State Takes $65M From Center's Bed-tax Funds

A recent action by the Washington State Legislature to snag $65 million in bed-tax funds is just the latest fiscal maneuver by lawmakers worried about balancing state budgets.

“When they see a big pot of money sitting there, they rub their hands together and get excited,” said John Christison, president and COO of Seattle-based Washington State Convention & Trade Center. “We will be lighter in the wallet, which didn't make the hoteliers happy.”

Last summer, a similar situation in Nevada resulted in a compromise agreement between the Las Vegas Convention & Visitors Authority, the Nevada State Legislature and Nevada Gov. Jim Gibbons that will cost the LCVCA $20 million annually. The bed-tax funds will be used to repay a $1 billion highway construction bond.

In Washington, the bed-tax funds, which the hotels collect, had been earmarked for improvements and expansions at the WSCTC, Christison said. The center was on track to have close to $85 million in its coffers by mid-2009 – until lawmakers decided last month that the state needed $65 million of it.

“It won't drive us into bankruptcy,” Christison said, “but it is troubling to me heading into recessionary times. It would have been nice to have the cushion.”

The two lawmakers who spearheaded the effort – State Rep. Frank Chopp, who is also speaker of the house, and Sen. Margarita Prentice, chair of the Senate Ways and Means Committee – did not return calls for comment.

Don Welsh, president and CEO of the Seattle Convention & Visitors Bureau, expressed his concerns. “Now the WSCTC and the CVB have no surplus funds,” he said. “If the economy took a turn, there's no rainy day fund.”

Hoteliers weren't pleased either.

Dennis Clark, general manager of the Fairmont Olympic Hotel in downtown Seattle, said, “We think what has been done is unlawful, and we are looking into ways that we can stop the action from going forward.”

Carla Murray, senior vice president of Starwood Hotels & Resorts Worldwide, said, “We were most disappointed to discover the intent and plan in the final days of the legislative session, especially in light of the fact the money's intent is to pay off the bonds.”

According to Christison, there was no warning that the funds were going to be taken, an action that the state legislature nevertheless has the authority to take. “It was done pretty quietly,” he added.

Seattle's bed tax, initiated in 1985, is 15.6 percent, one of the highest in the nation. “Seattle is a very popular destination, and we help put a lot of people in hotel rooms,” Christison said.

Over the years, the funds accumulated because the WSCTC supports itself, he added, and even turns a profit. “We're one of the limited number of (centers) that are self-sustaining,” Christison said.

The center may be doing well, but Welsh pointed out that it's the smallest convention venue on the West Coast, even after one expansion that's finished and another that's on the drawing board. “If the funds couldn't be allocated for a future (new) center, they could have been used to accelerate payment of the principal still owed on the current center,” he added.

Welsh said he also was upset that “not one dollar” in the state's budget was allocated for tourism promotion, even though tourists put $5 billion annually into the Seattle area's economy, as well as $434 million in state and county taxes. The tourism business also employees 62,000 people.

At press time, Christison said the measure, passed by both houses of the legislature, awaited only the signature of Gov. Chris Gregoire. “I'm licking my wounds at this point,” he added. “I'm not waiting for anything to change.”