT Economic Impact of Expenditures by Travelers in Carver County as: . Travelers Expenditures $117,544,475 . Full- Time Equivalent Jobs 1,677 . Local Revenue $2,533,819 Over the past month, both myself and Mark Halla, Vice Chair of the Chamber Board for 2007, visited with representatives of all of our Chanhassen lodging facilities and received overwhelming support from a majority of those we spoke with. In fact, they even requested we implement this tax as soon as possible to capture the tax collected during their the busy season and have an immediate influx of approximately $50,000 to support advertising and promoting our community. With the existing draw to the area, the easy access from our community to points of interest, as well as MSP International Airport and major highway infrastructure, plus the area growth projected within the next 5 years, the opinion of Chanhassen Area Chamber of Commerce & Visitors Bureau is that it is time to move forward with the implementation of a Lodging Tax to enable strategic marketing applications which will aid to the total economic strength of our community now and in the years to come. Refer to that included documents: . Minnesota State Statute 469.190 . Twin Cities Regional Lodging Tax Rates . Projected Annual Budget . Hotel-Motel Tax Return Form . Proposed Amendment to City Code 469.190, Minnesota Statutes 2006 Copyright @ 2006 by the Office of Revisor of Statutes, State of Minnesota. 469.190 LOCAL LODGING TAX. Subdivision 1. ~()rizatiQ!Y Notwithstanding section 477A.016 or any other law, a statutory or home rule charter city may by ordinance, and a town may by the affirmative vote of the electors at the annual town meeting, or at a special town meeting, impose a tax of up to three percent on the gross receipts from the furnishing for consideration of lodging at a hotel, motel, rooming house, tourist court, or resort, other than the renting or leasing of it for a. continuous period of 30 days or more. A statutory or home rule charter city may by ordinance impose the tax authorized under this subdivision on the camping site receipts of a municipal campground. Subd. 2. Existing taxes. No statutory or home rule charter city or town may impose a tax under this section upon transient lodging that, when combined with any tax authorized by special law or enacted prior to 1972, exceeds a rate of three percent. Subd. 3. Pi~ipsition ofpr(}s~,~!Jj. Ninety-five percent of the gross proceeds from any tax imposed under subdivision 1 shall be used by the statutory or home rule charter city or town to fund a localcoriyerition or tourism bureau for the purpose of marketing and promoting the city or town as a tourist or convention center. This subdivision shall not apply to any statutory or home rule charter city or town that has a lodging tax authorized by special law or enacted prior to 1972 at the time of enactment of this section. Subd. 4. Unorganized territories. A county board acting as a town board with respect to an unorganized territory may impose a lodging tax within the unorganized territory according to this section if it determines by resolution that imposition of the tax is in the public interest. Subd. 5. Reverse referendum. If the county board passes a resolution under subdivision 4 to impose the tax, the resolution must be published for two successive weeks in a newspaper of general circulation within the unorganized territory, together with a notice fixing a date for a public hearing on the proposed tax. The hearing must be held not less than two weeks nor more than four weeks after the first publication of the notice. After the public hearing, the county board may determine to take no further action, or may adopt a resolution authorizing the tax as originally proposed or approving a lesser rate of tax. The resolution must be published in a newspaper of general circulation within the unorganized territory. The voters of the unorganized territory may request a referendum on the proposed tax by filing a petition with the county auditor within 30 days after the resolution is published. The petition must be signed by voters who reside in the unorganized territory. The number of signatures must equal at least five percent of the number of persons voting in the unorganized territory in the last general election. If such a petition is timely filed, the resolution is not effective until it has been submitted to the voters residing in the unorganized territory at a general or special election and a majority of votes cast on the question of approving the resolution are in the affirmative. The commissioner of revenue shall prepare a suggested form of question to be presented at the referendum. Subd. 6. Joint powers agreements. Any statutory or home rule charter city, town, or county when the county board is acting as a town board with respect to an unorganized territory, may enter into ajoint exercise of powers agreement pursuant to section 471.59 for the purpose of imposing the tax and disposing of its proceeds pursuant to this section. Subd. 7. Collection. The statutory or home rule charter city may agree with the commissioner of revenue that a tax imposed pursuant to this section shall be collected by the commissioner together with the tax imposed by chapter 297 A, and subject to the same interest, penalties, and other rules and that its proceeds, less the cost of collection, shall be remitted to the city. Twin Cities Regional Lodging Tax Rates (this was provided by a Chanhassen hotel manager, not all Twin Cities area communities are listed, only those communities in which the specific hotel franchise is located). Of the 35 municipalities included in the complete statewide listing (only the Twin Cities regional is listed below), 80% have an additional tax on top of the 6.5% state tax. As per list: . Richfield . Bloomington . Eagan . Bumsville . Minneapolis . Roseville . St. Paul . Golden Valley . Minnetonka . Coon Rapids . Maple Grove . Shakopee . Lakeville . Elk River . Arden Hills . Vadnais Heights . Woodbury . Stillwater 9.5% 13.5% 9.5% 9.5% 13% 9.5% 13% 6.5% 6.5% 9.5% 9.65% 9.5% 9.5% 6.5% 9.5% 6.5% 6.5% 6.5% Projected Annual Tourism/MarketingBudget - Year 1 Chanhassen Area Chamber of Commerce Visitors Bureau Income Hotel/Motel Tax $ 220,000.00 Interest Income $ 1,200.00 Total Income $ 221,200.00 Expense Meetings $ 500.00 Trainino/Tuitions $ 800.00 Accountino $ 4,200.00 Office Supplies $ 1,700.00 Dues & Membeships $ 1,500.00 Travel & Lodging $ 2,500.00 Postaoe $ 7,500.00 Telephone & Internet $ 3,500.00 Software & Office Equipment $ 6,500.00 Office Maintenance $ 500.00 Public Relations $ 400.00 Miscellaneous Expense $ 1,000.00 Insurance - Liabilitv $ 1,200.00 Total General Expenses $ 31,800.00 Payroll Expenses Gross Wages $ 42,500.00 Payroll Taxes $ 3,783.00 Employee Benefits $ 2,000.00 Total Payroll Expenses $ 48,283.00 Office Expenses Rent $ 9,600.00 Leasehold Improvements $ 5,000.00 Miscellaneous Expense $ 800.00 Total Office Expenses $ 15,400.00 Total Marketing Expense $ 124,527.00 Total Expenses $ 220,010.00 First Year One Time Expensl Indicated In Blue Year 2 Marketing Expense would increase to $136,027 without the fst year one time expenses. A total of 61.8% in year 2 would be allocated directly to marketing of the community.