Tug of war over room tax

Tuesday, Aug. 1, 2006 | 7:29 a.m.

If Clark County had not exported tens of millions of dollars generated by a hotel room tax within its borders, it would have no problem building the Sunset Park Aquatics Center or improving its Lone Mountain Park.

But because of a 1995 agreement with local cities that divvies up room-tax revenue based on population, the county has sent millions of dollars generated by Strip hotels to the cities - money that commissioners want to start keeping to help fund $356 million in regional park construction and improvements.

An indication of just how far the county is willing to go in its corrective power grab came July 5 when commissioners rejected a proposed compromise and told the county's staff to drive a harder bargain.

Commissioners have been looking for a way to get a larger portion of the room-tax revenues for the past nine months but, not surprisingly, have yet to convince the cities that it is in their best interest to give up millions in revenue.

The room tax, collected by local hotels, raked in $201.9 million in fiscal 2006. Most of that money goes to the Las Vegas Convention and Visitors Authority to promote tourism.

But 10 percent is sent back to local jurisdictions. How that $20 million is distributed among the county and five cities is at issue.

Driven by mammoth Strip hotels, the vast majority of the tax - more than 90 percent - comes from unincorporated Clark County. But just over 40 percent of the local cities' 10 percent share, or about $8.3 million, comes back to the county.

"The majority of money is coming from the county and being exported to the cities," Commissioner Yvonne Atkinson Gates said.

The current debate deals solely with the 10 percent portion of the room tax that is divided among local governments. The county is willing to continue to allow the vast majority of those dollars to flow to the LVCVA and has not raised the possibility of trying to retain more of those revenues, too.

The funding disparity that disturbs county officials stems from the fact that the formula used to disperse the room tax money among the six jurisdictions is based on population, not where the money originates.

When the county and cities signed that agreement in 1995, county commissioners did not see a problem with the arrangement, Commissioner Bruce Woodbury said.

"Commissioners, including myself, felt it was OK to distribute things on a per capita basis - at least then," he said.

The hotel-room boom on the Strip over the past decade, however, has changed that, he said.

"Growth in room-tax revenue from the unincorporated area has skyrocketed since then," Woodbury said. "It has made the distributions much more inequitable."

Last January the county announced it was pulling out of the agreement with the cities. Commissioners contend they could unilaterally pass an ordinance to keep all of the money generated in the unincorporated parts of the county, including revenues from the Strip. And they also proved that their willingness to compromise has limits.

The compromise, proposed two weeks ago by the county's chief financial officer, George Stevens, would have allowed each jurisdiction to continue receiving a base distribution equal to the amount each entity received in fiscal 2006. But any future growth in revenues would be distributed based on the amount of revenues each jurisdiction generates - a formula more favorable to the county.

Under the new formula, the county's annual room-tax revenue would grow from $8.3 million this year to $19.6 million in fiscal 2011.

The county has agreed to that aspect of the compromise, acknowledging that the cities already rely on their base amounts.

But the cities want more concessions.

"Give us something we can bring back to our councils and say, 'We will build a park in the city or one with direct tangible benefits to the city,' " Las Vegas City Manager Doug Selby said.

The cities' room-tax revenues would only grow slightly, if at all, under the new formula. For example, Las Vegas, which received $6.2 million in fiscal 2006, is projected to receive $9.8 million in fiscal 2011 under the current formula. But under the proposed new formula, it would receive only $6.3 million in 2011.

To quell concerns about giving up future money, the cities - which also include Henderson, North Las Vegas, Boulder City and Mesquite - want the county to commit some of its money to specific regional park projects and to demonstrate how those projects would be of greater benefit than the room-tax revenue the cities currently receive.

With the county already saying it wants to use the money for park projects, Selby said, commissioners should be comfortable committing to as much.

"You've said it verbally and in your plans. Let's just put it in your document," he said.

In response to the cities' concerns, Stevens proposed depositing half of the county's room-tax money in a fund for specified projects to which cities would agree.

But county commissioners are taking a harder stance. They quickly shot down Stevens' proposed compromise, calling it too restrictive.

"Why would Clark County have to have special rules?" Commissioner Chip Maxfield said.

The county insists it should be responsible for - and control the funding for - regional parks. It makes more sense for the county to build large park facilities because it has a higher bond rating and is a more regional body than the cities, county officials say.

Commissioners instructed Stevens to continue negotiations with, as Commissioner Tom Collins put it, "a little more of a hammer."

County staff and city managers had hoped to have a plan hashed out by July 1, the beginning of the new fiscal year.

Instead, the cities have proposed a new deadline of Jan. 1. City managers say room-tax distributions will continue under the old formula for another year.