Update: On Tuesday, April 6, the funding source for SB 355 was changed from the Lodging Facility Use Tax to the Lodging Facility Sales and Use Tax. With this change, the funding for Virginia Nevada City was stuck from the bill. On the same day, a successful amendment was made to HB 2 that would increase the amount of funding Virginia Nevada City receives from the Lodging Facility Use Tax by $600,000. Virginia Nevada City currently receives $400,000 off the top before the rest of the distribution occurs. We are waiting to see the companion bill that will show how the $600,000 will be appropriated.
SB 355: Revise payments related to state school trust lands
What does SB 355 do as amended?
The bill diverts $482,000 annually of the 4% lodging facility use tax (a.k.a. bed tax) used for promoting Montana to 16 counties with high percentages of state lands. In the bill, it calls for Daniels County to receive over 70% ($330,000) annually of the use tax without any clear direction on how the county can spend the money. Daniels County is in the northeast corner of the state (county seat is Scobey) and is within the bill sponsor’s district, SD 17.
In the Senate committee, the bill was further amended to divert 3% (approximately $1 million annually) of the lodging use tax currently going to the Department of Commerce to support Virginia/Nevada Cities in place of the current $400,000 they receive annually. Click here for SB 355 as amended: SB0355.001.002.pdf (mt.gov)
Virginia/Nevada cities currently receive $400,000 annually from the lodging use tax promotional funding. SB 355 will amend the current flat allocation to annually divert 3% of the promotional funds allocated to the Department of Commerce lowering their total allocation from 63% to 60%. In the first year, that is approximately $1.1 million and will grow over time.
What we are asking you to do:
We have developed a targeted list of key State legislators, listed below, and are requesting them to Vote No on SB 355.
You are asked to send a message to Representatives from your area, or who you know, by clicking on their name to send an e-mail. In addition, after you send your e-mail, call 406-444-4800 and leave a message for the Representatives you have contacted – the messages will be delivered to their desk.
Also, we are asking for your help in getting at least three other tourism partners in your community to also contact Representatives, such as restaurant/tavern owners and rafting companies. We need their help to make immediate contact in opposing to SB 355.
Reasons to Oppose SB 355 (remember to stay positive in your messaging):
The tourism industry, and my business, have been hit hard by the pandemic and now is not the time to divert tourism promotional dollars to other programs. The timing could not be worse! Statewide lodging collections are down 21% from 2019 and over one year lodging lost $192 million in sales due to the pandemic, resulting in significant reduction in Montana jobs.
SB 355 is attempting to use much needed tourism marketing dollars to address a historic state land equalization funding issue which does not involve the tourism industry. The lodging facility sales and use tax (the portion of the bed tax that contributes to the general fund) is the appropriate funding source for non-tourism related projects and programs or for projects and programs that deal with impacts of tourism. The tourism industry respects the concerns around the lack of entitlement funding for counties with higher percentages of state land, but lodging use tax funding for promotions is not the right source to look to for funding. The bill sponsor acknowledged this when he stated in executive action on February 27,
“Yes it needs to be fixed in entitlement share and hopefully that will be done, and people will be treated fairly and equitably at some point, but right now this is a way to get something that has been going on since 1910 and we need to get this fixed up and get some money into their coffers.”
Although we understand the underlying frustration these counties face, this bill essentially robs Peter to pay Paul. It permanently diverts tourism promotional dollars to satisfy inequities in the State’s allocations of public land funds, without ever taking care of the real issue and perpetually inhibiting the tourism industry. A solution to this issue needs to be addressed from a much broader perspective.
The proponents of SB 355 call this a fairness bill, which it may be from the viewpoint of the counties involved. But taking vital funding from an industry that has been decimated by this recent pandemic and is in no way related to the problem at hand is not fair. What is fair is going back to address how entitlement funding is distributed to all counties with state lands.
As drafted, SB 355 permanently diverts dollars from a program that has worked to produce jobs, tax revenue and economic growth for all Montanan’s and sends the funds to just 16 counties for purposes outside the intended use of lodging use tax promotional funding.
SB 355 takes funding from a tourism industry program that needs legislative support now more than ever. The tourism industry has seen more negative impacts from COVID-19 than any other industry in the world. It will take years to fully recover. Diverting critical funding from an industry that can help speed Montana’s recovery is not the solution. Should it be decided that lodging tax funding is appropriate, this bill needs to be modified to divert lodging facility sales and use tax funds currently going to the General Fund, not from the funds that help support local and state tourism programs and small business across Montana.
Socializing a loss to counties with large amounts of state lands through taking monies from a source of funding dedicated to driving economic development is counter intuitive. Destination marketing and management helps position destinations (city, county, region, state) ensuring their sustainability over a prolonged period of time. The lodging facility sales and use tax that goes to the General fund was created to shore up any losses to state funding resulting from the impacts of tourism.
The lodging facility use tax used for promotion – which SB 355 is tapping – is responsible for promoting a community as an attractive travel destination and enhancing its public image as a dynamic place to live, work and play. Through the impact of travel, destination marketing strengthens each community’s economic position and provides opportunity for people who live there.
An example of appropriate use of promotion dollars would be to promote the area to get hunters to Daniels County and the other 15 mentioned, not to pay for the impact of travel. The lodging facility sales and use tax contributing to the General Fund is meant to be used for the impact of travel.
The tourism industry has long supported and provided funding for Virginia/Nevada Cities and the amendments to divert even more funds to this worthy program fails to look at the new funding these entities are in line to receive through HB 12. In short, four Virginia/Nevada City programs are listed in HB 12 totaling over $1.1 million from the new Historic Grant Program that is funded by the 1% increase in the lodging facility sales and use tax from SB 338 passed in 2019. The tourism industry supported SB 338 and the creation of these grant programs. Click here for HB 12 with the proposed amendment in House Appropriations: HB0012.001.002.pdf (mt.gov)
SB 355 is a last-minute bill that had little time for public input on the bill’s intent and absolutely no public input on the amendments placed in the measure.
To demonstrate the competition Montana is facing from a state that has similar assets and experiences to offer visitors, here is case study of what the Utah Office of Tourism is doing to recover more quickly than their competition including Montana.
The Utah Office of Tourism, (UOT) is funded by the Tourism Marketing Performance Fund, (TMPF) which is legislated annually. In the fiscal year '19, (July 2018 - June 2019) the UOT received $24 million. In the fiscal year '20, (July 2019-June 2020) the UOT received $25 million; 10% is paid to the UT Sports Commission, 20% is dedicated to 1:1 matching co-operative marketing partner grant programs and the remaining 30% is dedicated to marketing and development. (In 2019 the state saw $10 billion in traveler spending)
In a special session in June 2020, the legislature decreased the TMPF to $12.5 million for fiscal year '21, although, $12 million of CARES funding was legislatively allocated to the UOT to support the state's recovery through marketing, including supplementing the traditional partner co-operative grant program.
As a result, they have been able to continue to market regionally/domestically, while supporting local transportation and development needs, partner grant programs and have maintained an international presence inspiring international visitors to visit in the future and plan for international recovery.
Domestically, maintaining marketing has led to quicker recovery of regional/domestic travel reflected in some of the stats below...
Other destinations across the west are doing the same which means that Montana must invest every dollar we can to responsibly encourage visitation to Montana.
Through SB 355, Daniels County ($330,000) will receive almost as much or more lodging use tax funding than many destination marketing organizations receive to promote their entire regions and communities:
Missouri River Country ($249,000)
Southeast Montana ($336,000)
Great Falls ($147,000)
....just to name a few.
Montana Office of Tourism’s budget is critical to helping all of Montana’s tourism economy recover, especially Eastern Montana as they have seen the largest decreases in bed tax collections.
Regions feeling the most impact right now:
Central Montana -35%
Missouri River Country -21%
Southeast Montana -31%
Southwest Montana -30%
Communities feeling the most impact right now:
Great Falls -40%
Havre – 42%
Miles City -28%
Missoula – 34%
We would encourage counties to advocate for a long-term and fair solution on entitlement share and not prop up a temporary solution that does permanent damage to Montana’s small business recovery. A bill like this only prolongs funding inequities by masking the problem.
This bill has been assigned to House Taxation Committee. The hearing is set for March 26th at 8 a.m.
You can click on name for email and send message, use the web messaging tool online to send the entire committee the same email or you can call 406-444-4800 and leave a message for the Representative and ask that it be delivered.
Please also think about registering to send in testimony or, better yet, register to testify at the Hearing on March 26. You must register before noon on March 25th to testify by Zoom.