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Loyal friend about to fall on hard times? |
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Wednesday, 10 October 2007 |
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By Jon Klusmire
Register Staff 10-9-2007
After snoozing through the start of the new century, Inyo County’s bed tax is awake and growing once again.
Despite the string of higher bed tax collections in the past few years, county officials are hedging their bets for 2007-08 by estimating the tax revenue could stagnate once again due to high gas prices and a weakening state economy. If the tax revenue drops or stalls this fiscal year, it will be a rare event.
Revenue growth from the bed tax started to slump in 1999-2000, then staggered and fell for the first time in the tax’s history during the next three years as the county and the rest of the country battled through a recession and the after-effects of the 9/11 attacks. One of the more significant of those aftershocks was a general decline in travel and tourism, especially from foreign travellers.
The voter-approved increase in the bed tax from 9 to 12 percent starting on Jan. 1, 2007, delivered more money from the tax, but didn’t generate more actual cash than the move made in 1986 to increase the tax from 6 to 9 percent.
Before the run of stagnant and dropping bed tax revenue from 2000 to 2003, it appeared the bed tax was recession-proof and otherwise unaffected by national events and the overall state of the regional and national economy. Conditions in Inyo County, such as snowy or dry winters, good wildflower years or short fishing seasons, probably moved the tax up and down somewhat, but the overalltrend was always up.
The county bed tax is only collected from visitors staying in motels and hotels in the unincorporated areas of the county. Death Valley and Lone Pine hotel and motels are the biggest contributors to the county tax (Bishop levies its own bed tax on hotels and motel visitors staying in the city limits).
The three straight years of declining county bed tax revenue were the first time the tax revenues had fallen since the county imposed a 6 percent Transient Occupancy Tax in the 1980-81 fiscal year. From 1980 until the 2000-01 fiscal year, the county always took in more bed tax revenue every year (the only exception was a 1 percent drop of about $3,000 in 1982-83). The increases in bed tax revenue for the first 20 years of the tax’s life ranged from 2-5 percent, and in some years jumped up to the 8-9 percent range, according to a complete history of bed-tax collections prepared by Treasurer-Tax Collector Alisha McMurtrie.
The key feature of that tax history was that the tax always generated more money each year than during the previous year. That trend ended before the 9/11 attacks and national recession.
Signs of a slowdown appeared in 1999-00, when the tax revenue went up a mere 3.8 percent, after recording hefty gains of 6 and 9 percent the previous two years. Those gains pushed the tax total to $1.32 million, which would remain the highest total for the tax until 2004-05.
Since the bed tax is tied to the cost of each room, when room rates rise, so do bed tax revenues. Thus, it takes a fairly decent drop in the actual number of visitors to counteract higher room rates and acheive dropping bed tax revenue.
In the 2000-01 fiscal year, which ended in July 2001, the bed tax recorded a drop of about 1 percent. The total tax revenue generated declined by about $19,000, to just a tad more than $1.3 million.
The next year, 2001-02, the tax revenue dropped again, but only by a mere one-third of a percent (around $5,000), so the total was basically the same $1.3 million.
The real drop was felt in 2002-03, with a 2.5 percent drop in revenue from the previous year. That knocked about $32,000 off the tax total, and sent that total to $1.27 million.
Over that three-year span, income from the tax shrunk by about $54,000.
One good bounce-back year almost put the total tax revenue back where it was in 1999-00, before the slump. A 5.2 percent increase in revenue in 2003-04 got the tax’s total back to the $1.3 million level, but left it about $20,000 short of the 99-00 total.
Finally, in 2004-05, a 9 percent jump in bed tax revenue, representing almost $130,000 in cash, got the tax total over the slump, and pushed it to a new record high of about $1.4 million. Another 7 percent jump the following year brought in an additional $107,000, and increased that total to $1.54 million.
The final total for 2006-07 was a tidy $1.7 million, thanks to a rate increase in the bed tax from 9 to 12 percent that went into effect in January, which meant the higher rate was in effect for only half a fiscal year.
The higher rate generated about $160,000 more than the previous year, for a 10.3 percent increase.
The total revenue increase by adding 3 percent to the bed tax was actually less than the last time the tax was raised. The county moved the bed tax from 6 to 9 percent on Nov. 1, 1986, and saw revenues jump by $170,000 from the move (yes, that’s comparing eight months to six, but room rates in 1986 were probably a bit lower than in 2006). The $170,000 jump in 1986 represented a 40 percent increase in bed tax revenue to $584,000.
The 2007-08 fiscal year will be the first to reap a full year of benefits from the 12 percent bed tax. But travel trends have prompted county officials to be leery with revenue estimates. The estimated bed tax revenue for the next fiscal year is actually a bit below this year’s total. The high price of gas, the potential for the state’s housing bust and a general economic slowdown could decrease the number of visitors to the county, which might result in less bed-tax revenue.
One constant with regard to the county bed tax is that Death Valley generates close to 70 percent of the county’s bed tax, according to the regional breakdown provided by McMurtrie. Death Valley National Park features the historic and high-priced Furnace Creek Inn and the park’s other hotels are also about twice the price of a room in the rest of the county. Since the bed tax is a percentage of the cost of a room, higher room rates generate more bed tax.
The Death Valley region produced about $1.1 million in bed tax in 2006-07, according to the Treasurer’s report.
Lone Pine pitches in about 26 percent of the bed-tax total, with its numerous hotels and motels generating about $440,000 in bed taxes last year.
Independence, Big Pine, mountain resorts and cabins, contributed the remaining $300,000 in 2006-07 bed taxes.
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Last Updated ( Wednesday, 12 December 2007 )
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