September 30, 2018
There’s an old saying, “Everyone’s entitled to their own opinion, but not their own set of facts.” I was reminded of this when I received a comment recently from a fellow citizen named Gary. He said:
With all due respect, investing in infrastructure has taken a back seat to shiny toys like Museum of the West and DDC. Its more exciting to spend $100M+ on those two things than it is to spend it on badly needed infrastructure improvements. And who’s fault is that Mr. Smith?
Maybe the tone of Gary’s message could have been a little less accusatory, but I don’t fault him for not understanding governmental accounting…which can be complicated. Thinking others may also be confused, I’m going to answer Gary by addressing his question here.
Unlike the business world where revenues are interchangeable, local governments use something called “fund accounting.” Money collected from taxpayers for a particular purpose is segregated into funds and spent exclusively for the purposes authorized.
A good case to illustrate the point are the funds collected from visitors as a tax on their room rates at our local hotels – our so-called “bed tax.” Scottsdale voters authorized a new tax rate (5%) and specified the use of proceeds in a special election held March 9, 2010. It’s the use of proceeds that is important. Here’s the governing language from the election ballot itself:
…use 50% of the total revenue for destination marketing and 50% for tourism-related event support, tourism research, tourism-related capital projects, and other eligible uses.
Bound by this voter directive, half the collected bed tax each year is spent for destination marketing through the City’s partner, Experience Scottsdale. The other half has been deposited in a segregated account and used to pay for a variety of tourism projects and events. These bed taxes, paid exclusively by visitors, were used to pay for the “shiny toys” Gary referred to in his email.
Visitors paid 100% of the construction cost for Western Spirit: Scottsdale’s Museum of the West, one of the most iconic additions to our portfolio of tourism assets. This institution became a Smithsonian affiliate just two years after opening in January 2015. Its presentation of the art, culture and history of western states led it to be recognized as the nation’s “Best Western Museum” by True West magazine.
Visitors’ bed tax dollars also helped pay for renovations to Westworld. In early 2010, the city undertook a $56-million program to modernize and expand the Tony Nelssen Equestrian Center. This nationally recognized, multi-use events facility now hosts the Barrett-Jackson Auto Auction in climate-controlled comfort.
Visitors are also paying for Canal Convergence, our newest signature event; what began as a weekend event on the canal will expand into a 10-day iconic celebration this November.
Bed tax from visitors paid for the entire $2.7 million DDC feasibility study authorized in September 2015. If any facility is ever built, bed tax receipts from visitors will pay a significant share of the cost.
Just as important as what visitors’ bed tax can pay for is what bed tax cannot pay for. It cannot be used to pay for the “badly needed infrastructure improvements” referred to in Gary’s email. By law, we are bound by the voters’ 2010 direction.
The primary source of funds for infrastructure improvements are voter authorized property tax assessments, applied to properties owned by citizens, businesses and investors. There are other miscellaneous sources, such as federal, state or county grants, or even one-time funds generated from developers who pay assessments when their project has a capital impact. And sometimes, a sales tax can be used, but it is less fair in its application.
Property owners naturally pay for improvements needed on their own property and often pay for improvements to collectively-owned neighborhood properties, perhaps through an HOA. Property owners must also accept responsibility for needed investments in collectively-owned City properties. The alternative is a continual decay of City assets to the point of affecting individual property values and spoiling the visitor experience for tourists.
We are grateful for the “shiny toys” that enrich the visitor experience and add to our own enjoyment. But the positive experience of “shiny toys” can be spoiled by decaying infrastructure, crumbling concrete, potholes and closed bridges.
Gary asked, “…who’s fault is that Mr. Smith?” As citizens who take pride in our city and enjoy the benefits of tourism…we’d better all look in the mirror!
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