Lodging Charges Present & Future November 2018 Election: Lodging Charges Present & Future Destinations International Advocacy Summit November 9, 2018

Lodging Charge Presentation TID Update Fiscal Environment – Cities Advocacy – Why Study Lodging Charges? 2018 US Travel Civitas Tax Study Tax Measures on the Ballot Three Days Ago Next Actions

National TID Statistics Assessment Structure 172 TIDS Most Recent: Tulsa, OK (November 7, 2018) 58% Gross Revenue % 42% Fixed $ Amount AMOUNT RAISED ANNUALLY Low $10,000 Median $794,500 High $39,000,000 Total $387,837,806 15 STATES (West, Midwest, South, & Northeast)

Fiscal Environment - Cities In September 2018, the National League of Cities issued a report on city fiscal conditions. Their findings indicate a deceleration of fiscal growth in cities across the country.

Changes in General Tax Receipts Major revenue sources include; Property Tax Income Tax Sales Tax These major revenue sources hit their peak in 2015-2016 All major tax sources grew more slowly in FY 2017 than FY 2016. This trend is expected to continue in FY 2018. SOURCE: National League of Cities

Changes in General Fund Revenue and Expenditure Steady decline in revenue since 2016. Expenditures are expected to continue outpacing revenues in the coming years. SOURCE: National League of Cities

Pension Crisis Across the USA SOURCE: Pew Charitable Trust

Fiscal Environment - Key Takeaways Decline in general tax receipts will create tighter city budgets. These tighter budgets will be under even more stress as pension costs rise. Cities will be more inclined to divert discretionary revenue away from tourism promotion efforts. Cities will be more inclined to raise revenue through bed taxes and sales taxes.

Why Study Lodging Tax Rates? DMO Awareness of Cost Competitiveness Much of DMO Revenue Linked to Lodging Tax Revenues Industry May Oppose Tax Measures That Do Not Support the Industry Industry May Support Tax Measures That Support the Industry Industry May Seek Other Levies to Support Promotion (Approval of Lodging Taxes Vary – City, County, State, Electorate)

Civitas Report on Lodging Charges Average tax rate: 14.6% Average tax rate among large cities: 15.4% 49.9% of lodging tax revenue dedicated to general funds. We studied taxes and lodging charges extensively and now started to track ballot measures that affected these charges.

Civitas Tracked 78 Lodging Charge Ballot Measures in the 2018 General Election 57 Hotel Taxes 7 were newly proposed hotel taxes. 39 were proposed increases to existing hotel taxes. 11 were proposed renewals of hotel taxes. 21 Sales Taxes 1 was a newly proposed sales tax. 9 were proposed increases to existing hotel taxes. 11 were proposed renewals of sales taxes.

Tax Rate Increases Ranged from .1% to 12% Tax Type Lowest Highest Average Rate Average % Increase New Hotel Tax 2% (Laredo, TX) 12% (Colma, CA) 6.17% N/A Sales Tax 1% (Collier County, CO) 1.00% Increasing Hotel Tax (multiple) 6% (Calaveras County, CA) 2.09% 24.66% Increasing 0.1% (Scottsdale, AZ) (Hillsborough County, FL) 0.50% 36.23%

Measures by Jurisdiction and by Expenditure ^ Total ballot measure count exceeds 78 due to measures allocated to multiple functions.

Results of 2018 General Election Ballot Measure Success Rate by Tax Type 64 of the 78 ballot measures passed for a success rate of 82%.

Results of 2018 General Election Allocation Type Number of Ballot Measures Ballot Measure Success Rate General Fund 45 86.7% Destination Promotion & Convention Center 17 82.3% Affordable Housing 7 85.7% Public Safety 4 50.0% Transportation 3 66.7% Infrastructure 2 Schools 100.0% Ballot measures concerning lodging charges had high success rates, whether proceeds were for the General Fund, Affordable Housing, or Tourism. Among the 64 successful ballot measures, the average “Yes” vote was 68%.

What do these results mean for the Travel Industry? Ballot measures involving lodging charges have high passage rates, even when revenue is not going toward the travel industry. Local government budgets will get tighter in the future, increasing the demand for bed tax increases. The travel industry must continue to increase its presence in tax-related ballot measures and advocate for measures that improve the industry.

DMO Future Actions / Take Aways Understand Your Tax Position Review the Existing Lodging Tax Study Use DI Org & Fin Website Keep Watch for 2019 DI / U.S. Travel Update to Lodging Tax Study Continue to Professionalize Your Advocacy Efforts Continue to Seek Funding Mechanisms that Cannot be Diverted

Thank You! Contact Us John Lambeth Founder & CEO jlambeth@civitasadvisors.com (800) 999-7781