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Council axes TID taxes

The Sonoma City Council waded through more than 80 pages of staff reports, revenue projections, draft resolutions, petitions, plans and proposals for a $440,000-a-year Sonoma Tourism Improvement District (STID), gave it an hour of discussion and consideration Wednesday night and then, with a three-vote majority, refused to approve it.

The plan, presented by a consortium of Sonoma hoteliers, proposed to create a self-assessed 2 percent levy on all room revenues within city limits to produce the $440,000 annual revenue stream. The money would be invested in promoting Sonoma tourism by increased spending on Internet marketing, radio and TV time, print media ads, trade show attendance, familiarization tours, production of promotional materials, promotional events and "sales blitzes" among other things.

Creation of the STID would require the approval of lodging businesses paying more than 50 percent of the assessment. As an autonomous nonprofit agency, the STID would work independent of city oversight, although once a year, during a 30-day period, those 50-percent owners could protest and terminate the district.

The major downside to the proposal, at least in the eyes of three council members, was the fact that the STID would effectively eliminate a potential 2 percent increase in Transient Occupancy Tax (TOT) because conventional wisdom holds that two 2 percent increases in room rates would not be viable.

The current "bed tax" in Sonoma is 10 percent and most council members - as well as some hoteliers - have said that a 12 percent TOT is a reasonable taxing level should the need arise to generate more general fund revenue. A $440,000 increase in city revenues would come close to covering losses inflicted by state appropriation of local funds.

But according to Bill Blum, general manager of MacArthur Place Hotel & Spa, the city could generate as much money with increases in TOT driven by more "heads in the beds."

Blum told the council that the existing marketing campaign increased hotel revenue by 25 percent between 2004 and 2007. He said similar increases would be possible with more promotion and would translate into 25,000 more overnight stays, or 50,000 more individual guests.

And David Dolquist, general manager of The Lodge at Sonoma, added that "We spend way over $440,000 per year, and we'll continue to do that." Dolquist said the average stay at The Lodge is 2.2 nights and that translates into "lots of additional spend" at area restaurants and shops.

At that point Councilmember Joann Sanders moved to adopt a resolution of intention to form the STID, but none of the remaining three members present moved to second the motion. Councilmember Tom Rouse was absent.

Without a second, the motion died, and no succeeding motion was made.

As Councilmember Steve Barbose explained, "I am not prepared to support this concept. The city is in precarious financial condition ... I don't think we can afford to give up $440,000." And he challenged the suggestion that local hotels could generate the additional $4,660,000 in room revenue to produce additional TOT equivalent to the STID assessment.

Councilmember Ken Brown observed that he would "like to find a way to make this work," but added that too many questions remained about "how much money would we get back."

Concluded Mayor Laurie Gallian, "I don't feel we are 100 percent informed." But she added, "We're already engaged. This is a first step," and said she wanted to hold a "revenue meeting" before deciding whether the STID could work.