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The Sun Is Still Shining: Most Uses of Lodging Tax Revenues are Preserved


May 20, 2013 by Judy Cox
Category: Lodging Tax (Hotel-Motel Tax)

The Sun Is Still Shining: Most Uses of Lodging Tax Revenues are Preserved

In a nutshell:  With the passage of ESHB 1253, all the current allowed uses of lodging tax funds have been preserved except one—lodging tax funds may no longer be spent on capital expenditures for tourism-related facilities owned by nonprofit organizations. In this bill, the legislature also:
  • added some application requirements;
  • changed the procedures for making funding decisions in cities and counties with a population of 5,000 or more; and
  • revised the reporting requirements.
As some of you may recall, the new uses of lodging tax funds introduced by legislation in 2007 were due to sunset on June 30, 2013. These uses – 1) operation (as opposed to just “marketing”) of special events and/or festivals designed to attract tourists; and 2) support of the operations and capital expenditures of tourism-related facilities owned by non-profit organizations – were very popular with some cities and counties. The Association of Washington Cities (AWC ) and the Washington State Association of Counties (WSAC) tried last year to get the sunset dates removed or extended, but they were unsuccessful.

This year was a different story, and almost all these uses were preserved in ESHB 1253.

What Are the Allowable Uses Now?

ESHB 1253 repealed the sunset clauses and made some amendments to RCW 67.28.1816RCW 67.28.1815, which also lists uses, is unchanged. The sum total of these changes leaves us with all the same uses that have been allowed since 2007 except spending lodging tax funds on capital expenditures for tourism-related facilities owned by non-profit organizations. As a result:
  • You can still spend lodging tax funds on tourism promotion, including operating special events and festivals in addition to marketing. All the language in the definition in RCW 67.28.080(6) is still there!
  • You can spend lodging tax funds for operating expenditures of tourism-related facilities owned or operated by nonprofit organizations. 
  • Spending lodging tax funds for the operations and capital expenditures of city- and county-owned facilities was never at risk, so they are still permitted uses and are now specifically mentioned in Section 1(1)(c) of ESHB 1253.
Review MRSC's City Revenue Guide and County Revenue Guide for more discussion of all these allowed uses.

What Are the New Application Requirements? 

Section 1(2)(a) of ESHB 1253 states that applicants for any use of lodging tax revenues must now provide:

estimates of how any moneys received will result in increases in the number of people traveling for business or pleasure on a trip:

(i) Away from their place of residence or business and staying overnight in paid accommodations;

(ii) To a place fifty miles or more one way from their place of residence or business for the day or staying overnight; or

(iii) From another country or state outside of their place of residence or their business.

Applicants to a city or county with a population of less than 5,000 submit their applications to the city or county as they have done in the past.

What Additional Procedures Apply to Cities and Counties with a Population of 5,000 or More?

As set out in Section 1(2)(b) of this bill, applicants for lodging tax funding from a city or county with a population of 5,000 or more must now submit their applications (which must include the estimates listed above) to the city or county lodging tax advisory committee (LTAC). The LTAC must select the candidates for funding from these applicants and provide a list of the candidates and recommended amounts of funding to the city or county for final determination. The city or county legislative body may choose to make awards in the recommended amounts to all, some, or none of the candidates on this list.

How do we “harmonize” this new application requirement with the procedures set out in RCW 67.28.1817(2)?

Under RCW 67.28.1817, in a city or county of 5,000 or more, applicants submit their funding requests to the city or county, not the LTAC. Section 2 of the statute reads:

Any municipality that proposes imposition of a tax under this chapter, an increase in the rate of a tax imposed under this chapter, repeal of an exemption from a tax imposed under this chapter, or a change in the use of revenue received under this chapter shall submit the proposal to the lodging tax advisory committee for review and comment. The submission shall occur at least forty-five days before final action on or passage of the proposal by the municipality. The advisory committee shall submit comments on the proposal in a timely manner through generally applicable public comment procedures. The comments shall include an analysis of the extent to which the proposal will accommodate activities for tourists or increase tourism, and the extent to which the proposal will affect the long-term stability of the fund created under RCW 67.28.1815. Failure of the advisory committee to submit comments before final action on or passage of the proposal shall not prevent the municipality from acting on the proposal. A municipality is not required to submit an amended proposal to an advisory committee under this section.


If the city or county is proposing, say, the initial imposition of a lodging tax or an increase in the rate of a tax, it would still send the request to the LTAC for review and comment, and the remaining provisions of RCW 67.28.1817(2) will still apply. There are no changes.   However, when the issue is the “use” of the funds or a “change in use,” then we need to harmonize this language with the new language in Section 1(2)(b) of ESHB 1253.

Bob Meinig, the MRSC attorney who has graciously allowed me to draft him into working on lodging tax issues, offers the following suggestion:

When an applicant for lodging tax money submits their application to the LTAC, the council could not act on any application that is included among the candidates selected by the LTAC until at least 45 days after the particular application was submitted to the LTAC. It’s a bit tortured, but it’s the best way I see right now to harmonize these two statutes. I think each jurisdiction should establish a schedule by which applications must be made, for that year or six-month period or whatever, and the council or board (if county) would then not act on the applications until at least 45 days after that deadline.

I think that either the city council or the board of county commissioners or the LTAC, with the consent of the council or board, could establish procedures regarding calls for applications, deadlines, etc.


What Are the New Reporting Requirements?

Section 1(2)(c)(i) of the bill provides:

All recipients must provide a report to the municipality describing the actual number of people traveling for business or pleasure on a trip:

(A) away from their place of residence or business and staying overnight in paid accommodations;

(B) to a place fifty miles or more one way from their place of residence or business for the day or staying overnight; or

(C) from another country or state outside of their place of residence or their business.

The city or county receiving a report must make it available to the legislative body and the public and furnish copies to the Joint Legislative Audit and Review Committee (JLARC) and members of the local LTAC. The JLARC must biennially report to the legislature’s economic development committees on the use of lodging tax revenues by municipalities.  Reporting under this subsection must begin in calendar year 2015.

The statutes say nothing about when cities and counties must forward the reports to their legislative body and the JLARC. The JLARC will presumably be coming up with some instructions.

If We Sign a Contract by June 30, 2013, to Fund Activities That Take Place After June 30, 2013, Can We Do the Funding Under the “Old” Process?

Yes, except that every recipient of funds will probably have to do its reporting under the new rules because the old reporting rules will be repealed on June 30, 2013. Here are some situations in which cities and counties might find themselves:

  1. Some cities and counties have already approved funding and have a contract in place for spending after June 30, 2013. They do not have to go through the new LTAC process.

  2. Some have made contingent  awards for funding festivals or special events, waiting to see if the sunset clauses were lifted. They should sign the contracts by June 30; then they do not need to go through the new application or LTAC process.

  3. Some entities might have some new ideas for programs they want to fund during the latter half of 2013. Cities and counties with a population under 5,000 may do so under the old process so long as they execute a contract by June 30. Larger cities and counties will have to follow the new rules, because there is not enough time between now and June 30 to give the LTAC the 45 days to consider the proposals that RCW 67.28.1817(2) requires.
So, the sun is still shining on most uses of lodging tax revenues.

MRSC is a private nonprofit organization serving local governments in Washington State. Eligible government agencies in Washington State may use our free, one-on-one Ask MRSC service to get answers to legal, policy, or financial questions.

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