KINGMAN - After three months of discussion and speculation, the Kingman City Council on Monday took its first formal step toward raising the city's hotel room tax from 2 to 4 percent.
Council voted 4-2 to direct staff to draft a formal ordinance to raise the hotel tax, which would generate about $276,000 in additional revenue to the city each year. Council is set to vote on the actual increase at either its next meeting, Nov. 2, or on Nov. 16.
The vote followed a contentious discussion between Council members as well as various representatives from the local hotel industry and the Downtown Merchants Association. While Council had unanimously agreed against raising the citywide sales tax or imposing a new tax on restaurants and bars, members were clearly split over whether to raise the hotel tax, and how the new revenues would be spent.
Proponents argued that raising the bed tax was the best way of generating additional revenues without hurting the pocketbook of the average Kingmanite or the city's economy in general. Councilwoman Robin Gordon noted that the hotel tax hadn't been raised since the 1970s, and was among the lowest in the state.
She claimed that raising the tax would have no effect on tourists' decision to stay in Kingman, while the revenues raised could go a long way toward financing the city's economic development and capital improvement projects, particularly in the downtown area. Those improvements, she said, could bring both increased tourism and new economic development opportunities to the city.
"We need to look at some way to have funds to fund the many projects that would make our downtown a better place and a better part of our community," Gordon said. "I think it's really important that we take a leadership role in saying that downtown is important to us, and that we're willing to put money behind that effort, because that's a big piece of what hasn't happened in the past."
Councilman Keith Walker agreed that raising the hotel tax would hurt taxpayers the least, though he disagreed on where the funds should be allocated. Rather than focus on downtown projects, he'd prefer to see the funds go toward capital improvements in general, noting that the city still has nearly $300 million in road repaving, equipment upgrades and many other essential projects that remain unfunded or only partially funded.
Councilman Ray Lyons said, however the funds are used, the city should have the uses designated prior to passing any tax increase. He pointed to Prescott as a model example, noting that the city uses its bed tax to pay for Christmas lighting, the Coalition for Tourism and its Fourth of July fireworks.
Councilwoman Carole Young said she wanted to see at least some of the hotel tax go toward economic development initiatives, particularly those of the newly-formed Economic Development and Marketing Commission. "If we're going to support economic development, we need to support it ongoing, and not just through contingency funds," she said.
Mayor John Salem and Vice Mayor Janet Watson were the two holdouts. Salem said that while he could appreciate the need for capital investment and economic development, he simply could not support any tax increases while the economy has yet to recover.
"I'm against all of it," he said. "Just because we have the power to collect new revenue doesn't mean we have to."
As a business owner, Salem said he understood how every penny counts in the current economy, adding that he was personally sick of writing "another check for another tax" every month. And while raising the hotel tax might not hurt average Kingmanites, he said, it would still affect the tourists passing through. Having traveled extensively across the state, Salem said he felt the pinch when other cities raised their hotel taxes and he didn't want to foist that burden on visitors to Kingman.
"I would like to be able to look throughout the state of Arizona and, comparing, have the lowest bed tax rate," he said. "I'd like to continue to brag about that."
Watson argued that raising the hotel tax could still hurt the local populace if hotels have to fire employees due to a decline in business. She added that property taxes have already risen considerably this year, and the city is looking at raising water and wastewater rates again in order to maintain a loan to expand the Hilltop Wastewater Treatment Plant.
"When you see how that financially impacts a household, to increase water, sewer and taxes, I can't in good conscience think that this is the time to raise anything," Watson said.
Gordon said she didn't think any time was necessarily a "good" time to raise taxes, but the city must be proactive and should not attempt to wait out the recession before taking actions to improve its image.
Salem said he agreed with her in principle, but added that his monthly water bill has already jumped more than $10 in the past year and would likely jump another $20 to $30 by year's end.
"A lot of times, that extra $20, $25, $30 in this kind of economic climate is going to break some families," he said. "Things are tough right now, and I just don't think it's the right time."
Public comments were split, with hotel owners and anti-tax advocates speaking out against the increase, while several downtown representatives spoke in favor of it. Opponents' main concern was that Council still had not produced any kind of comprehensive plan to show exactly how the new tax revenues would be spent.
"I'm very, very concerned that we continue to raise funds and not have a follow through and a plan that's going to produce the results we need as a community," said Krystal Burge, chairwoman of the Economic Tourism and Development Commission. "I would rather not increase taxes on anyone without a powerful offer that's going to produce value for our community."
Chris Durkin of the Downtown Merchants Association agreed with Burge, stressing that, while he supported the tax increase, the new revenues should require a comprehensive plan. He added that any improvements made to the downtown area should focus on long-lasting improvements to the entire area, not to individual properties.
But in the end, neither of them may have gotten what they wanted. Walker made a motion to direct staff to draw up a formal ordinance, including the stipulation that any funds raised by the new tax must go to capital improvement projects.
He did not, however, earmark the funds for downtown or any other specific project. Lyons seconded the motion.
Prior to passage, Salem pleaded with his colleagues to consider dropping the tax increase to just 1 percent instead of 2.
But Walker refused to change his original motion, arguing that it made no sense to take half-measures to tackle Kingman's capital improvement plan. "If we're gonna do this, we'd better do it," he said.
The motion passed, with Salem and Watson voting against. Councilman Kerry Deering was excused from Monday's meeting.