Hotel owners wary of possible bed tax increase

Proposal would make Juneau hotel tax third-highest in state

One topic on the agenda at tonight’s City and Borough of Juneau Finance Committee meeting has some hotel owners nervous.

 

The committee is examining a proposed increase in the hotel bed tax for the first time since 1988 and whether to put it on the ballot for the Oct. 3 election. The proposal is also to use funds from the tax increase to help the new Juneau Arts and Culture Center (JACC).

Though tonight’s meeting — at 5:30 p.m. in the Assembly Chambers at City Hall — is open to the public, there will be no public comment. The Finance Committee will vote on whether to forward this and the extension of the 1 percent sales tax increase to the Assembly. The Assembly will vote on whether to put the ordinances on the ballot at its next meeting, Aug. 21, which will be open for public comment.

This ordinance would raise the tax that visitors spend on a hotel room from 7 percent to 9 percent, which would earn the city about $400,000 per year. That would amount to about $2 million over the course of the five years, and at the Finance Committee’s July 13 meeting, Assembly member Loren Jones proposed that $1.6 million of that go to the construction of the new JACC.

Mel Perkins, who runs the Best Western Country Lane Inn, testified at the July 31 Assembly meeting, opposing the bed tax increase. Perkins, who said he has been in the hotel business for 33 years, called the increase “outlandish” and said it would be “punitive” to travelers both from outside the state and from the local villages.

“We love the travelers that come off the cruise ships,” Perkins said, “but the independent traveler should be our lifeblood and our future, because they’re here all year.”

The organizers of the JACC have met with the Downtown Business Association and Travel Juneau, but haven’t yet met with hotel owners themselves. Bud Carpeneti, who’s on the Partnership Board and Capital Campaign Committee for the new JACC, said he and his fellow organizers are doing their research. He also said having a thriving JACC would fit perfectly with what he called the “convention suite” of Centennial Hall and Elizabeth Peratrovich Hall, all of which are located near each other.

“We’ve tried to look around at other cities and what they do with regard to bed tax,” Carpeneti said. “We haven’t seen a lot of indication that there’s a negative implication, and on the plus side, we think that having a facility like this that could really be marketed by Travel Juneau to help it with its convention suite, would be a huge positive.”

Perkins pointed out during the meeting that with this tax increase, Juneau’s overall tax for visitors would actually be higher than in Anchorage. Anchorage’s bed tax alone (12 percent) is higher than Juneau’s, but Anchorage doesn’t charge sales tax on bed rentals. Juneau charges a 5 percent general sales tax on room rentals, so this increase would take the total tax rate on a hotel room up to 14 percent.

This 14 percent rate would be 2 percent higher than Anchorage’s, and would rank behind only Bethel and Dillingham, according to research done by the CBJ. Liz Perry, the President and CEO of Travel Juneau, said the tax increase would put the city at a disadvantage even just competing against in-state cities, let alone other cities in the Pacific Northwest.

“Our position is that this kind of increase is going to make Juneau increasingly difficult to sell,” Perry said.

Perry said she’s heard from hotel owners both downtown and in the Mendenhall Valley who are concerned about the possible increase. Just Tuesday morning, a hotel owner in the Valley who said that an increase in the bed tax would cause the hotel to lower its daily rates and figure out ways to make up for that loss in revenue.

The issue that immediately came up in the committee’s previous meeting is whether or not the new JACC competes with Centennial Hall. The city owns and is putting money toward Centennial Hall, and Assembly member Jerry Nankervis in particular has been wary of wanting to fund a nearby facility that also has meeting spaces, similar to Centennial Hall.

Katharine Heumann, the Project Coordinator for the new JACC, said Tuesday that she and her fellow organizers don’t see the two buildings competing. She said sometimes there are events that spill over from one building to the other — Carpeneti mentioned Celebration in particular — and that the two buildings provide enough diversity in their services where they don’t overlap.

“The competition piece really puzzled a lot of us,” Heumann said, “because we don’t see our programs as competing, but rather enhancing each other.”

The organizers of the new JACC have set a fundraising goal of $26 million, and according to the project website, 16 percent of that (just shy of $4.2 million) has been raised. Heumann said the money from the city would help, but the gesture of the city making a commitment to the project would be even more important.

“A big part of this is that as we go out and talk to potential downers about our project, one of the frequent questions we get is, ‘How is the community and the city of Juneau supporting your project?’ If this bed tax did pass and we were to benefit to the tune of $1.6 million,” Heumann said, “it really enhances our answer.”


• Contact reporter Alex McCarthy at alex.mccarthy@juneauempire.com.


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