The city’s first two budget meetings looking at fiscal year 2015-16, held April 22 and 29, contained two crucial pieces of advice from City Manager Brant Kucera.
The city should increase the transient lodging tax, from 6 percent to 6.5 percent, solely to fund the Visitor Information Center through the Cannon Beach Chamber of Commerce, and should invest in long-overdue improvements to the city’s infrastructure.
The proposed FY2015-16 budget represents a 7.6 percent increase over the current fiscal year’s budget — a jump from $13,508,389 to $14,539,865.
The increase is mainly because of the half-percent tax increase, which is expected to generate approximately $139,000 for the information center, according to Kucera’s budget message. The city is also counting on nearly $400,000 in grant money to come its way, and approximately $3,471,230 will carry over from this year’s budget.
The city’s spending on its personnel may increase by about 12 percent because two positions — the finance director and the information technology director — will now be filled by employees rather than be contracted out, Kucera said.
The final budget meeting, scheduled for May 13 at 5:30 p.m., will include a public comment period. Members of the business community in particular are encouraged to share their thoughts on the tax increase, Kucera said.
The City Council plans to vote on the budget at its regular June 2 meeting. If additional deliberation is needed, the council will hold a special meeting later that month.
With the extra $139,000, the Chamber of Commerce would be able to hire a full-time employee. This person would help upgrade the information center’s operations and assist Courtland Carrier, the chamber’s executive director, with marketing, Kucera said.
Because the chamber is the town’s primary economic development agency, money spent on the chamber is money spent on tourism, he said.
The issue, Kucera said, is not that Cannon Beach isn’t funding its chamber well enough. The city, in fact, spends more money on its chamber than does Seaside; last year, Cannon Beach spent about $71,000 whereas Seaside spent about $38,000.
The issue is that Cannon Beach has a chamber-run information center, which performs the same task as Seaside’s Visitors Bureau but is funded far less — roughly $125,000 compared to $625,000, Kucera said.
Cannon Beach’s information center sees about three times as many walk-ins annually than does Seaside’s Visitors Bureau, according to Carrier. In 2014, the Cannon Beach tallied about 54,000 walk-ins to Seaside’s 20,000.
“In Seaside, the city takes that on as an expense. Here, our chamber, a private organization, is doing that function for us,” Kucera said, “and doing it at a very low, low cost.”
The revenue the chamber receives from the tax increase would be on top of the Tourism and Arts grant, which is awarded to the chamber in varying amounts every year.
“You hear that phrase ‘heads in beds’ — well, that’s exactly what the chamber does,” Kucera said, referring to the desire of destination resort communities, like Cannon Beach, to attract as many overnight visitors as possible.
City Councilor Wendy Higgins said that, if the tax increase is approved, there should be a way to track how the chamber and information center spend the money.
Kucera agreed: “Spending money on a problem doesn’t solve the problem. There has to be accountability and a real reporting mechanism where we see success with the money that we’re going to give them.”
Because the chamber partially relies on money from the city’s Tourism and Arts fund — an amount that fluctuates from year to year — the chamber has had an unstable revenue stream, Carrier said. The tax increase would solve that problem by tying the chamber’s revenue to a stable source of income.
The budget committee should keep in mind, Kucera said, that, even with the added revenue, the information center’s needs far exceed $139,000. However, “this is a good first step to begin to address some of those needs,” he said.
He added that the expected return may grow into a far greater amount down the road than initially hoped for by establishing a self-reinforcing positive feedback loop: The increase in lodging tax revenue would allow the chamber to advertise better, which means an increase in visitors, which means more tax revenue and so on.
The bottom line, Kucera said, is that the city would not have to raise the lodging tax any further to gain more revenue.
He said that a substantially large increase in lodging taxes could produce diminishing returns — that is, more people might be disinclined to rent a room in Cannon Beach. The proposed increase won’t have that effect on the hospitality industry, he argued.
“I think it creates the revenue to continue to promote this town, which will ultimately benefit that sector of the economy,” he said.
After speaking with the department heads while preparing next year’s budget, “it became very apparent to me very quickly that we have quite a bit of deferred maintenance that we need to address,” Kucera said. “The time is high that we begin to address some of the capital issues that we have.”
Among the proposed capital improvement projects Kucera, the city staff and the budget committee discussed are:
• The ongoing renovation of City Hall;
• Installing antennas at both the north-end and south-end emergency cache container sites;
• Repairing and rehabilitating the surfaces of the city’s downtown tennis and basketball courts;
• Reconstructing the blocks between First and Third streets to make them ADA-accessible;
• And constructing a new plaza at the west end of Second Street with benches, low lighting and a rebuilt sidewalk.
At future meetings, the budget committee will consider possible improvements to the city’s water system, sewer system and RV Park.
Though the city must maintain a healthy fund balance, Kucera noted that, after a while, a city’s saving too much money can begin to seem gratuitous, especially if the money isn’t reinvested in the community.
“If people don’t think you have a plan for the money that you keep socking away, the logical question is, ‘Why are you taxing me?’” he said. “I think we need to show people, ‘Here’s the plan for those taxes we’ve been putting away.’”