Council still mulling hotel-tax increase


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The thousands of visitors who stay in Iowa City and Coralville hotels each year may need to pay a bit extra in the future.

The Iowa City City Council is interested in implementing a 2 percent hotel-motel tax increase. The idea is a part of the council’s 2010 priorities.

City councilors ranked the tax increase at No. 3 on their priority list for the next fiscal year. Gaining funding for a passenger rail line and imposing a commercial property tax on nonowners living in condos are No. 1 and No. 2, respectively.

“This would be a worthwhile thing for us to do,” City Councilor Mike Wright said. “It would be fairly helpful for revenue.”

Mayor Regenia Bailey said the tax would be an alternative method for bringing revenue to the city.
The majority of the city’s income comes from property taxes, putting a large portion of its funding burden on local residents. But the hotel tax would predominantly affect those visiting the area, councilors said.

If the idea gained support, Iowa City would see an estimated $214,941 in additional revenue. Half of that must be allocated to tourism marketing, Bailey said. The rest can go toward any other part of the budget, but councilors are not yet sure where they would choose.

The average year-to-date hotel room-rate for the Iowa City, Coralville, and North Liberty area is $80.99, said Joshua Schamberger, the president of the Iowa City/Coralville Area Convention & Visitors Bureau.

At this rate, the current hotel-motel tax averages $5.66, but with an increase from 7 percent to 9 percent, lodgers would see a tax fee of $7.28. On average, each guest would pay an additional $1.62 to stay in local hotels.

Not all visitors to the area would have to shell out the extra cash, however. Those staying at the Iowa House in the IMU would be exempt from the tax increase because the hotel is associated with the UI, Schamberger said.

He doesn’t believe the proposed increase would deter travelers from staying in other hotels in Iowa City, he said, but he is concerned it might affect business-conference bookings if the tax is higher than other communities.

If the state allows cities to raise the tax to 9 percent, each city will decide if it wants to impose the increase.

If Cedar Rapids, the Quad Cities, or Dubuque choose to stay at or below the current 7 percent tax, the Iowa City area could see a lower bid for conferences, Schamberger said. However, he said, it’s unlikely any city would choose not to raise the tax.

Jeff Peller, the general manager at the Coralville Marriott Hotel and Conference Center, said he believed hotel taxes are necessary to provide revenue for a city, but he noted Iowa City and Coralville City Councils should take other cities’ rates into consideration when deciding on the increase.

“It’s important to have a fair and competitive rate,” Peller said.

Even with discussion, Iowa City lodgers won’t see the tax take effect anytime soon.

After receiving approval from the state Legislature to increase the tax, councilors would have to determine how to allocate the funding. The community must also vote on the initiative — but the proposal wouldn’t appear on the ballot until November 2010.

Collections at 9 percent would not start until Jan. 1, 2011. Any effect on the city’s budget wouldn’t be noticed until fiscal 2012, Schamberger said.

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