Reply: Taxes on Tourists Mean Millions for Sedona Services, No City Food or Property Tax

A Sedona resident emailed Chamber President/CEO Jennifer Wesselhoff recently stating that Scottsdale and Tucson’s tourism budgets, though much larger than Sedona’s, are lower on a “per person” basis. Wesselhoff replied as follows:

Thank you for your comments and your perspective. There are many ways to look at spending. There are many ways to look at spending. ‘Per capita’ is one way, though I suggest there are more accurate ways to see the whole tourism picture.

I agree with you regarding Las Vegas.  But, my point in sharing was simply perspective.  I think it’s interesting that ALL of Sedona lodging units can fit into ONE resort in Vegas, and that their investment in tourism promotion is HUGE.  It’s also interesting because some people say, “we’re Sedona, you don’t need to market, people will always visit.” If this were the case, Las Vegas, arguably one of the most well-known cities in the USA, would not spend more than $300 million annually to promote tourism.  It’s just an interesting point, in my opinion, not necessarily meant to compare or contrast.

As for tourism in Sedona, no other industry generates as much money to pay for Sedona city services as tourism, and Sedona’s tourism spending is remarkably efficient:  tourism-related revenues in the FY19 Sedona General Fund are expected to be more than 7 times the FY19 Chamber tourism budget.

You probably know the City of Sedona levies a bed tax on hotel guests to promote tourism funding. Visitors pay the tax, not Sedona residents. Scottsdale and Tucson also have bed taxes that fund tourism promotion. How much each city collects in bed tax revenue is related to how many visitors come to the hotels, not how many people reside in the city. In fact, I’d reason that it’s even more important to fund tourism when it is the largest source of revenue for the community.

In Sedona, 45 percent of bed tax revenue is committed to the City’s General Fund, which pays for the services we all receive. In FY18, that was approximately $1.9 million. You referenced infrastructure, and the General Fund has some infrastructure uses, though major projects are traditionally financed through the sale of municipal bonds.

Tourism promotion has triggered minimal occupancy growth at local hotels (6% over 4 years), however, rates on rooms have increased almost 30% thus increasing bed tax revenues to an estimated $4.4 million in FY19. That means even more dollars for city services and infrastructure. The City estimates bed taxes will add $2,000,700 to the General Fund in FY19.

Hotels collect sales tax as well as bed tax, so the annual contribution to the General Fund from the lodging industry alone is close to $9 million. Total tourism-driven revenue to the General Fund will be in the vicinity of $16 million in FY19, more than 7 times the Chamber & Tourism Bureau’s $2.1 million tourism budget. Almost 70 percent of Sedona’s total sales tax revenue is paid by visitors.

The City Council allocates 55 percent of bed tax revenues to attract visitors. As the only locally-based, nonprofit, certified Destination Marketing and Management Organization in Northern Arizona, we have been the Council’s choice for tourism promotion for many years.

As you can see, the bed tax levy and its allocation are based on Council-approved ordinances, not population, and the General Fund that covers services for all is much healthier because of it.  It’s one reason we have no food tax in Sedona, and no city property tax.  It also bears mentioning that tourism promotion means we all enjoy amenities rarely found in  cities of 10,000, such as excellent restaurants, events, and art galleries – not to mention the thousands of jobs and estimated $600 million annual economic impact.

We all know traffic congestion, overcrowding, and environmental concerns are challenging issues. We are doing our best – in partnership with the community – to be a positive force for solutions.

I hope you will visit our web pages and to learn more.
Jennifer Wesselhoff