Report from Don Laws and Cate Hartzell on effort to reconsider Transient Occupancy Tax (TOT) provisions

June 12, 2003

Our effort led us to make recommendations related to three separate components:
1) Reallocation of a portion of the 2003-2004 TOT revenue to Oregon Shakespeare Festival and Chamber of Commerce
2) Revision of the TOT Ordinance relative to allocations and responsibilities
3) Update and revision of the Economic Element of the Comprehensive Plan

1) Reallocation of a portion of the 2003-2004 TOT revenue to Oregon Shakespeare Festival and Chamber of Commerce

On March 12, 2003, we (Cate and Don) proposed to change the TOT Ordinance to reduce Oregon Shakespeare Festival (OSF) and Chamber of Commerce (CoC) allocations to the 2001-2002 budgeted level and allocate the difference to social service grants. Potential Gain: $44,000.

We met with OSF and CoC in April; the agreement made there was to commit to updating the Economic Element of the Comprehensive Plan, with an emphasis on examining the effects of tourism and to specify expectations and goals for use of the TOT funds allocated to those two organizations. Don and Cate also met with Gino and Lee to discuss possible changes to the Ordinance.

In May, OSF and the Chamber offered to help narrow the operating budget gap for next year by returning, with no strings attached, two-thirds of the increase they have been budgeted for next year The Chamber would reduce by $20,000 and the OSF would reduce by $10,000. This was proposed as a one-time-only offer that's based on the assumption that the revision of the Economic Development Element will inform and guide changes in the TOT allocation ordinance.

Recommendation:

1) That their offer be gratefully accepted; 2) That some of those funds be spent as mentioned below.
2) Revision of the TOT Ordinance relative to allocations and responsibilities

We are concerned that, during a time when the city is spending more than it is receiving in revenues, a significant portion of the budget that is spent for culture and economic development is receiving very little review. We question whether the City really knows what we want those funds to achieve, how those goals are best accomplished, or what is currently happening.

There is a significant literature on economic development efforts by municipalities, and some of it is very skeptical about the effectiveness of their role. At one time, we received fairly detailed reports from OSF and the Chamber about how they spent the money allocated to them. However, largely because their activities seemed pretty much the same every year and there was less concern over our total budget, the Budget Committee actually asked to receive only brief written reports and the Council changed the Ordinance to designate an established percentage of the TOT for OSF and the Chamber, eliminating the need for them to make proposals or receive serious annual reviews.

This year the Economic Development Subcommittee asked that the ordinance designating the apportionment of that money be reviewed. Their interest was in allocating more of it to smaller/other culture and economic development groups. We (Cate and Don) floated a draft amendment that would have diverted some of the TOT to pay for the free bus program. It became obvious that these proposals needed adequate input from the affected parties and more consideration than was possible to complete before the end of the budget approval process. We met with OSF and the Chamber and we all agreed that this portion of the budget should do its share in helping to balance our operating budget. We also agreed that we needed to revise the Economic Development Element of Ashland's Comprehensive Plan in order to clarify what we want to accomplish through the TOT Ordinance.

There are at least three ways to approach this task, if the Council decides to accept that recommendation:

a) The City Council could identify options for Ordinance revision, informed by the work of the Comp Plan Committee, conduct a public process and possibly complete that before the next budget cycle.

b) The City Council and Mayor could appoint an Ad Hoc Committee to:

•  Sponsor a public input process to derive options for change that respond to concerns raised about the existing allocation structure and about possible changes to it;

•  Work with the Comp Plan Element Ad Hoc Committee to clarify how the TOT should support the Element;

•  Recommend specific goals, targets, and reporting procedures for recipients of TOT allocations;

•  Recommend options for changing the Ordinance.

c) The Ad Hoc Committee working on the update of the Comp Plan Economic Element could assume this charge, since it is related to their charge. One drawback to this option is that it is possible that they would not complete this task before the next budget cycle. Another drawback is the potential for the suggestion to allocate more to smaller groups getting lost in the larger, Element discussion.

3) Update and revision of the Economic Element of the Comprehensive Plan

One of City Council's 2003 - 2004 Strategic Goals is to:

a. Continue update of economic development Comprehensive Plan element.

· Develop written outline of Economic Development policies.

· Review Economic Development strategies with the community.

· Focus on appropriateness of industrial development goals.

We propose the following process as a discussion point for achieving this goal.

1. Convene a new Ad Hoc Committee to serve as the public involvement point of contact for this process. Consider both members of the last Ad Hoc Committee as well other members of the public. We recommend ensuring that we have broad-based representation, given that one of the questions we are asking has to do with diversifying our economic base. Council will outline a set of questions or assumptions as part of the framework within which the Committee will work. These include questions addressed in some way through the Plan: diversity of the economic base, the implications of types of economic growth, what we've learned about the relationship between economic and population growth in the last 10 years, and what the role of the city should be in the next 10 years.

2. Use a portion of the funds that will be returned to the city from OSF and the Chamber (see 1 above) to hire Rebecca Reid or a consultant with similar expertise to compile recent data tiered to the Comp Plan Element indicators, and questions that the City Council and Ad Hoc Committee identify and prioritize.

3. While the consultant works, the Committee would review the existing Element and convene public meetings for input.

4. The consultant would present that information to the Council, Ad Hoc Committee and possibly an Ad Hoc Committee considering changes to the TOT Ordinance.

5. The Committee would draft an update of the Element for Council consideration.

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