The Grand County Council will vote next week on whether to raise taxes on tourists staying overnight in the area.
To help generate more income, the council is considering a proposal by Councilman Chris Baird to raise what is called the “Transient Room Tax” rate from 3 percent to 4.25 percent, the state-allowed maximum.
Approving the increase would bring Grand County to on par with what other Utah counties with a tourism-heavy economy charge, Baird said. Fifteen of 29 Utah counties charge the maximum room tax rate, he said.
“It really comes down to we raise the Transient Room Tax or we raise property taxes,” Baird said. “Or we cut services.”
Grand County is in this predicament because of a small population that makes a lower-than-average income and a small property tax base, Baird said. Roughly 9,200 people live in Grand County, and less than 5 percent of the county’s property is taxable.
Couple that with the more than 2 million tourists each year who utilize the county’s services, and you’ve got a tight budget to contend with, Baird said.
The county allocates money to different funds – roads, the Travel Council, solid waste management, etc. Departments budget and spend money out of their respective funds. Just like with a personal bank account, carrying a balance is the goal.
Because of the tight revenue compared to expenses, the county has been paying for some operational expenses with the fund balances, or the surplus, over the last few years.
“Those fund balances are going to come up empty,” Baird said.
The roads department fund balance, for example, will be used up by the end of the year, he said. The county has been drawing against it to pay for road projects, salaries and general maintenance.
In fact, the roads department’s operational deficit for next year is projected to be roughly $250,000, Baird said.
Since maintaining roads is one of the county’s main mandated duties, running out of money in that fund is a concern, he said.
Ultimately, the county might have to drain the fund balance of its main bank account – the general fund – to continue to provide services and start to tackle some of the needed maintenance and capital improvements.
The Transient Room Tax rate increase would generate an additional $728,000 a year, Baird estimates.
That money could go to help support search and rescue, law enforcement, the Old Spanish Trail Arena, Star Hall, the Grand Center, Emergency Management Services, Solid Waste Management, the Travel Council and paved pedestrian and bicycle path maintenance.
The state mandates how counties can spend revenue from the Transient Room Tax. Basically, it must be used to promote tourism or mitigate the impacts of tourism.
Money now being spent on services used largely by tourists could be paid for with the additional Transient Room Tax dollars, freeing up general fund money for other county services and needs.
Those include upgrading the county’s IT system, making improvements to the jail and the courthouse, increasing salaries and reclassifying some county employees positions, addressing drainage issues and replacing some roads department equipment.
Some business owners are concerned, though, that hiking taxes even more will deter visitors from staying overnight – or coming at all.
“We are getting a lot of feedback from our customers that they simply can’t come here anymore because they can’t afford it,” said Doug Sorensen, owner of Portal Resort and Campground at 1261 N. Hwy. 191. “It used to be an area where families could come. I think the prices on things like groceries are very expensive to begin with. These visitors we’re pushing to come in, they can only take so much as well.”
Guests at Sorensen’s campground pay $35 to $100 a night, depending on amenities, not including taxes. Since his business is located in the city, his guests are paying 12 percent in taxes already, he said.
If tourists stop coming because they can’t afford the room or camping rates, owners will be forced to cut staff, Sorensen said. Moab already struggles with high unemployment, thanks to a seasonal, tourism-based economy, he said.
“It’s obviously a tourism area,” Sorensen said. “What (the council members) aren’t understanding is that’s what keeps this town alive.
“What I’m asking is they need to step back and think about this. To solely attack these businesses that focus on tourism, it’s going to come back and bite them. We just think enough is enough.”
County councilman Jim Nyland does not support the Transient Room Tax rate increase.
He’s concerned mainly about relying on money that wouldn’t come in, if tourism took a dive.
“Here we are again, the county, using money that’s not guaranteed,” he said. “Already right now, we’re using a lot of … money on a lot of different budgets throughout the county.
“If something happened where our visitors slowed way down or quit coming, then some of the council members are wanting to put this money into departments and the county budget. I have a concern about the consistency of the funds.”
Nyland said he hasn’t talked to anyone in the community who supports the tax rate increase.
Dustin Frandsen, general manager of Moab Property Management, said his company already gets complaints from visitors about the tax rate. He expects to get more if this rate increase is approved.
He also said it might encourage companies to not report their businesses as overnight rentals. If that happened, the county might lose money it’s currently receiving, and it could put the law-abiding businesses at a disadvantage.
“We do get calls from potential customers asking us to not charge them tax, because company xyz, whom they regularly stay with, doesn’t charge tax,” Frandsen said. “When we tell them that’s illegal, they move on and try to get another company to help them avoid taxes. With the proposed raise, the problem with be further exacerbated as the legal companies’ final price will be that much higher than the illegal company.”