Lodging Tax Reserve At Bottom
GRAND RAPIDS — Total receipts to the county’s Lodging Excise Tax for 2006 are expected to be up by 6.3 percent from 2005 to about $4.7 million, indicating that business is picking up for area hotels and motels.
Still, the spike in tax revenue isn’t likely to be enough to stop the fund’s available reserve from running out this year. And even with the revenue hike, the account — which has spent more than it has taken in since 2001 — is likely to record a deficit of at least $1 million for the year. If that proves to be the case, there will be roughly $3.3 million left in the reserve for this year, and total expenditures from the fund will top $6 million.
White said the available reserve will run out this year because not all of the reserve is available. Of the estimated $3.3 million that will be left in the account, about a third of that amount can’t be spent.
“We can’t draw down to zero,” said White.
The largest outlay from the hotel-motel tax revenue makes the payments for the DeVos Place construction project, and that bond agreement requires the county to keep a quarter of the annual debt service in reserve. The bond payment was $4.7 million last year, and it rises annually by 3.4 percent, so nearly $1.2 million of the $3.3 million in the reserve fund can’t be spent this year. And as the payment grows, so will the untouchable portion of the reserve.
What makes this situation more critical is that the county has pledged to fund the West Michigan Sports Commission from lodging excise tax receipts: $200,000 a year for five years starting this year. Others receiving funds from the account are the Convention and Visitors Bureau, the
White told the county’s Legislative Committee that commissioners have two choices. The first is to eliminate funding for one or two organizations the account supports. The second is to shift some of the funding from the lodging excise account to the county’s general fund.
Delabbio also said funding for the zoo, the arts festival and the sports commission falls into the discretionary spending category and isn’t required to have financial support from the lodging excise revenues.
Moving the funding for one or two of those organizations to the general fund would add some financial strain to that account, however. The fund’s deficit was nearly $2.4 million last year and could be $2.1 million this year. An early estimate for 2008 has the shortfall at $5 million.
White told the committee the general fund’s deficit is coming from current expenditures.
“You’re spending $14 million more than you’re taking in right now,” he said.
For now there is enough money in the general fund’s reserve to handle those hits — about $67 million in cash and $4 million in accounts receivable. But by drawing down $11 million each year from the revenue-sharing reserve fund, the general fund’s reserve will begin to shrink when the revenue-sharing reserve runs out in three years.
“But on a short-term basis,” said White, “you are rather healthy.”