Hotels balking at tax

Fargo hotel managers say a proposed 1 percent lodging tax to boost the state's marketing fund is unfair and could hurt their chances of landing major conventions.

A bill passed by the Senate and headed to the House Tuesday would impose the tax on hotels, motels and tourist courts in North Dakota from June 30, 2003, to July 1, 2007.

Money generated from the tax -- an estimated $2.9 million in the first two years -- would be deposited into the state's Lewis & Clark bicentennial celebration fund.

Doug Anselmin, general manager of the Fargo Holiday Inn, said Fargo hotel managers don't see the benefit from the added promotion of Lewis & Clark. "It's for something that's going to be going on in the western part of the state," he said.

Senate Bill 2337 unfairly targets hotels to support state tourism efforts, said Gary Grandbois, regional sales manager of Ramada Plaza Suites & Conference Center in Fargo.

"Why should the lodging industry bear the general funding of North Dakota tourism?" he asked.

But supporters of Senate Bill 2337 say the state's general fund can't support the dollars needed to promote the Lewis & Clark celebration and other tourist spots.

The House recently cut $200,000 from Gov. John Hoeven's $5.1 million tourism budget for the next biennium.

"This is the way that we can restore those cuts and give the state a chance to shine during this period that should be our finest hour," said Tracy Potter, co-chairman of the statewide Tourism Alliance Partnership, which pushed for the bill.

North Dakota's tourism budget ranked 45th out of 48 states in a recent survey, state tourism director Sara Otte Coleman said.

The Division of Tourism has requested $853,000 in the 2003-05 budget to market the Lewis & Clark celebration -- about $53,000 less than in the current budget.

"We knew it didn't do a lot of good to ask for money that wasn't there for this biennium," Otte Coleman said.

The hotel tax revenue would be spent on out-of-state advertising, she said.

Patty Lewis, executive director of the North Dakota Hospitality Association, said she's concerned legislators may use the hotel tax as an excuse to cut tourism funding.

"Any time you have a dedicated fund, you make the tourism budget vulnerable," Lewis said.

The cost of promoting tourism should be borne by all of the state's residents, or at least the entire tourism industry, Lewis said.

But applying the tax to restaurants and convenience stores is too complicated, said Sen. Rich Wardner, R-Dickinson, one of six lawmakers who sponsored the bill on behalf of the TAP.

Sen. Russell Thane, another bill sponsor, said he believes the hotel and motel industry is overreacting.

"I don't call it targeting of the tax," said Thane, R-Wahpeton. "It was logical to place the tax there because it is the facility that tourists always use."

However, an informal survey of Fargo hotels last year revealed more than 60 percent of patrons were residents of North Dakota, Grandbois said.

"In other words, we're taxing ourselves again," he said.

Originally proposed as a 2 percent tax, the bill was amended and passed with bipartisan support in the Senate on a 33-11 vote.

Opposition was slow to mount, but it should be at full force when the bill goes before the House Taxation and Finance Committee at 9 a.m. Tuesday, said Terry Harzinski, executive director of the Bismarck-Mandan Convention and Visitors Bureau.

Major cities in other states are lowering their hotel rates, and the tax would put North Dakota at a disadvantage, Harzinski said.

"When we go and bid on national conventions, we find that we don't have the competitive edge we once had," he said.

Border cities such as Fargo and Grand Forks would have an even tougher time competing with hotels across the Red River, Anselmin said. The city of Fargo already has a 3 percent lodging tax, and an additional 1 percent would result in a 2 percent higher tax than Moorhead hotels, he said.

"With business travel being more scrutinized, the big point is, let's not make it more expensive to bring people here," he said.

However, supporters said they believe the impact will be minimal.

"For the people traveling through the state, I guarantee they do not ask what your tax is," Wardner said. "They just pay it and that's it."

Potter, executive director of the Fort Abraham Lincoln Foundation in Mandan, said Fargo's opposition has underlying roots.

"The real complaint lies with that feeling that the state tourism office doesn't do enough to promote the Red River Valley," he said. "And we think they should give the new tourism director a chance to promote the whole state."

But Lisa Gisvold, manager of Country Inn & Suites in Fargo, said she fears negative reactions, like the one she got Thursday from a Las Vegas man in town for a hockey tournament, will be all too common if the bill passes.

"He goes, 'Jeez, what are your taxes up here?'" Gisvold said. "I said, 'Nine and a half (percent),' and he said, 'Where do you think you are, New York City?'"

Readers can reach Forum reporter Mike Nowatzki at (701) 241-5528