Two Duluth tourism sales taxes expire

Talk about it

With little fanfare, sales taxes in Duluth ticked down a notch this month.

In November, a 0.5 percent tax on food and beverage sales and a separate 0.5 percent tax on lodging expired. In 2011, the two taxes brought in about $970,000 and $283,000, respectively, according to Peg Spehar, Duluth’s chief financial officer.

A tourism tax task force had recommended the city seek authorization from the state Legislature in the upcoming session to renew the sales taxes, but David Montgomery, Duluth’s chief financial officer, said the timing didn’t seem right. He said the Legislature will be focused on the state’s larger budgetary needs.

How much less will that mean for you? Not much. If you go to eat at, say, Grandma’s Restaurants, where company president Brian Daugherty said the average a person spends on lunch/dinner is $14 (lunch is $12, dinner is $16), you’ll be paying about 7 cents less.

If your hotel bill is $100, you’ll save a bit more — about 50 cents.

But expiration of the two taxes will help Duluth market itself, said Todd Torvinen, who sees the lodging tax in his position as president and chief financial officer for ZMC hotels, but who also helped set up the city lodging tax in 1998 when he served as the city’s director of finance.

When outside meeting planners come to Duluth, “they look at the total amount of taxes that some of the guests have to pay,” Torvinen said. The drop of 1 percentage point, however minor, “makes us a little bit more competitive when relative to other cities than it was in the past,” he said.

The sales taxes originally were scheduled to remain in effect for several more years, but Duluth’s growing tourism industry produced more revenue than anticipated. As bonds issued for the Duluth Entertainment Convention Center and the Great Lakes Aquarium are paid off, the dedicated sales taxes automatically expired.

“Our view, as we discussed it, was that the discussion at the Legislature this year should be about a broader addressing of the state’s tax and financial structure. In the long term, that should be to everyone’s benefit, because we won’t be subject to the boom-and-bust approach to budgets we’ve seen in the past,” Montgomery said.

“We thought it would be more appropriate to lend our support and encouragement to overall adjustments in state budget structures that will put us all on a more sound footing,” he said.

But Montgomery said the city will continue to consider funding mechanisms that could help it address capital expenditure needs related to maintaining local tourism assets in the future. He wouldn’t rule out the possibility of another tourism sales tax as a means to raise money for such a purpose.

Despite the 0.5 percent taxes on lodging, food and beverage sales expiring, Duluth expects that tourism tax revenues will grow in 2013 and it projects the proceeds of those taxes will exceed what was budgeted in 2012 by 4.9 percent.

All told, Duluth forecasts it will take in more than $7.1 million in tourism taxes next year.

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