County panel approves contract with Experience GR
One commissioner objects to the size of the payout.
The current three-year contract expires at the end of this year.
“Three years is all I’m willing to go with Experience Grand Rapids, due to the volatility of the market,” said County Administrator and Controller Daryl Delabbio.
Should commissioners approve the new agreement, which is scheduled for a vote later this month, it could increase county revenue to the organization next year by about half, or roughly $360,000, in comparison to what Experience GR received in the first year of the current contract, which was 2010.
Under the new agreement, the county would give Experience GR 16.75 percent of the total revenue from Kent’s lodging excise tax, a 5 percent charge that hotels add to guests’ tabs. Revenue from the tax has been projected to reach $5.9 million this year; Delabbio estimated that Experience GR would receive $988,250 from the county next year if that number is reached in 2013.
According to County Fiscal Services Director Stephen Duarte, Experience GR is on track to receive about $854,600 this year as its share of the tax revenue. Last year, the organization collected $783,500 from the county, based on tax revenue that totaled $5.8 million in 2011.
Commissioner Dick Bulkowski was the only member of the Finance Committee who voted against the agreement. “I agree with the incentive here,” he said of basing the payment on a percentage of the tax revenue.
But Bulkowski added that the additional revenue Experience GR would receive from the tax fund is about the same amount it is expected to grow. So he said the county would be turning over the entire increase to the organization while it has been subsidizing the account with operational dollars to meet the bond debt for DeVos Place and other expenses the tax revenue covers.
The county transferred $840,000 from the general fund into the lodging excise tax account this year and $1.4 million in 2011, largely to pay the bondholders who backed the convention center’s construction. That bill is $5.8 million this year and was $5.6 million last year.
“Year-to-date, revenues from taxes are up 9.8 percent,” said Duarte of the county’s income from the hotel-motel tax at the three-quarter mark of the fiscal year. At the end of September, the tax total stood at $4.35 million, compared to $3.96 million at the same time last year.
The current, but expiring, contract gave Experience GR 12.5 percent of the tax revenue or $625,000, whichever was greater, in 2010 — the first year of the agreement. That percentage rose to 13.5 percent in 2011 and to 14.5 percent this year. The last two years of the agreement didn’t contain a minimum payment like the first year.
Bulkowski also questioned that contract three years ago. Back then, he suggested that Experience GR should raise its assessment to hotel operators from 3 percent to 4 percent, which he said would give the organization an additional $1 million in revenue each year.
“It merits some consideration to how we want to subsidize the CVB with this fund when they have the ability to raise more revenue,” he said in November 2009.
Bulkowski made that comment at a time when the county was getting ready to transfer $1.8 million from the general fund into the lodging excise tax account in 2010 to cover expenses. “That’s now and that’s huge,” he said then.
Commissioners will vote on the new agreement on Nov. 29, which is the same date they’re expected to approve the 2013 general operating budget.