Tourist Bureau anticipates insolvent Convention Center

As the voice of this county’s tourism industry with a fiduciary responsibility to its members, and as a recognized leader in the community, the PA Dutch CVB Board of Directors has adopted the following position:

Hotel Tax Position Statement

The PA Dutch CVB does not support an increase in the hotel tax or excise tax (currently set at 3.9% and 1.1%, respectively) for the purpose of funding shortfalls in operating expenses or debt service requirements related to the Lancaster County Convention Center.

The PA Dutch CVB strongly believes the current 20% of the hotel tax (3.9%) and excise tax (1.1%)revenues derived on the rent of a room or rooms within Lancaster County should be used only for“tourism promotion purposes” as directed by the PA Dutch CVB on behalf of this destination.

Approved by PA Dutch CVB Board of Directors 3/11/2010

This position statement supersedes any position stated publicly or privately by the PA Dutch Convention &Visitors Bureau concerning the hotel tax or excise tax.

Background

Currently, within Lancaster County two taxes on occupied (rented) rooms exist. The first tax is a hotel tax equal to 3.9% of all revenues collected upon room rental. The second is an excise tax equal to 1.1% of all revenues collected upon room rental. Both taxes combined currently equal 5%. When the two taxes were levied, 20% of the 3.9% hotel tax and 100% of the excise tax was identified as going to the PA Dutch CVB for “tourism promotion purposes.” The 20% of the 3.9% hotel tax has averaged $800,000 to $1,000,000 per year over the life of the tax. These funds have been used by the PA Dutch CVB for selling and marketing Lancaster County.

Rationale for Position Statement

The Lancaster County Convention Center (LCCC) is a tremendous new asset in this destination’s meeting and convention inventory; one that has the potential to reap untold benefit for residents and businesses countywide well into the future. The PA Dutch CVB is excited to be a partner in the sales/marketing efforts and ultimate success of the LCCC, and understands that providing strong and consistent leadership is paramount to the overall success of the now completed project.

Not unexpectedly, the first year of operating the LCCC has been full of learning experiences as we all (the City of Lancaster, Lancaster County Convention Center Authority, Penn Square Partners, Interstate Hotel and Resorts, our many lodging properties, this CVB, and other key stakeholders) navigate these new waters as partners in this venture. But we are now at a critical juncture, and it’s crucial that we (the City of Lancaster, Lancaster County Convention Center Authority, Penn Square Partners, Interstate Hotel and Resorts, Lancaster County Commissioners, our many lodging properties, and the PA Dutch CVB) work vigorously together to avoid any missteps that could impinge upon the vitality of this new venue and the community it seeks to bolster.

The LCCC budget for the current fiscal year is $973,000. This budget was in excess of the original financial assumptions and we fear that the availability of tourism marketing dollars will be affected adversely if this trend continues, with the CVB’s hotel tax monies diverted to cover debts and operating expenses that could possibly be avoided.

As a possible result of the LCCC not being able to fully fund its debt service or operating expenses, a provision currently exists to “claw back” the 20% of the 3.9% hotel tax currently earmarked for use by the PA Dutch CVB for “tourism promotion purposes.”

The potential implications of a “claw back” are far reaching and jeopardize small and large businesses throughout the county that depend on the PA Dutch CVB’s marketing to bring in excess of 11 million visitors to our county doors each year. The consequences will also be felt by the county and state; as CVB marketing dollars are depleted, so too will be the tax revenue that tourism generates. We would also point out that support for the selling and marketing of the LCCC would be substantially decreased if the PA Dutch CVB were to lose more than $800,000 to $1,000,000 (the projected loss of the 20% of the 3.9% hotel tax to the CVB) in funding by a “claw back” of the hotel tax to satisfy debt or operating shortfalls. This action would be necessary in order to balance the marketing and selling needs of our overall membership.

Our CVB, along with the City of Lancaster, Lancaster County Convention Center Authority, Penn Square

Partners, Interstate Hotel and Resorts, and Lancaster County Commissioners, must work together to curtail spending, and require heightened levels of accountability, efficiencies and partnership from us all.

We further believe that a representative of the tourism community is a valuable and necessary complement to the existing LCCC Authority Board of Directors, and have indicated our interest in working with Lancaster County Commissioners and the Authority Board to identify individuals for such service if they feel the need and request us to do so.

As members, you may be asking what we are doing about a possible shortfall in the revenue from the

Lancaster County hotel tax. We want to be as transparent as possible and provide all of you with the most up to date information available to us. Thankfully, we have never crossed this bridge before. As such we are working very closely with Lancaster County Convention Center Authority officials to identify timelines and possible solutions. The best solution is driving more sales overall which will have a positive impact upon the tax. Some additional steps:

• We have been maintaining dialogue with stakeholders so that we have the most up-to-date picture.

• • We have had meetings with Interstate, Penn Square Partners, and the Authority in an effort to developa “memorandum of understanding” which will clearly outline the responsibilities of all parties in theselling and marketing of the Convention Center so that finite resources are maximized.
• • This CVB budget cycle carries three less staff positions and one less contracted position, than it did in2009. We are continuing to cut costs and review operations on a weekly basis with an eye on preserving funds for media purchase.

• • Thankfully, our media co-op program has grown significantly over the last two years which has helpedus to maintain media spending and the ability for us to get the word out about Lancaster County.

• • We will continue to pursue non-traditional revenue sources.

• • You have come to expect high quality member services from this organization and we are committed tocontinuing to provide these services to you.

• • We will reevaluate the 2010 marketing and sales plan and adjust accordingly if need be.

• • We have presented the executive committee of our board with a phase 1 contingency plan for reviewand action.

Together, we have tremendous expertise as well as resources we can share to the benefit of the LCCC. We are eager to work with all LCCC stakeholders to ensure that the future of the LCCC does not come at the expense of the tourism community, and to see that the dreams for this project become its legacy.

Please direct any thoughts or questions about this position statement to PA Dutch CVB President & CEO ChrisBarrett; [email protected] or 717-391-6001.