Madison will soon consider bumping the city’s room tax from 9 to 10 percent, which would nudge up the cost of staying at hotels and motels and boost city revenues by $1.8 million to $18.1 million for 2018.
The city’s new Room Tax Commission is informally recommending the increase, and unanimously voted to include the new revenue in its budget for next year, which delivers 70 percent of collections to tourist-related activities and the rest to the city’s general fund.
The increase would mean an extra $1.3 million for tourist-related spending, which includes Monona Terrace, the Greater Madison Convention and Visitors Bureau, Overture Center and smaller events, and $540,000 more for the city’s general fund.
Mayor Paul Soglin and Alds. Mike Verveer and Mark Clear, who sit on the Room Tax Commission, on Tuesday will introduce an ordinance to the City Council calling for the increase. The ordinance will be considered by the Finance Committee with a council decision expected on Oct. 3.
“The Room Tax Comission has been reviewing projections of programs funded by the 70 percent share of the room tax,” city Finance Director Dave Schmiedicke said. “They saw there was not sufficient revenue to maintain key programs.”
One critical program, the Convention and Visitors Bureau, now gets 24 percent of all room tax revenues and the share is scheduled to rise under a contract with the city to 34 percent in the early 2020s, Schmiedicke said.
The state allows a room tax up to 8 percent, unless a municipality has debt from a convention center. Madison is still paying debt from renovations at Monona Terrace.
Hoteliers generally want to hold the line on the room tax for competitive reasons. The city of Milwaukee has a 7 percent room tax, but the Wisconsin Center District levies an additional 2.5 percent there. Many Fox Valley communities have a 10 percent room tax.
Local hoteliers brought the idea for an increase to Soglin, said Tom Ziarnik, general manager of the DoubleTree by Hilton Hotel Madison and the industry’s representative on the Room Tax Commission.
“By increasing the room tax, it allows the Room Tax Commission and the city to honor the current Greater Madison Convention and Visitors Bureau contract and keep their funding whole,” Ziarnik said. “Otherwise, the room tax fund for 2018 would have had a shortfall and we would not have had the funding to support the GMCVB to the full contract amount.
“The hoteliers know the importance of funding the GMCVB as they are the marketing arm not only for the city but also for Monona Terrace,” he said. “If the GMCVB is not marketing and selling the city, the hotels are not filling up and the room tax (funding) will continue to decrease.”
The extra 1 percent would increase funding for Monona Terrace from the current $4.5 million to $5.4 million in 2018, and raise support for the Convention and Visitors Bureau from $3.7 million to $4.2 million and sustain Overture Center’s funding at $1.9 million, according to the budget passed by the Room Tax Commission.
The city once had full control over spending room tax revenues. But that has changed in the last two years.
For years, the state required municipalities to use at least 70 percent of room tax funds for tourism-related activity, but the use of Madison’s room tax was grandfathered and was unaffected. In 2015, the state budget eliminated the exemption for Madison and other communities and put the 70 percent of room taxes for tourism under the control of a tourism commission appointed by the mayor and council.
Editor's note: This story has been updated to correct the hotel of which Tom Ziarnik is the general manager.