One consequence of the recession is that people aren't doing as much traveling. For Madison, that has meant a serious loss of revenue from the city's room tax.
According to city comptroller Dean Brasser, the 9% tax imposed on hotels and motels was expected to bring in $9.1 million this year, but will instead bring in at most $7.6 million.
The room tax goes to fund three things: Monona Terrace, the Greater Madison Convention & Visitors Bureau, and the city's general fund. Monona Terrace and the Visitors Bureau get their share first, so when there's a shortfall, the general fund gets shorted, Brasser says.
This year, the city expected to have almost $3 million from the room tax, Brasser says. Now it needs to tap into city reserves to address the shortfall. Add in lower revenues from investment income and building permit fees, and the city is projecting it will need to use $3.4 million more than expected from its contingency fund.
Brasser's office adjusted its projections after the first-quarter returns came in earlier this year, so the lower numbers are "not a surprise at this point." Next year, the city has drastically adjusted its projections, expecting its room tax share to be only $836,000.
Mayor Cieslewicz expects the revenue to eventually increase again, especially with more hotel projects being built or proposed. Does the shortfall suggest several hotel projects proposed for downtown aren't viable?
"You don't build a hotel project for the next year, you build it for the next decade or two," Cieslewicz says. "The people investing in them are taking that long view. We are coming out of this recession. The activity you see is based on the assumption they will make a profit."
