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Tourism marketing to retain largest slice of lodgers tax funds

Durango City Council considered asking voters to reallocate money to housing, child care
Nine business leaders, tourism officials and Durango area residents spoke out against any changes to lodgers tax allocations at the Jan. 17 Durango City Council meeting. (Jerry McBride/Durango Herald file)

A proposal to spend less on tourism marketing and more on affordable housing appears to be going nowhere after Durango City Council indicated last week that it is unlikely to put the issue before voters in April.

The city began collecting additional lodgers tax revenue in July 2022 after voters approved the tax increase the year prior. Of the new revenue, 55% goes toward tourism marketing, while 20% goes to transportation, 14% goes to arts and cultural events, and 11% is reserved for spending at City Council’s discretion.

The city had considered asking voters to change the funding structure so that only 35% would go to tourism marketing, while 20% would go to affordable and workforce housing and child care for local workers.

The remaining categories – transportation, arts and cultural events, and discretionary spending – would remain the same.

But after a discussion last week, City Council spiked the idea of asking voters to adjust the funding structure. Mayor Barbara Noseworthy said on Thursday she was the only councilor ready to support a reduction of allocations to tourism marketing.

Councilors noted that allocating funds away from marketing to housing solutions would hardly impact the housing crisis on its own. The lodgers tax increase that voters approved in 2021 was expected to bring in about $2 million annually, which means a 20% share would result in about $400,000 going to housing issues.

Estimated city lodgers tax collections for 2023 total $3,627,369, in which case a 20% share would result in about $725,474 going to housing issues, according to data reviewed by City Council last week.

Business leaders, tourism officials and nonprofit representatives went to bat for keeping the lodgers tax allocations as they are, urging City Council at its regular meeting Jan. 17 to take more time to review how the current spending structure is affecting tourism marketing efforts.

Nine residents attended the City Council meeting to voice their concerns about changing the funding structure of the lodgers tax.

Public speakers at the meeting included David Woodruff, president of the Durango chapter of the Colorado Restaurant Association and a candidate for City Council; Jenny Roberts, general manager of the Hampton Inn; and Jack Llewellyn, executive director of the Durango Chamber of Commerce; among others.

Woodruff said lodgers tax allocations, approved by voters in April 2021, have been in distribution for only about seven months, which isn’t long enough to judge its impact.

He said the Colorado Affordable Housing fund approved by state voters in November could aid the city “considerably” with affordable housing in addition to a home investment partnership fund, a housing development grant fund, and a neighborhood stimulation program that could make state and federal dollars available.

“Taking money away from the marketing of Durango only hurts the city and community of Durango in the medium- and long-term,” Woodruff said. “By marginalizing the revenues going to Visit Durango, we are taking from the families that own and operate those businesses along with the employees that rely on those businesses being open.”

Roberts said moving lodgers tax funding away from tourism marketing could diminish the quality of life for residents and tourists.

“The quality of life that we value so deeply here in Durango is a direct result of tourism. Therefore, I join in adding my voice and asking you not to rush into this decision,” she said. “At the very least, it should be postponed, and you did make that decision today and we greatly appreciate that.”

Residents said housing, followed by homelessness, are the two biggest problems the city of Durango faces. Survey results were discussed at the Jan. 17 Durango City Council study session where the council decided not to pursue an April ballot item asking voters if lodgers tax revenues should be reallocated to fund more housing efforts. (Courtesy city of Durango)
Residents surveyed prioritize housing, homelessness over other city goals

While those who spoke opposed adjusting the lodgers tax, a survey shared last week with City Council suggests housing is a No. 1 concern among residents.

The survey asked 300 residents and likely voters to list Durango’s biggest challenge, with 36% saying housing followed by 23% who said homelessness.

The survey also asked residents if they would support a ballot issue reallocating lodgers tax funds, so that only 35% would go to tourism marking.The question was asked two different ways.

Lori Weiger, principal at New Bridge Strategy, the firm that conducted the survey, said one question included a laundry list of proposed lodgers tax allocations while the other question simplified things by presenting a “65/35 split” – 65% representing transportation, arts and culture and other lodgers tax allocations, with 35% for tourism marketing allocations.

She said survey results indicated more people were responsive to the second format because the laundry list question format could have given the impression that the majority of lodgers tax revenue is going to tourism marketing, which isn’t the case.

Councilor Melissa Youssef said she has seen varying data points – residents overwhelmingly supported allocating over-collected lodgers tax revenues in 2021 and 2022 to housing efforts in the November election. But that doesn’t mean lodgers tax revenues are enough to make a dent in the housing shortage.

“Let’s just say it’s an extra $300,000 a year, perhaps, to go toward housing. It’s not enough. It’s not nearly enough,” she said. “That doesn’t even begin to move the needle on housing.”

The presentation by New Bridge Strategy includes estimated lodger tax collections for 2023 totally $3,627,369.

Councilor Kim Baxter said lodgers tax revenues would need to be allocated to housing efforts in full to have an impact.

Eva Henson, the housing innovation manager for the city, said during the study session that dedicated local funding sources are needed to properly address the city’s housing shortage.

Dedicated sources “will enable a housing pipeline for workforce and affordable housing by providing matching funds for grants, leveraging for attracting state and federal grants as well as loans, or funds to defray costs to developers of qualified projects that entail workforce and affordable housing units,” she said.

American Rescue Plan Act funds, fair share and transfer fees – which can require developers to make a certain percentage of new units affordable to low-income residents or to pay a fee – are current sources for the city’s housing innovation division. But those fees aren’t enough to meet Durango’s affordable housing needs, she said.


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