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City officials should push to increase the hotel tax

BY DI EDITORIAL BOARD | NOVEMBER 20, 2009 7:21 AM

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Hotel visits are a great way to stock up on extra bottles of shampoo, conditioner, and paper-wrapped soap bars. However, they can — and should — provide a whole lot more for our community as well.

Iowa City has long contemplated increasing revenue by raising the hotel/motel tax from 7 percent to 9 percent. Unlike the franchise fee — a tax the city seems supremely focused on passing — a hotel tax would help the city’s coffers without placing an undue burden on residents.

Taking this into consideration, the city should make a strong effort to increase the hotel tax in the near future.

Connie Champion, the only city councilor who has voted against the franchise fee, said she is in favor of increasing the hotel rate. In comparison, the franchise fee would push businesses out of Iowa City “because our industries are working at minimum balances already,” she said.

Joshua Schamberger, the president of the Iowa City/Coralville Convention and Visitors Bureau, said an increase would be a boon for residents.

“It’s a fairly substantial benefit for the citizens,” he told the Editorial Board. “It would still keep Iowa City and Coralville at or below the regional average for this tax.”

Iowa City would receive an extra $214,941 if the levy were 9 percent instead of the current 7 percent, he said. That would be an additional $200,000 to spend on vital public services — all at little cost to residents. And guests would only see an average increase of $1.62. Guests at the Iowa House wouldn’t be subject to the charge.

The City Council would first have to petition the state Legislature to increase the hotel tax, because the state must approve any proposed spike in local taxes. If the Legislature OK’d the tax hike, officials would then send the request to the Johnson County Board of Supervisors, and officials could set a special election date to decide the matter.

The funds would be available no earlier than fiscal 2012. Detractors may argue that 2012 is too far in the future to contemplate such a tax hike. But it is this failure to plan ahead and produce fiscally sound budgets that has left our city in dire financial straits. Councilors need to work proactively to develop this potential revenue stream.

For Schamberger, it’s only fair that visitors chip in as well.

“Thousands and thousands of citizens come here every year, and they take advantage of our services,” he said.

In contrast, Nancy Quellhorst, the president and CEO of the Iowa City Chamber of Commerce, contends that officials should jettison the proposal.

“Although we strongly support the City Council’s commitment to public safety, the Iowa City Area Chamber of Commerce does not favor a tax,” she told the Editorial Board. “We would like public safety to be the city’s highest priority, funded by budget cuts rather than tax increases or fees.”

The Chamber of Commerce’s stance is understandable. As a pro-business group, it would be shocking if it actually supported the franchise fee or a potential hotel tax increase. But in weighing the merits of a tax hike, we must consider its effects on the community writ large, rather than the concerns of parochial interests. Increasing the hotel tax would help the overwhelming majority of residents, who rely on city services that could be cut because of lackluster revenue.

If Iowa City officials want to stall on this issue, they will only be setting us up for additional failure in the future.

We urge councilors to petition the Legislature for this increase. If implemented, it would provide the city with a much-needed cash infusion — and at a minuscule cost to residents.


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