Frisco considers changes to lodging tax spending
Frisco soon might be updating the way it allocates revenue from the town’s lodging tax.
The Frisco Town Council discussed the topic with staff during a regular work session Tuesday, Feb. 9, and decided to make adjustments to the allocation of funds through the tax during further budget discussions next month.
In 2003, Frisco voters approved a 2.35% lodging tax to be used exclusively for economic development, special events, advertising and marketing, recreation amenities, multipurpose facilities and open space. The Town Council later approved a series of ordinances that set the allocation of revenue as a percentage for different categories. But the percentages haven’t been updated since 2012, and officials feel the revenue source could be better leveraged in the future.
“The point is the lodging tax can certainly do a lot more than it’s doing if .. it can be more focused on whatever outcome we’re looking to do,” council member Dan Fallon said. “The way it’s structured right now is problematic. … To me, it doesn’t make sense to even break it into different components when you could … have a fund balance you can apply whenever you need for whatever you want.”
The tax collects about $500,000 a year and has built a total fund balance of more than $700,000 since it was passed. Currently, the fund allocates 45% of expenditures to the Frisco Visitor Information Center, which pulled in an estimated $229,000 from the tax last year. The center’s total expenditures were around $205,000 last year, and it has grown a fund balance of more than a half-million dollars through the lodging tax.
Of the remaining funds, 20% is allocated to economic development and special events; 20% to recreational amenities, open space and multipurpose facilities; and 15% to operation and maintenance of recreational amenities and other tourism-related operation and maintenance expenses.
Officials determined the money could be better used if the specific category allocations were dissolved and the town could pull from one pot of money to fund bigger and more specific projects, as long as they still fit the requirements laid out in the initial ballot language voters approved. The council would have to pass an ordinance amendment To change the allocation percentages or remove them entirely.
The change also would prevent fund balances from getting out of control as a result of future lodging additions in the town or potential lodging tax increases.
“Then if you’re going to 4.7% or 5.2%, wherever it’s going to go, and that fund is going to go to $1.2 (million) or $1.8 million, you’re not struggling with an information center — unless you want to move it into a high rise somewhere — with a $1.4 million budget balance they have to figure out what to do with,” Fallon said as an example. “I think we should create some more flexibility in this.”
While it is a possibility in the future, the council didn’t seriously discuss any potential increase of the tax at the meeting. For comparison, Breckenridge has a 3.4% accommodations tax, Vail has a 1.4% lodging tax, and Silverthorne and Dillon each have a 2% lodging tax.
Given the relatively broad spectrum of allowable expenditures the tax allows for, the town also identified some line items that could be pulled from the general and capital improvement funds into the lodging tax fund — including trail and park enhancements, public art projects and more — to provide additional flexibility.
As the group looks at how best to adjust the allocation of revenue, council member Andrew Aerenson urged other members not to let the considerable reserves in the fund go unused.
“I hope like heck when the budget amendment comes about in a couple of months that we’re going to spend this money,” Aerenson said. “We’ve got reserves sitting in every pocket of our existence, so we’re strong. Why would we keep this kind of fund balance in this kind of fund? Spend it for the purpose it’s been intended for.”
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