Ahrens (left): 'It's a ridiculous amount of money that we're turning over' to the convention bureau. Archer (right): 'It's important for the city to move to a competitive level.'
Madison's 2015 budget was especially tough to produce, with almost every city department forced to tighten their belts.
Some departments saw slight increases in the $283 million budget -- mostly to cover modest increases in pay and benefits -- but overall spending generally stayed flat. There was one notable exception: The Greater Madison Convention & Visitors Bureau. The bureau is slated to get a $395,071 increase in funding next year, an 18% hike over the $2.1 million it received this year. It can expect to get even more money in subsequent years thanks to a new, eight-year contract the city signed with the bureau this month.
The increases top out in 2022, the final year of the contract, when funding is expected to at least double to $5.4 million.
Ald. David Ahrens fought to lower the amount of the contract, allowing for a more modest 4% increase in funding to the bureau. The Common Council rejected his appeal at its Dec. 2 meeting and approved the contract (PDF). The generous support confounds and perturbs Ahrens.
"Why has [the bureau] gotten budgetary dollars that we've denied everybody else?" he wonders. "We couldn't come up with a 2% increase for employees. We came up with zero for people who work in neighborhood centers."
Funding formula
Madison funds the convention bureau through a hotel room tax. People staying at hotels here pay a 9% tax on room rates, which in 2013 added up to just under $10.9 million. This year, the tax is estimated to generate $11.4 million, and in 2015 it is expected to bring in more than $11.9 million.
By state law, Madison has to spend 27% of hotel room tax revenue on tourism-related functions. But traditionally, the city spends much more of the revenue on tourism -- although, how "tourism" is defined is subjective. In 2013, Madison spent about 85% of the room tax fund on tourism, with the largest share, $6.6 million, going toward debt and operating expenses for Monona Terrace. The convention bureau got $2.1 million last year. The money was also used to fund the Overture Center and the Rhythm & Booms fireworks show, among other things.
But with the contract the Common Council approved last week, the convention bureau's take of room taxes will grow significantly -- from 21% next year to 34% in 2022.
Nobody knows how much the room tax revenues will be, so it's impossible to say how much the bureau will actually get. The city's finance director, David Schmiedicke, estimates the room tax will be about $16 million in 2022, meaning the convention bureau would get $5.4 million in funding.
Ahrens believes that the city's estimates are conservative and the bureau's take could be as high as $8 million in 2022. He notes that the city routinely underestimates what it will get from room tax.
But even if the city's conservative estimate ends up being correct, the new contract still doubles the funding to the convention bureau.
"It's a ridiculous amount of money that we're turning over to [the bureau], while for other nonprofits, whether it's a neighborhood center or a day care center, there's no increase at all," he says. "I have potholes in my neighborhood you could lose your front end in. It's not because of negligence of the streets department; it's because they can't afford to hire more people."
Ald. Chris Schmidt, president of the council, supports the new contract, saying the city should not rely on these funds to pay for general municipal services. The trend has been for room taxes to grow, but sometimes they drop.
"Room tax is not as reliable as property tax," he says. "I don't like making the general fund reliant on it, because we've had that problem in recent years, where we had a hole because of that."
In 2009, room tax revenues came in 18.5% lower than expected, says Schmiedicke. The gap was addressed, in part, by giving the bureau less money. In most other years, however, the room tax revenues came in higher than expected.
State meddling
Last year, Republicans in the state Legislature proposed stripping Wisconsin cities of the power to control how room tax revenues are spent and giving most of room tax revenue directly to tourism-related entities like the Greater Madison Convention & Visitors Bureau.
The proposal died, but Mayor Paul Soglin fears something similar could be revived. "We are still vulnerable to the kind of legislation that was proposed last year," he says. "That's a driver, in terms of decision making, because we don't want to lose that revenue."
So increasing funding to the bureau is a way of preempting state interference. But, Soglin adds, he believes the bureau is also doing a good job and deserves more money.
"You can't prove a one-to-one correlation between their efforts and every visitor to the city," he says. "But, when you look at the growth [in room taxes] and you look at Madison compared to similar markets, something is working, and it's hard to ignore their role in it."
More competitive
Deb Archer, president and CEO of the Greater Madison Convention & Visitors Bureau, says the conversation about increasing funding "started several years ago."
The convention industry is fiercely competitive, and other cities have more money for promotion than Madison. "It's important for the city to move to a competitive level in terms of resources," she says.
The bureau does a number of things, but measuring how effective it is is not easy. It promotes conventions at Monona Terrace, including paying some conventions to come here. (Although these payments also come from room tax receipts and are managed by the bureau, they are not part of the bureau's contract with the city.)
A sister group, the Madison Area Sports Commission, promotes sporting events in Madison, including Ironman Wisconsin. More generally, the bureau helps publicize Madison in the media, both nationally and locally. Each time Madison makes a "best of" list or is mentioned in national media, the bureau points to this as evidence its efforts are working.
Schmidt believes these efforts pay off. "So far, I have not seen any reason to believe they're misusing the funds," he says. "They're getting new events to town and retaining ones that are threatening to leave."
Schmidt adds that these efforts pay off in more ways than one. "Just look at the way we're used as a punching bag in state politics," he says. "If we're drawing people to Madison for state events, it will take the edge off of that."
Prioritizing tourism
Ahrens is skeptical that the bureau's efforts are producing results. He says that other city contracts -- for a building project, for example -- are incredibly detailed, with city officials closely monitoring how all the money is spent. He calls the bureau's contract vague.
"Will they double the number of conventions brought to Monona Terrace?" he asks. "Will they double the amount of free media we get? Will the hotel revenues double? These are all things they're ostensibly responsible for and we pay them for."
Ahrens also wonders why there is such a big push to invest in tourism. He notes that the city doesn't have an eight-year plan to double funding for economic development or housing the way it now does for tourism promotion.
"What's the long-term economic strategy here?" he asks. "What does that say about where the administration wants the city to go? We could do better than being bellhops."
