The Pro’s and Con’s of the $2 room tax increase

Argus Leader online poll results at 9 PM

While, personally I am not opposed to a room tax increase, I am suspicious of the need. Will this money be used wisely? Or will it be thrown in another marketing burn barrel this city constantly cooks up? Maybe the solution isn’t giving the Convention Center more money, maybe the solution is changing CC management?

But let’s just read the Pro & Con arguments, they are both revealing. First the Pro tax increase;

When guests to our city stay in our hotels, they also eat in our restaurants, buy gasoline, make purchases at our great retail outlets, visit attractions and use many other services available here, all of which generates significant sales tax revenue.

Which is true, BUT, don’t you think most visitors are on a budget? And if they are spending an extra $2 a night on a room that is $2 less they are spending elsewhere in our city? Aren’t we just redirecting more subsidy to the Convention Center instead of the general fund, CIP fund and local business profits?

You might be surprised to know the Sioux Falls Arena and Convention Center have more than 400 events a year – more than Fargo and Sioux City, Iowa, combined.

So if the CC is so successful, as you claim, then why does it need a bigger subsidy? And why isn’t it making money? Maybe the answer is in the Con argument;

If the bed tax is approved, the recipient of the new tax dollars – projected at more than $1.2 million – is the Sioux Falls Convention and Visitors Bureau, an arm of the Sioux Falls Area Chamber of Commerce.

The CVB already receives $575,000 from a separate tax and an additional $500,000 from the city. The city then would keep the $500,000, if the tax is approved, instead of passing that money on to the CVB.

The CVB is not a government office. The employees aren’t city workers. They are chamber of commerce employees.

I think many taxpayers will be squeamish about using the coercive power of government to collect a new $1.2 million in taxes to support a private organization.

But these are the kinda games people continue to play in Sioux Falls, take from the little guy to benefit the big guy. If hotels want more money to market themselves, I suggest they take the bull by the horns and raise their room fees to help market themselves instead of depending on a government mandated increase, because as Nelson points out;

Sioux Falls already has programs that are suffering and projects that aren’t getting built. This past Thursday, the city was, again, discharging sewage into the Big Sioux River. We need tax dollars to repair our outdated infrastructure. If the council truly is willing to pass this $1.2 million tax, why not use the revenue for needed repairs now instead of rolling the dice with the CVB in hopes of more sales tax in the future?

Before we start dreaming about better conventions and event centers, lets face the facts, unemployment is high and the economy is in the shitter. Maybe that is why people are not visiting our city as much? This isn’t rocket science folks, just basic economics.


#1 scott on 09.27.10 at 7:41 am

funny how when someone proposed a bed and booze tax to fund the event center, the hotel folks came crying that people wouldn’t stay in sioux falls because of the extra dollar or two that the room rates would go up. now, when this tax will basically be used to give them free advertising, they have no problem with it.

#2 Costner on 09.27.10 at 8:13 am

I have a relative who used to attend a yearly convention for his company in the same city each and every year along with hundreds of other people who worked for the same company or it’s direct subsidiaries.

All of these people needed rooms, and every room was paid for by the company. That particular city increased their room taxes by a few bucks per room (I don’t recall if it was $2 or $3) and although that doesn’t seem like a huge issue, it was enough for this company to relocate their convention to another city the following year.

I also know know a hotel owner in Chamberlain who told me flat out he lost out on repeat business because Chamberlain has a hefty room tax. When people heard what it was they would complain because when booking a room they only know the daily rate ($89 a night for example) but they don’t find out the tax and fees until they arrive and are paying the bill.

People might not think a few bucks makes a big difference, but when people feel they are being taken advantage of – even for just a few dollars – they can (and do) spend their money elsewhere.

Now I don’t expect a few bucks to force companies to hold their large conventions elsewhere, but there will be a certain impact. If in a few years we find ourselves short on operating funds for the EC, maybe they will tack on another dollar or two to the bed tax – and next thing you know family travelers, convention schedulers, and those passing through will soon realize it is a lot cheaper to keep on driving to Mitchell or Sioux City or Watertown than it is to stop in Sioux Falls.

With each action there is a equal and opposite reaction. Tax policy is no different.

#3 Dave R on 09.27.10 at 9:41 am

I think politicians imagine that this is the perfect tax. One that won’t uspset constituants because outsiders pay for it, and it won’t slow economic growth because its just too small to be a big deal to people.

There is no such thing as free money. Its a tax and it takes money out of the private economy.

What annoys me is the petty uses they put these special assessments.

#4 Sy on 09.27.10 at 10:39 am

The CVB has much bigger issues than a lack or marketing dollars.

A Room tax should be part of the funding mechanism for a new Events Center, but since this is going through, look for them to fall back on the Sales tax, which as I’ve stated before is the wrong way to go.

#5 l3wis on 09.27.10 at 12:39 pm

“The CVB has much bigger issues than a lack or marketing dollars.”

Boy, you ain’t a kidding.

#6 anominous on 09.27.10 at 4:19 pm

You can still stay at the Oaks without paying that $2.

#7 l3wis on 09.27.10 at 6:59 pm

A candle might cost you a $1

#8 John on 09.28.10 at 5:54 am

For me it is not about wether this is a “good” tax or not. It is about turning over almost $2 million to the Chamber. We could use the tax for an opperating budget for an events center, etc.

The Chamber doesn’t represent me or my families interests.

#9 l3wis on 09.28.10 at 11:15 am

I would agree. They also sucker businesses into joining them but their are no benefits.

#10 Best of DaCola — South DaCola on 12.16.15 at 1:21 pm

[…] A look back on the BID Tax […]