ASTORIA — Cities and counties in Oregon are eyeing changes to the state’s lodging tax law as a potential fix for strains on local services and infrastructure.

For decades, local governments have collected lodging taxes from hotels, motels and other short-term lodging providers — but in 2003, the Legislature imposed a statewide tax. The statute also established restrictions around how local lodging tax dollars could be spent, requiring at least 70% to go toward tourism promotion and tourism-related facilities and reserving the remaining 30% for local discretionary spending.

The law is meant to support tourism while also putting money back into communities, but many local governments have called out what they see as an imbalance.

To Jenna Jones, a lobbyist for the League of Oregon Cities, it’s time to reexamine the revenue distribution.

The League of Oregon Cities has included increased flexibility for lodging tax spending on its list of legislative priorities for the upcoming session in Salem in January. Where it may have been necessary to build up tourism economies 20 years ago, Jones said some cities are advocating for a shift toward maintaining those economies and responding to the burdens that come with them. Under the statute, existing definitions of tourism promotion and tourism-related facilities only leave local jurisdictions so much leeway to respond to those strains.

“When you have a huge rush of tourists who come over a weekend and your population doubles, for some communities, your roads wear out a lot faster. There’s a strain on your water system. Sometimes that means people tend to buy vacation homes in your area to rent out and things like that, but that impacts your housing stock,” Jones said. “People come to your parks because they have children and they want to experience your community and everything it has to offer. You’ve got public restrooms in a lot of communities that have TLTs (transient lodging taxes), public parking lots, and all of those are things that the city bears the burden of maintaining and operating.”

Jones said the hope is to expand or potentially add a definition to the law to include tourism-impacted services within the 70%. Part of the driver is the fear that, without making changes to the lodging tax, local jurisdictions may not be able to maintain service levels without eventually raising their rates.

That fear isn’t unfounded. Earlier this year, the Clatsop County Commission discussed potentially increasing the countywide lodging tax rate after learning of a roughly $1.2 million shortfall at the county jail, which receives funding from the tax. The county has tabled the discussion for now in hopes of a legislative fix, but they’re still open to increasing rates if necessary.

“This is one of the few levers that we have — I mean, the transient lodging tax is really one of the few ways that we can raise revenue. There aren’t a lot of ways for us to raise revenue, so that’s why we have to be serious in considering it,” said Mark Kujala, the chair of the county Board of Commissioners. “At the same time, you know, I do not feel comfortable going to our constituents and saying we’ve got to raise taxes on all of you to pay for the influx of tourists that are visiting the community.”

Pushback

Going into the legislative session, addressing funding gaps for services across the state will be a key priority. Not everyone agrees on how to solve local jurisdictions’ budgeting woes, though.

Over the past two decades, the Oregon Restaurant & Lodging Association has consistently opposed changes to local lodging taxes.

“In our opinion, they’re working really well,” said Jason Brandt, the organization’s president and CEO. “The laws include what we feel is an ongoing robust contribution to local governments across the state in providing unrestricted funding through lodging taxes that governments can use however they see fit.”

Brandt acknowledged the funding challenges local governments face, but said he believes lodging providers across the state are already paying more than their fair share into local communities, especially through the millions of dollars worth of sales taxes they remit. Oregon doesn’t have a statewide sales tax.

Lodging taxes don’t always pencil out to a perfect 70/30 split, either — because the rule only applies to local tax rates set after the law passed in 2003, some local governments actually have more than 30% going toward the general fund. Astoria, for example, first established a lodging tax in the 1970s and has just under half of lodging tax revenue available for discretionary spending, according to Spence.

Although tourism continues to grow, Brandt added that the industry sees a consistent zigzag in employment between the summer and winter months.

“We would argue that we have not reached a point where we’re maintaining tourism promotions and simply managing demand,” Brandt said. “We have a lot of work to do to have the backs of our workforce and our employees to provide them a job and, in many cases, a career throughout the year, as opposed to only having a job for them at peak points where demand is highest … and if we pivot into a policy direction that reduces our ability to promote the tourism industry during the shoulder seasons and the off seasons when there’s still a ton of stuff for tourists to do, then we won’t be successful in achieving that goal for the workforce.”

“Oregon leaders really need to come together and start figuring out what we’re going to do to address the long-term challenges that are facing local governance and causing these broader financial constraints,” Brandt said. “And we look forward to being at that table if Oregon leaders decide to start addressing this, because every year we see these challenges within budgetary processes at local government levels, and this isn’t going away until we figure out how we’re going to tackle it together as a state.”