2004-176-Minutes for Meeting February 18,2004 Recorded 3/5/2004COUNTY OFFICIAL
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COMMISSIONERS' JOURNAL
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2004-116
DESCHUTES COUNTY CLERK
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{ Deschutes County Board of Commissioners
1130 NW Harriman St., Bend, OR 97701-1947
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(541) 388-6570 - Fax (541) 388-4752 - www.deschutes.org
MINUTES OF PUBLIC HEARING
DESCHUTES COUNTY BOARD OF COMMISSIONERS
WEDNESDAY, FEBRUARY 18, 2004
Commissioners' Meeting Room - Administration Building - 1130 NW Harriman St., Bend
Present were Commissioners Dennis R. Luke, Tom De Wolf and Michael M. Daly.
Also present were Mike Maier, County Administrator; Dan Despotopulos,
Manager of FairgroundslExpo Center; Marty Wynne, Finance Director; Cheryl
Circle, Finance; Sue Brewster, Sheriff's Office; and Mark Amberg, County Legal
Counsel. Also present were approximately forty other citizens. No representatives
of the media were in attendance.
The purpose of the meeting was to take public testimony on proposed revisions to
Deschutes County's transient room tax ordinance.
Chair Michael Daly opened the meeting at 10: 00 a.m.
Commissioner Daly asked those in the audience who wish to testify to fill out the
sign -in sheet. (Copies of the sign -in sheets are attached as Exhibit A) He also
said that a sheet summarizing the proposed changes is available. (A copy is
attached as Exhibit B.)
MARK AMBERG:
What we have before the Board today is a public hearing on proposed revisions to
the Deschutes County room tax ordinance. This is something that has been in
process for quite a period of time. For at least a year we have been looking at
considering some changes to the County's room tax ordinance. This originally
came about as the result of an audit that was conducted on the County's collection
of room taxes, which is done periodically as a routine matter.
Minutes of Public Hearing regarding Proposed Changes to Deschutes County's Transient Room Tax Ordinance
Tuesday, February 18, 2004 Page 1 of 36 Pages
Kind of the long and short of it is that the result of the audit showed that there were
quite a few discrepancies among hotel operators in the County on how room tax is
being collected; particularly, what was being included in rent for purposes of
determining the amount of room tax. For example, some operators were including
cleaning fees in the amount of rent they were using to assess room tax. Other
operators were not including cleaning fees. Some were including recreation fees
and some were not.
The auditors recommended that an attempt be made to try to clarify the ordinance.
That's what we've done here, an attempt to clarify the ordinance. The idea behind
the clarifications was to try to attempt as much as possible to make the ordinance
as clear as possible, and also to make it as fair as possible across the board.
We have a number of different types of hotel operators in Deschutes County,
including regular type hotels and motels, destination resorts, individual
homeowners that rent out their properties, and property management companies.
This is an attempt to try to address this across the board and make as clear and
simple as possible for all concerned how the County intends to collect room taxes.
I've prepared a summary of the proposed revisions. This is a brief summary and
doesn't go into all of the details of all the changes, but it is intended to give a brief
oversight of the changes that have been proposed. I also want to add that this has
been done primarily by Deschutes County Legal Counsel and Finance. We worked
with a group of representatives of the lodging industry and had a number of
meetings with them to hear their concerns about the proposed changes. We have
certainly taken all of that into consideration and it has been very helpful input.
The big changes that I think are going to be the real subject of discussion today are
the definition of rent, which is Section 4.08.065. The big change there is to
basically leave it up to the operator on what is included in the rent that is charged
to the guest. Basically what the County is proposing is that if it is not optional to
the guest, and the guest has to pay that amount to stay in that room, that full
amount needs to be included as rent for purposes of discussing room tax.
If it is not optional - for example, let's say that the operator has recreation facilities
available and says to the guest, "You can stay in the room for $80 a night, and if
you want to use our recreation facilities, it's an extra $20 for that." — that is optional
to the guest. Only the $80 is subject to assessment of room tax. On the other hand,
if the operator chooses to charge $100 for that room and the guest does not have an
option whether to pay for those recreation facilities, then the full $100 is subject to
assessment of room tax.
Minutes of Public Hearing regarding Proposed Changes to Deschutes County's Transient Room Tax Ordinance
Tuesday, February 18, 2004 Page 2 of 36 Pages
Another point that may be the subject of discussion today is the definition of rent
package plan. The intent there is, for example, if the operator normally charges
$100 for a room, and offers a package plan of $125 for the room plus two rounds
of golf, the intent there is that the extra $25 over and above the rate of the room is
not subject to the room tax.
There are two other changes in here — one I don't think really affects anybody here.
Under the exemptions there is a clarification that employees of the federal
government — and federally charted organizations such as the Red Cross — are
exempt when they are on official business. That just brings our ordinances into
conformance with IRS regulations.
The other big charge, which is a benefit to the operators, is that currently the
operators in Deschutes County collect the room tax for the County, and the
operators do not get to hold back anything for their service of collecting the room
tax. The proposed ordinance would allow the operators to retain up to 5% of the
room tax revenues as a fee for collecting room taxes.
That very briefly is a summary of the proposed changes that we are considering.
DENNIS LUKE:
I think the big word here is "clarify". I don't believe these are major changes to the
ordinance. They are a clarification because of the audit and the way things are
done, except the payment of the 5% collection fee to operators, which is a change.
I think everything else is pretty much clarification of the existing ordinance. There
were questions out there; do we include this, do we not include this? And as you
mentioned, some do and some don't. Clearly, there needs to be some clarification
of the ordinance.
AMBERG:
That's exactly right. From the County's perspective, this is what the intent of the
ordinance was all along. Anything that is not optional to the guest should have
been included in assessing room tax. The only real substantive change from the
County's perspective on this is the operator fee. We would view it a substantive
change in the room tax if, for example, the County decided to raise the room tax
from 7% to 9%, which would require an election. From the County's perspective,
we're not talking about that kind of substantive change here.
MIKE DALY:
Okay. Any other questions for staff before we get into taking testimony?
Minutes of Public Hearing regarding Proposed Changes to Deschutes County's Transient Room Tax Ordinance
Tuesday, February 18, 2004 Page 3 of 36 Pages
LUKE:
Marty (Wynne) spent a lot of time on this. Do you have a staff report on this or has
Mark covered it?
MARTY WYNNE:
(Off microphone) He covered it. I have nothing to add.
KAREN MAINZER:
Members of the Commission, for the record my name is Karen Mainzer, and I'm
representing the Oregon Lodging Association today. I am passing out a letter from
Scott West, our Executive Director. (A copy the letter is attached as Exhibit C.) He
had wanted to be here today but unfortunately had a previously scheduled meeting.
I want to preface my testimony by saying that I understand that the catalyst for
going over this language and reexamining the language is tax collection
consistency. Obviously we are in full support of that. As you know, the Lodging
Association was instrumental in crafting and the passage of House Bill 2267.
House Bill 2267 is looking at tax collection consistency, so obviously we are a big
supporter of that.
Where we disagree with the Commission is that we do believe, and have been
advised by legal counsel, that this new language does constitute a new tax. It
would therefore come under the purview of House Bill 2267 regarding the changes
in the definition of rent, the definition of rent package, and also the taxation of
complimentary rooms. We believe that you are giving the 5% operators' fee, but
the additional collection is subject to the 70/30 split under House Bill 2267.
DEWOLF:
Why would you disagree with us? We agree with that.
MAINZER:
We consider this to be a new tax. My understanding that the revenue that was
being collected was not going to be split into the 70/30.
I
The revenue is almost neutral. By giving the 5% collection fee, the revenue is
almost neutral. And we already put $850,000 a year into tourism promotion in this
County. We don't use it in our general fund. The other money goes to Sheriffs
patrols, which is necessary because of the amount of tourists that we have here.
So, I'm not quite sure how we are in violation of the law, if we agreed with you
that it does fall under the House Bill.
Minutes of Public Hearing regarding Proposed Changes to Deschutes County's Transient Room Tax Ordinance
Tuesday, February 18, 2004 Page 4 of 36 Pages
MAINZER:
If you agree with me, then I would say you are correct. If you agree that this is a
new tax and it falls under House Bill 2267 —
LUKE:
We don't agree with that.
MAINZER:
Okay. Well, we believe that it is a new tax and falls under House Bill 2267.
AMBERG:
Maybe this will help a little bit. We have taken a look at that, and I don't know that
we necessarily have any intent to change the split. We are aware of that provision
in the State statute. But that really isn't —
DEWOLF:
We just put out a letter about two weeks ago to the world that indicated that the net
impact to Deschutes County's receipts is maybe $65,000 or $75,000, after the 5%
is paid out on the full taxes collected. And we all signed a letter that indicated that
the 70/30 split was part of the result of this. Whether we fully considered that, a
letter did go out from the three of us to the media and to —
MAINZER:
Our main point in coming before you today is that we understand that these
definitions are based on the Department of Revenue's temporary rule that they
created for the implementation of House Bill 2267, again trying to be consistent
with the State. What we wanted to tell you is that we have been in conversations
with the Department of Revenue because many of those rules we believe conflict
with the legislative intent.
We are working with the Department of Revenue, and they are currently in the
process of revising some of those definitions. For example, one of their definitions
goes to a greater length than your definition of rent packages, which is they wanted
to include everything. So if you have a package with a restaurant meal and golf,
the entire amount would be included. They are looking at redoing that language.
What we are requesting is that before you go final with this language, let the State
finalize their implementation rules, and then come back together with industry. I
don't want to give an implicit endorsement of what the State does because we
haven't seen it. But they are going through the process of working on final rules.
That process starts with public hearings next month.
Minutes of Public Hearing regarding Proposed Changes to Deschutes County's Transient Room Tax Ordinance
Tuesday, February 18, 2004 Page 5 of 36 Pages
The Lodging Association would like for you to just hold off until those rules are
finalized, then come back together with industry and let's work together to see if
those definitions will work for Deschutes County and the industry.
LUKE:
I don't personally believe that this is based upon the State. We were working on
this long before the last legislative session. The problem is that some members are
paying more room tax than others based on the same rules. We are trying to get,
and have been working with them very closely, on some kind of standard.
Although the State's temporary rules are there and we, of course, looked at those,
and we looked at a lot of different alternatives, including the City of Bend, which
allows a little bit for each operator. We don't collect within the City of Bend, by
the way. We just collect in the County.
We believe - I believe - that is very difficult to enforce. All of the other
alternatives we looked at were difficult to enforce, and were not very clear. I
believe these are very clear. And to help, of course, we decided that the 5%
collection fee should go to the operators because they do a great service, and we
understand their value. I, for one, don't believe that the State's rules have a major
impact on us.
MAINZER:
Well, then, I would also say that I would like you to wait until the State, for the
benefit of the industry, because you don't want to make them collect taxes one way
for the State and another way for the County. It needs to be more consistent.
LUKE:
Does the State give a collection fee?
MAINZER:
Yes. In the legislation.
DALY:
Do you have any idea when this State process might be finished?
MAINZER:
It starts in March.
LUKE:
When is the State going to collect it?
Minutes of Public Hearing regarding Proposed Changes to Deschutes County's Transient Room Tax Ordinance
Tuesday, February 18, 2004 Page 6 of 36 Pages
MAINZER:
They are collecting it right now under the temporary rules that are going to be
revised through the public process. There are certain things that even the
Governor's Office has weighed in on, and says that this simply wasn't the intent of
the legislation, such as the issue of rent packages.
DALY:
Is there any intent for the State to stop collecting and hold off until these rules are
finished?
luGO121A
They don't have the ability to do that because the legislation mandated that the
collection start January 1. Which is why they had to go into the rush of creating
the temporary rules.
DALY:
Do you foresee the State having refunds to fund?
MAINZER:
I don't know. I cannot possibly predict what they will do.
LAURA HARVEY:
Hello, I'm Laura Harvey, and I own Sunriver Retreats, and I'm a private
homeowner that rents out my own houses. Actually I am confused on this, because
we are supposed to add another 1% for the State, which I believe I haven't paid yet.
I believe they are not collecting it, maybe quarterly, but I haven't received any
notice about it from the State.
So that 1% would be on the invoice, and since we are trying to clarify this would
you want us to tax the 1% tax? According to this, anything - and the refundable
damage deposit would be on an invoice to a guest. But that's refundable. I mean, I
do believe that we need clarification because I read it to be an increase in the tax
and a tax on the tax.
DEWOLF:
Something that is refundable is optional. If I choose to trash your room, I've been
given the option of paying or not paying it. If I keep it clean, I'll get that back,
right? That's an option to me. That would not be subject to the room tax.
HARVEY:
So it really isn't everything that is on our invoice to a guest.
Minutes of Public Hearing regarding Proposed Changes to Deschutes County's Transient Room Tax Ordinance
Tuesday, February 18, 2004 Page 7 of 36 Pages
DEWOLF:
It would be what is on the invoice that is not optional for the guest. So if there is
something there that is refundable due to the actions of the customer, that's
optional. They have the option of complying with your rules and not having to pay
it; they'll get it back at the end of their stay.
What about cleaning fees? Everybody charges cleaning fees. We don't take that
money - it goes to the cleaning people.
LUKE:
Do people have an option of cleaning the house before they leave?
HARVEY:
They can.
DEWOLF:
If they don't have to pay the cleaning fee, then it's optional.
HARVEY:
But what if they want to pay the cleaning fee?
LUKE:
It would have to be truly optional.
AMBERG:
Maybe I can offer an example here that might help a little bit. I think of the
Phoenix Inn, which is in the City and not the County. You stay there and get a
continental breakfast and get to use their swimming pool and weight room, and
you pay one room rate for that room. It obviously includes maid service and other
amenities. When you pay that rate, you don't have the option to say, "I don't want
to use the swimming pool, I don't want the breakfast, so want to pay a lower rate."
You pay the regular amount, whatever that is. And the amount on your bill is
assessed room tax.
HARVEY:
A lot of this is written up for your hotels and motels, and of course in Sunriver it is
mostly houses. I only have houses. I did read it as an additional tax and a tax on a
tax. The way I do my invoice, the I% tax for the State would be taxed again.
Minutes of Public Hearing regarding Proposed Changes to Deschutes County's Transient Room Tax Ordinance
Tuesday, February 18, 2004 Page 8 of 36 Pages
LUKE:
We don't charge a tax on the State tax.
If you charge $100, you would pay 7% to Deschutes County and I% to the State.
It wouldn't be 7% on the whole thing.
HARVEY:
Thank you. I think there's been a lot of confusion.
SCOTT PENCE:
My name is Scott Pence, and I own Sunset Realty in Sunriver. The first thing I'd
like to ask is to be able to go through my entire testimony before any interruptions.
I would appreciate that.
DEWOLF:
How long is your testimony?
SCOTT PENCE:
I'll make it quick. (Mr. Pence then read his statement, a copy of which is attached
as Exhibit D.)
DALY:
Does anyone have any questions for Mr. Pence?
(There was no response.)
IN go a NTA a.4 6
My name is Brett Evert, and I want you to know up front that I don't have any
financial interest in the outcome of the County's room tax code. All of my
properties have been annexed into the City of Bend.
LUKE:
When the State makes their changes, you'll actually be operating under two
different rules, one for the City and one for the State.
EVERT:
Yeah, but I helped to draft all the State rules so I'm fairly happy with how that
legislation is moving. Because they sat down with the industry to draft this
legislation.
Minutes of Public Hearing regarding Proposed Changes to Deschutes County's Transient Room Tax Ordinance
Tuesday, February 18, 2004 Page 9 of 36 Pages
LUKE:
Temporary rules or the rules that haven't been adopted.
EVERT:
Frankly, the rules that haven't been adopted, but I think they will be adopted. The
intent was pretty clear at the State level. Unfortunately the Department of Revenue
was not in all the hearings on the development of those policies and when they
started implementing, they did not follow the intent of the legislature.
DEWOLF:
Do you have any kind of estimate on when you think they will be adopted?
EVERT:
No, I don't. I really don't. But I really do agree with Scott (Pence), in that I just
don't see - like he said, we've been collecting room tax since 1974 in Deschutes
County and the City of Bend, thirty years. I don't see why there would be any
potential rush to move ahead on new language for the current code until all of these
areas are clarified. And I definitely think that the industry in Deschutes County
should sit down together to come up with final language on this.
LUKE:
We understood that under the temporary rules that they aren't going to tax
houses.
EVERT:
That was a total misunderstanding on the part of the Oregon Department of
Revenue. The intent of the legislation was to tax anyone that is currently
collecting room tax under local ordinance. The Department of Revenue
unfortunately didn't implement the rules along those lines. The industry — house
rental people, hotels, motels — no one went into those discussions with any intent
other than the State was going to collect their tax for all the current tax collectors,
whatever that definition may be. The Department of Revenue didn't implement the
rules along those lines, and that's what we are trying to change right now.
LUKE:
I hope you don't mind, because I know you are very active in the State
Association. Probably the reason why Laura (Harvey) hasn't received anything
from the Department of Revenue is because under the temporary rules houses are
not taxed.
Minutes of Public Hearing regarding Proposed Changes to Deschutes County's Transient Room Tax Ordinance
Tuesday, February 18, 2004 Page 10 of 36 Pages
EVERT:
I understand that. And I think it was a terrible oversight. The whole industry is
aware of this. We had hoped that there would be a way. We actually had some of
the resorts in Sunriver say that they would voluntarily start complying on January 1
in collecting that I% tax, and the State told them not to. I think that Deschutes
County and the State need to look at the industry. Our goal is the same as yours;
we want to collect these taxes from our guests in a fair and equitable way, and
want to apply the spending of those taxes not only for general funds but for the
betterment of the industry.
DEWOLF:
There's nothing in general fund. Just to clarify for the record. Not one penny goes
to general fund.
EVERT:
I guess, Tom, what I'm looking at is that I have my State hat on now, since
Deschutes County is one of ninety-four local codes. Within Deschutes County it's
not general fund — it goes to Sheriff's funding. I'm looking at it overall statewide.
Of the ninety-four codes, most of those are for areas outside of tourism funding.
That's determined by the local jurisdictions. Deschutes County just happened to
choose the Sheriff. I realize it's not general fund; I'm talking about it on a broader
level.
Getting into the definitions or whatever - frankly, when I read this, I would like to
ask up -front, the whole reason I'm here is to ask the County to delay
implementation until we have further discussions. I think we open up some cans of
worms that nobody wants to open up, and I'll give you some of those reasons.
Frankly, this isn't a claritive renewal of the room tax code. This is a substantial
change. The definition of rent cannot be arbitrarily changed, to include what I
consider to be a general sales tax in any other areas under the code. These include
meals, recreation, entertainment, goods, services, commodities, fees, charges and
assessments.
I believe that these can't be added to this code without a vote of the people. The
voters of Deschutes County were given at the polls a very clear statement. I pulled
the old ballot titles for all three of them, and they were given a very clear
statement. They were voting on rent, rent on rooms. Rent is defined under the old
code, and does not include the sale of any goods, services or commodities other
than the furnishing of rooms, accommodations and parking spaces. This is what
the voters of Deschutes County voted on.
Mmutes of Public Hearing regarding Proposed Changes to Deschutes County's Transient Room Tax Ordinance
Tuesday, February 18, 2004 1 Page 11 of 36 Pages
All these other areas we're running into, the industry isn't necessarily saying that
we're not going to go there as long as it is clarified how we go there. But, we can't
make that substantive change to this code without going back to a vote of the
people, in my opinion and the opinion of some I've talked to legally about this.
It is not in the County's best interest to discourage packaging. The code on this in
the definition of room packaging definitely goes out and discourages packaging,
because it does require - and this is why I'm curious, because the points you just
handed out this morning are different than what the actual code says. You are
saying that within the actual changes here, you're talking about a rent package plan
with room and golf at $125. Only $100 is subject to assessment.
But that's not what the actual code says in here. It says, "Where a single rate is
charged for accommodation for rent, food, and/or other amenities and activities,
the full consideration charged for a rent package plan shall be considered rent for
the determination of transient room tax, unless operator offers the space for rent at
one rate with the food an/or other amenities at another rate without the food and
other amenities and activities." That's not what this here says. This says you can
pull those out of there. Here it says that unless you charge it under one rate, you
can't do it.
The reality is that I'm an operator, and you have operators in the County, not all are
vacation homes, we don't own golf courses or tennis courts that our guests ask us
to provide. When I package, I will take a room and do packages for every one of
the recreational amenities in Central Oregon — skiing, golf, tennis, etc. I make
them available for my guests. I go out and negotiate rates with people in the area
who own golf courses and ski areas. They generally will give us a discounted rate.
Like Mt. Bachelor.
I don't have the option. The rate they offer me to sell within my package, I can't
make it into what your definition of what a room package plan is. I can't say that
your night's lodging is $60 and your lift ticket is $40, and therefore charge them
$100. You say if I want to consider this a true package, I can just break the lift
ticket out from the room. They won't allow me to do that. I can't break it out on
the invoice. They only give that discounted rate because what they are trying to
encourage is multiple day stays. This is generally the case with golf.
DEWOLF:
You make some good points. Have you written this stuff down in a fashion —
Minutes of Public Hearing regarding Proposed Changes to Deschutes County's Transient Room Tax Ordinance
Tuesday, February 18, 2004 Page 12 of 36 Pages
EVERT:
I don't think you can read it.
DEWOLF:
Could you? I would like to clarify for everyone that this is a proposal. This is
nothing that we have voted on. I read this summary for the first time today, just
like you did. I read this for the first time yesterday. I want to be clear that it is not
us versus you on this thing. This is a public hearing and we're taking testimony to
consider how to proceed, whether to proceed, what to do. I want to be clear about
that, there are no preconceived notions at least on my part on how this thing
proceeds. What would help is on the salient points that you are making, if you
could submit those to us in writing, it would help.
EVERT:
Tom, what I really would like to do, and this is part of the problem. I know you
have been meeting with the industry from Sunriver, and this was discovered in the
vacation home segment. That's where you had a problem. You discovered that
some vacation homes managers were collecting on different portions, i.e. within
their thing. Because it was discovered there, you tended to go into discussions
with that industry.
LUKE:
Also with Eagle Crest, Black Butte Ranch, and other providers.
EVERT:
I appreciate that. Maybe what we need - I don't know if you had any straight hotel
guys there. I will tell you this. Eagle Crest is complicated because of the fact that
they are a hotel, time share and condo rental, and vacation home rental, and a real
composite of different types.
LUKE:
I agree with Tom. If you could put this in writing, it would be nice. I'm sure
Commissioner Daly will keep the record open for additional testimony. Let's take
the Mt. Bachelor one. Do people have an option of renting your room without the
Mt. Bachelor package? Is it less?
EVERT:
Absolutely.
Minutes of Public Hearing regarding Proposed Changes to Deschutes County's Transient Room Tax Ordinance
Tuesday, February 18, 2004 Page 13 of 36 Pages
LUKE:
Well, then, you have a base rate.
EVERT:
No, because what happens is that we are not allowed to reveal to the public most of
packages. What hotels do? You'll notice that if you ever get a package someplace,
no hotel will ever print it out on your folio. If you went to Disneyland in Orlando,
and take a Disney package for $289, I defy you to get Disneyland to print out on
the folio that here are your room charges, here are your park entrance fees. It's not
done.
DEWOLF:
Well, what you submit to your customers could be very different than what you
submit in confidence in payment of room tax. You could separate something out.
I'm not saying that this is the right way, but I am just trying to give you examples.
You could make that separation for purposes of paying room tax, that is not
divulged to your customers. What is divulged to Deschutes County is confidential
information.
EVERT:
The guest knows that immediately. They already know what tax they are paying.
They know clearly that the tax to Bend is 9%. If you only charge on the room
portion of the package, they can immediately figure that out. Tax was $9 so the
room portion was $90. What they've done then is dissected that package, which is
exactly what the industry doesn't want to do.
DEWOLF:
So Mt. Bachelor is then going to defy State or local law, whatever comes out, and
either say you can't do this even though the law requires that you be able to
separate that out, or they will stop giving you packages? Mt. Bachelor wants to
stop having multiple day packages here?
EVERT:
I don't think they will. But what I am wondering is why the County would want to
put any hindrances into this. Because we can't divulge to our guest. If we want a
package that is viable and saleable, the whole idea behind it is to give them
multiple days and multiple amenities. Sometimes these multiple amenities include
like Sunriver, doing more than just skiing. They do option packages where you
can choose from a menu of options. You could have a meal in the dining room or
take sleigh ride. We do this also.
Minutes of Public Hearing regarding Proposed Changes to Deschutes County's Transient Room Tax Ordinance
Tuesday, February 18, 2004 Page 14 of 36 Pages
DEWOLF:
How do you pay the room tax? What is it collected on?
EVERT:
We just collect it on the room portion. What you are stating now with your new
code - the old code clearly allowed us to do that, the rent package plan means
consideration charged, whether or not received by the operator, charged for both
food and rent. And you're adding on there, where a single rate is made, or the total
of both. We're a single rate. Now what you are doing is saying now we have to
break out all of these additional things.
DEWOLF:
You'd rather pay the room tax on the full package rate?
EVERT:
We don't pay on the full package rate. We only charge on the room.
LUKE:
So they are able to figure it out right now from looking at the tax.
EVERT:
They possibly can. I mean, this is one of these areas.
DEWOLF:
I don't understand the difference. You've just told us that you break it out now and
only charge on the room rate.
EVERT:
No. We put on the folio the total amount of the package. And we do put the tax
separately. Yes.
DEWOLF:
And is the tax on the total?
EVERT:
Based on just the room portion.
DEWOLF:
Then that's exactly what's being proposed here. I don't get this.
Minutes of Public Hearing regarding Proposed Changes to Deschutes County's Transient Room Tax Ordinance
Tuesday, February 18, 2004 Page 15 of 36 Pages
EVERT:
But what you are doing is trying to bring other areas into there outside of food and
rent. You're trying to bring in charging for tax on other areas outside of that.
Because we aren't going to break that out. In order for us to not charge that rent,
we must break it out on the folio. We can't do that. We'll still just give them the
tax on the room portion, but we won't print out that the room is $60, skiing is $38,
whatever.
DEWOLF:
Maybe it would help to put this in writing. Because you've got me really confused
here.
EVERT:
There needs to be further discussions about this. Because what the code says and
what we are doing in practice -
AMBERG:
The intent is to try to codify exactly what the practices are. There is nothing in this
change that requires it be broken out on the invoice. It's an attempt to try to clarify,
for the benefit of the operators, some ambiguities. This is something that maybe
we can work on the language, but certainly the intent was to clarify for the
operators that they don't have to pay tax on the portion that is above the cost of the
room. There's no requirement to break that out on the invoice.
EVERT:
It says right here, "operator offers the space for rent at one rate, with the food
and/or other amenities and activities at another rate, without the food and/or other
amenities or activities, in which case the difference between the two rates shall not
be considered rent."
DEWOLF:
How about when you write up your notes for us, you give us your recommended
language on clarifying this, so that we can understand what your intent is.
EVERT:
My recommended language is not complicated. There should be no room tax
collected for any portion of a package outside of the room.
Minutes of Public Hearing regarding Proposed Changes to Deschutes County's Transient Room Tax Ordinance
Tuesday, February 18, 2004 Page 16 of 36 Pages
DEWOLF:
And we agree with that. And we agree it is not complicated. But the way you
have tried to explain it has gotten me horribly confused. What I'm asking you to
do is to clarify this when you type it up.
EVERT:
I can clarify it now. Don't change the language on the rent package plan. Your
current language specifies what we are doing. Don't add the new language. The
industry is saying that we don't want to break out our folios because we are not
charging rent for ski packages, or golf, or tennis or these other areas. They should
not have to appear anywhere so our guests can break those out.
Right now our guests can buy a general package. I'm sure some people go back
and break out the room tax. But most consumers won't. That's why it works. We
don't want to get hooked into having a room tax for non-taxable items. The voters
when they voted in a room tax didn't vote in a general sales tax. They didn't want
tax on lift tickets and golf and these other things.
DEWOLF:
I hope it is clear that we agree.
EVERT:
I'm hoping you do. If you do, I can quit right now.
DEWOLF:
That would be great.
EVERT:
I have a couple of more points. There are a couple points in the language, but you
may have already clarified one of those. The County is saying that the language
change is necessary to the definition of rent. I think you are adding this to raise the
rent. The only reason the County, in my mind, would possibly want to change the
current definition of rent is if there is the potential to collect more revenue. That
is, collect room tax under new areas.
If this is true, and I know for a fact that since the time Helen Rastovich was County
Finance Director, she was aware at that time that there were unequal collections in
Sunriver. We've had these discussions for the last fifteen years, that different
operators were collecting under different scenarios.
Minutes of Public Hearing regarding Proposed Changes to Deschutes County's Transient Room Tax Ordinance
Tuesday, February 18, 2004 Page 17 of 36 Pages
If this is true, then, in effect, the true definition that was in the code didn't even
allow for those collections outside of rent. So we've had operators for years
collecting tax on areas that they should not have been collecting tax.
So clarification is needed for fairness, not only for the operators who have been
collecting that tax, but for the ones that haven't been. If the language change is
necessary to actually collect on these areas outside of the definition of rent, then it
is an admission that previous collections made by a few operators were erroneous
and outside the scope of the current tax code. The few operators that were wrongly
collecting these overages for the County should probably be filing for refunds
under the 36 month rule. This could end up being a large tax refund for these
operators.
DEWOLF:
Those who haven't been collecting but should have been, do they then have to pay
extra for the past few years?
EVERT:
That would be a legal point.
LUKE:
I want to point out where this came from. Mark talked about it. It came from an
audit by the people who audit our room taxes. You all go through that, we know
that. There was a conscious decision not to go back and try to collect those taxes
that should have been paid, in our opinion. We don't want to go there.
But it was very clear that there are all kinds of people paying taxes on different
things. Very clearly there needs to be some kind of clarification in the definition
so everybody has a level playing field. Yes, there are probably some people who
might get refunds. But there are quite a few people who would owe. We didn't
want to go there at all.
EVERT:
I have been audited several times for room taxes myself. My understanding is that
this came to the attention of the County by an operator who found out that other
operators were not making these collections. In fact, I know this individual. It is
because of this - it wasn't discovered under audit - it was brought forth by someone
thinking that they were collecting outside of the scope.
LUKE:
No. It came from an audit.
Minutes of Public Hearing regarding Proposed Changes to Deschutes County's Transient Room Tax Ordinance
Tuesday, February 18, 2004 Page 18 of 36 Pages
EVERT:
I guess what I have is that I know an individual that told me that they actually
brought it to the attention of the County.
DEWOLF:
Does it matter?
EVERT:
It does matter, because the difference is that we have operators out there that were
misconstruing what this code meant.
DEWOLF
So it needs clarification.
EVERT:
It does need clarification. But what it needs is getting the legal definition of what
the current code is.
LUKE:
That's what we are trying to do.
EVERT:
Dennis, unfortunately what happened over the years when operators came to the
County and said we want to know, what should or shouldn't we collect on, if the
County truly had the intent of clarifying that code, for thirty years you've been
collecting under different ways for operators. For me, this screams out that if you
knew that people were collecting on areas that they shouldn't be collecting on and
turning that money in to the County, then in essence you are saying, hey, this is a
nice little bonus.
The opposite of that is that if there were operators that were not collecting in those
areas and you knew of it, then the County closed their eyes, which is absolute
malfeasance for those years. I think the code is very clear as to what the definition
of rent is. And I'd say that 80% of the room rent in the County was not collecting
in these areas. That's how they read the code, and how they set up their books.
They were not collecting on these areas that the County is now trying to put under
this definition of rent. So we had a minority of operators who were erroneously
collecting tax on areas that were not within the code, and the County was accepting
payment for that.
Minutes of Public Hearing regarding Proposed Changes to Deschutes County's Transient Room Tax Ordinance
Tuesday, February 18, 2004 Page 19 of 36 Pages
I don't want to go backwards on the process. This has been a thirty-year process, a
clarification of State room tax rules. What I want to do is clarify this code.
Clarifying doesn't mean adding new tax areas to it. And we're definitely going
outside the scope of what the voters passed. I don't want to see us go there. I think
we need to sit down together with the industry to clarify these codes. I think that if
we are looking for consistency, regardless of what happens to the definitions, there
needs to be an operator's fee in the County. Just because it's the only one that
doesn't have an operator's fee.
DEWOLF:
That's the only reason?
LUKE:
How many counties put as much money into tourism as Deschutes County?
EVERT:
Dennis, I'll tell you this. I want to talk percentages. Deschutes County gives the
least percentage of room tax collections of any county. The statewide average is
50% going into tourism.
LUKE:
The City of Bend puts that much in?
EVERT:
No, it doesn't. Statewide, 50% of room tax collections are put into tourism promotion.
LUKE:
You keep talking about thirty years. I've been here most of those thirty years.
Things have changed. Thirty years ago Eagle Crest wasn't here. Black Butte was
about twenty years old. Sunriver was kicking off. We went through the 80's when
we didn't have tourists; we were lucky anyone showed up; a lot of people were
moving out. Some of the operators have changed how they collect.
To say that having your room cleaned is not part of the room rent when it is not
optional doesn't make any sense to me.
EVERT:
I got my confirmation e-mailed to me yesterday, I'm going to rent a house in
Hawaii next month, and I don't pay room tax on the cleaning fees. It's not on there.
It's not done. This is why. You are trying to lump hotels and motels and condos
and house rentals together. In the home rental business it's not done.
Minutes of Public Hearing regarding Proposed Changes to Deschutes County's Transient Room Tax Ordinance
Tuesday, February 18, 2004 Page 20 of 36 Pages
The room tax is not figured on the cleaning fee. We are introducing new taxes
here that are not industry standard. This is why we need to get together. We need
to sit down and have this discussion.
DEWOLF:
This is the thing that I think you need to understand. What is frustrating to me is
that you toss out words like "malfeasance" and "incompetence" —
EVERT:
I didn't say incompetence.
DEWOLF:
You're saying that over thirty years that we, the County, are this, that and the other
thing. The fact is, I've been here for five years. This first came to my attention a
couple of years ago, the fact that there are inconsistencies. This is not something I
pay attention to every day like you do. This is your business.
So I've been aware of it for the last two years, and there have been discussions
taking place over those years. What we have is a proposal here. What I am asking
you is to allow some other people the opportunity to speak here today, and for you
to write down your concerns so we can take them and be able to use them. I'm
getting a little upset here, Brett. It is very difficult for me to listen to you without
being offended.
EVERT:
Let me put it to you this way. I didn't say "erroneous" or "incompetence". I didn't
say "malfeasance". I'm not trying to insult anyone here.
DEWOLF:
You actually did say malfeasance.
LUKE:
I'd like to have your comments in writing, too. I'd like to have everyone who has
testified, if they have written testimony, I'd like to have it.
EVERT:
Maybe I should have done what Scott did. There are other points that I would like
to get on the record about these changes. I've been answering questions, that's part
of my problem. We're getting into an argument here rather than me presenting
testimony.
Minutes of Public Hearing regarding Proposed Changes to Deschutes County's Transient Room Tax Ordinance
Tuesday, February 18, 2004 Page 21 of 36 Pages
DALY:
We're going to do this properly. Please finish your testimony so we can go on to
the next speaker.
EVERT:
We were talking about consistency. Then we got down to the industry standard of
rent. That is what over 80% of the room tax collectors have been using as their
standard. Because we have a few operators doing this outside of the standards, we
need to correct those operators, not change the code to bring all of the other
operators into what a few operators have been erroneously doing.
We talk about adding these new areas to rent. That is, calling all of these new
areas rent. I didn't know the County was doing this because I didn't get the letter
from the County. Definitely any new areas outside of the current definition of rent
would be subject to the 70/30 rule under State law. I didn't realize the County had
sent out a letter because I'm not a County room tax collector.
Even if the County moved ahead with this draft change in the definition of rent and
it somehow survived legal challenges, any dollars collected in these new areas of
tax should be subject to the 70/30 rule. If you change the language of the
ordinance to collect tax in areas where tax was not previously collected or
enforced, then you have created a new tax. This is clearly outside the scope of the
current rent definition and would open a Pandora's box of taxes in new areas.
These areas are clearly outside the scope of what the voters of Deschutes County
passed at the polls. You must go back to the voters if you want these general sales
tax areas.
In conclusion, the County needs to stop this process now and get back to the table
with the industry, since all of the ground rules have changed with the passage of
House Bill 2267, wait for the State to do the administrative and legislative fixes to
2267 which will affect what the County can and cannot do. The room tax
ordinance has been in place for thirty years and it is not critical to do this now.
Let's revisit this together to make it consistent with State law. I recommend you do
not move forward at this the time since the chance to muddy the waters even more
exists before 2267 has been clarified.
And I apologize if I offended you. I meant to talk about erroneous practices by
operators, not by the County. I'm saying there was a lot of muddied water.
Minutes of Public Hearing regarding Proposed Changes to Deschutes County's Transient Room Tax Ordinance
Tuesday, February 18, 2004 Page 22 of 36 Pages
DALY:
I have one question. You indicated that you were deeply involved with the State in
drafting this law. Were you part of the process?
EVERT:
I was not on the committee. I watched over it.
AMBERG:
I would like to ask a point of clarification. Regarding this optional versus non -
optional distinction, the way the State law is currently written, that is exactly what
it says. Optional versus non -optional, which is what the County is proposing here.
I wanted to find out if you know if the State is proposing to change that.
EVERT:
The industry is trying to get that changed.
LUKE:
The industry, not the State.
EVERT:
The legislators were on board with the language of the industry. We were in total
agreement. The only place it got muddy was after the Department of Revenue
wrote the rules. What you are saying there is not correct. The industry and the
legislators that drafted the law were in agreement on those areas.
LUKE:
Another point. You mentioned several times the original ordinance passed by the
County, and others passed afterwards. Perhaps the easiest way to do this is to send
the whole thing back to the voters.
EVERT:
Absolutely.
LUKE:
Rates at the same time, too.
EVERT:
I will tell you this, it wouldn't bother me. If you sent the whole thing out, we'd
then be under the 70/30 rule on every dollar. We would have operator's fees
written in and would be under 70/30 split, too. The industry would then get more.
The industry would love to do that.
Minutes of Public Hearing regarding Proposed Changes to Deschutes County's Transient Room Tax Ordinance
Tuesday, February 18, 2004 Page 23 of 36 Pages
LUKE:
You are testifying on the record that the industry supports raising the room tax.
EVERT:
The industry would support a total redraft of the room tax ordinance and go to the
voters with it. We would look at raising the tax if we could get a new ordinance.
We'd be falling all over ourselves for that, and would go hard to the voters to see
that it passes. That would be very encouraging.
DALY:
Thank you. We've got to move on here.
JEFF COLBURN:
For the record, I am Jeff Colburn from Eagle Crest Resort, lodge manager there. I
guess I am here to urge you to wait until we get the State law figured out before we
move forward on the County level. There are several reasons why I would like to
do that today. It seems like this revision is somewhat based on the State law, or at
least it appears to read that way. So, I don't feel it makes sense to move forward at
this point. There are a few reasons why. (At this time, Mr. Colburn read a
statement into the record. A copy is attached as Exhibit E)
AMBERG:
The tax would be on whatever you regularly charge for the room.
DEWOLF:
What you are suggesting makes sense to me. Whatever it is within the package is —
COLBURN:
That's the way it should be. I mean, if I go to Target and buy a shirt on sale, I don't
pay the retail rate. I would pay what I would pay.
(Regarding complimentary rooms)
DALY:
What's a complimentary room? How can you tax zero?
DEWOLF:
That's what this proposal suggests that you do.
Minutes of Public Hearing regarding Proposed Changes to Deschutes County's Transient Room Tax Ordinance
Tuesday, February 18, 2004 Page 24 of 36 Pages
LUKE:
For a number of years, you brought people into Eagle Crest and they could stay for
free to look at your condos and sit through your presentation and those kinds of
things. Are those the rooms you are talking about?
COLBURN:
Well, our business model has actually changed, so we are no longer doing that.
But, yeah. But we give rooms to the Tower Theatre when a group comes in, or
give rooms to any charity in town, United Way or any of those kinds of things.
Under the new proposal we would be taxed for that. So we would be penalized for
helping the community.
DEWOLF:
We also received a letter from Oregon Parks and Recreation Department
addressing this exact issue, and stating that this should not be the case. (A copy is
attached as Exhibit F.)
DALY:
Mark (Amberg), how could we tax something when there is no money involved?
DEWOLF:
At the standard room rate.
AMBERG:
This actually is out of the current ordinance: "Consideration charged, whether or
not received by the operator for occupancy of space in a hotel." Part of the intent
of that was that if the operator decided to comp the room, they still had to pay the
tax. It is also intended in case someone doesn't pay the bill. That was our
understanding of the way it was supposed to be under the current ordinance.
We certainly are not in favor of that, paying tax on something that we shouldn't.
To that point, government employees can stay tax-free in a room.
AMBERG:
That is an I.R.S. regulation and applies only to federal employees and federally
chartered organizations, like the Red Cross.
Minutes of Public Hearing regarding Proposed Changes to Deschutes County's Transient Room Tax Ordinance
Tuesday, February 18, 2004 Page 25 of 36 Pages
COLBURN:
The point is, where does room tax end and sales tax start? We are trying to clarify
a lot of things here. It all backs down to we should stop, wait, see what the State
does and try to get things cleaned up, and do things right. We've been at this for a
year trying to get it boiled down, and waiting another two or three months is not
going to kill us.
DEWOLF:
Let me ask you this. The State comes down with its final rules, and the Oregon
Lodging Association hates them and sues, and it goes to court for the next three
years. What do we do?
COLBURN:
Cross that bridge when we get there, I guess. Who knows what is going to happen.
That's a question that's difficult to answer right now. There are some
discrepancies, and obviously we've lived with them for the past two years since
these issues came up. I think the point is to get it right. I think putting something
in that is not right is not the proper thing to do.
DALY:
Have any of the operators changed their method of operations since this issue came
up during the past year or two? Or has everyone kept doing things the way they
had been.
COLBURN:
We've continued to do it the same way at Eagle Crest.
MARTY WYNNE:
(Off the microphone) I don't think that any have; there's no proof of it at this
point.
TIM BAILEY:
I don't need to testify.
LUKE:
I would point out, if you haven't signed up to testify but you want to get any
mailings of next hearings or decisions, you might want to sign up before you leave,
and we'll put you on a mailing list.
Minutes of Public Hearing regarding Proposed Changes to Deschutes County's Transient Room Tax Ordinance
Tuesday, February 18, 2004 Page 26 of 36 Pages
LAURA COOPER:
Good morning. My name is Laura Cooper, and I'm an attorney with Ball Janik.
I'm here on behalf of Sunriver Resort, and I'd like to read some testimony from
Tom Luersen. It is relatively short, and I will submit it in writing as well. (Ms.
Cooper then read the letter, a copy of which is attached as Exhibit G.)
One of the Commissioners raised the question prior as to whether the issue of
taxing the non -room component is ultimately going to be adopted by the State. I
can tell you from talking personally with Don Jones of the Department of Revenue
that he thinks there is a good chance that those things will not be taxed. Although
they are being taxed under the temporary rule, he did admit that it was probably a
mistake and not intended by the legislature.
DALY:
Are they intending to refund all of that money?
COOPER:
We would certainly encourage it, but they have not. Since it has already been paid
by people who have stayed, I suspect they may not.
LUKE:
I'd just like to point out that we have been working with the local industry. One of
the reasons is this coming forward is because that group could not come to a
conclusion. As a matter of fact, one of the major players withdrew. We have tried
to work with the lodging industry, to be fair and to get clarification. But that is
why this is here.
COOPER:
We would like to continue to work on this.
LUKE:
I have one quick follow-up, if I might. Since you mentioned something in your
letter about "it might take additional legislation", that's a year and a half away. Are
you suggesting that the legislature will be changing that bill?
COOPER:
I'm suggesting that it may be possible that we see additional legislation on this.
think what we are requesting now is that you wait for the completion of the rule
making process.
Minutes of Public Hearing regarding Proposed Changes to Deschutes County's Transient Room Tax Ordinance
Tuesday, February 18, 2004 Page 27 of 36 Pages
LUKE:
Which could change with legislation.
COOPER:
It could in a year and a half.
DEWOLF:
Sure, 2267 could be turned upside down by the next legislature, too. You never
know what is going to happen when those folks get together.
LOY HELMLY:
I'll keep my comments brief. I'm Loy Helmly, General Manager of Black Butte
Ranch. I have just an introductory letter. (Mr. Helmly read his letter at this point;
a copy is attached as Exhibit H.)
DALY:
Loy, I have a question. Your last sentence referred to the County following the
pattern of the State ordinance. Are you talking about the I%?
HELMLY:
When revised, yes.
LARRY BROWNING:
Good morning. I'm Larry Browning of Discover Sunriver Vacation Rentals. I'm
being audited by the County today, too. We manage homes and condominiums,
about 130 or so in Sunriver.
Sorry, I don't have a handout for you. First, I'd like to focus on the room tax task
force. I was on that task force, and attended all but one of the meetings, and I was
probably the one that held this up. The reason for that is because my business
varies from that of a hotel, or a resort that owns its own golf courses and
restaurants and that type of thing.
My homes are spread out over a 3,300 -acre resort, so I'm not like a hotel where my
maid can run a cart down a hallway and clean ten rooms at one time. We have to
pack up all of their cleaning items into a car and transport them to the different
areas. So, one of the reasons that it may have looked like the industry couldn't
come together is because we're not all alike.
Minutes of Public Hearing regarding Proposed Changes to Deschutes County's Transient Room Tax Ordinance
Tuesday, February 18, 2004 Page 28 of 36 Pages
However, we did come up, as an industry with all of the different types of
operations, with something that we could all agree on. The reason I am here today
is because I'm frustrated. It looks to me by this ordinance that was completely
ignored.
What we came up with was a percentage allowance, I'll call it. So, if I have a $100
room rate, we would be taxed on a percentage of that; let's say $90 for ease in
figures. So we'd be taxed our 7% on a $90 rate. That would allow me to use that
$10 to apply towards a cleaning fee or phone service, which I do. I provide long
distance calling for free for my guests. It would allow us to get away from these
fees that are non -optional. I think when you start telling us what we can do with
our businesses, you hinder free enterprise. And I don't think that's a place that we
really want to go.
So, that task force did come up with a suggestion that we could all agree with, and
when we worked out the figures the numbers and the dollar amounts coming to the
County worked out about the same. It seemed to be a simple process, easy for us
to figure out, and that was something that the group agreed on.
It allowed us to keep our individuality. Burger King is Burger King; McDonald's
is McDonald's. I don't want to be Sunriver Resort. I don't want to be the Entrada
Lodge. I want to be Discover Sunriver Vacation Rentals. I think a lot of these
things that you are trying to have us do makes us all look alike. I think that is a
wrong route to take.
We, as an industry, who sat at the table, felt this was a viable option. It handled
Black Butte's gate fees, it handled the Sunset's and Sunriver's recreation fees, it
handled the fees that Eagle Crest charges, and it also handled the fees that I would
charge as a vacation home rental manager. So, I would ask you to strongly
consider that before moving forward.
DEWOLF:
Would it be consistent with Senate Bill 2267 as it is rewritten?
BROWNING:
I'm not sure of that. We'd have to ask someone who knows.
DEWOLF:
Would you and the folks that agree with you still recommend doing that if it is not
consistent with the way Senate Bill 2267 is finished out?
Minutes of Public Hearing regarding Proposed Changes to Deschutes County's Transient Room Tax Ordinance
Tuesday, February 18, 2004 Page 29 of 36 Pages
BROWNING:
I don't know. I can't answer that.
LUKE:
Mark, what happened to that proposal? I'm sure it was discussed.
AMBERG:
It was discussed, and we decided not to do it. Part of the reason for that was the
State ordinance, which divides it between optional and non -optional. The State
ordinance does not hold out any percentage for these fees. I know part of the
Commission's thinking in this proposed ordinance was that we did not want to be
inconsistent with what the State is doing.
BROWNING:
Also, prior to that you mentioned the Phoenix Inn. The Bend City room tax has a
food allowance. I believe that is $5.00 per head. There is already a precedent set.
You brought up an example of a hotel here in our area that is already working
under those situations, and now you are saying we can't do that. So, I think there
needs to be consistency in which way we are going. If we are going to draw from
a bunch of different areas, then I think this is a viable option.
LUKE:
It is interesting that some of the motels in the City of Bend do offer food. Some of
them take advantage of that, and some don't. Some of them don't do the deduction;
they just pay it.
BROWNING:
I'm one of those folks. The other thing I wanted to talk with you about is the
vacation rental industry as a whole. I'm a member of a national association and
just attended a conference in October. There were 600 companies attending that
conference, and over 50,000 vacation rentals represented there. It is a huge
industry.
The majority of those companies, and they represent probably every state in the
union except Kansas, do not collect a tax on cleaning fees. Again, I'll go back to
that. A vacation home rental is different from a hotel. Whether we want to
recognize that or not, it is different. The companies on the coast have a twenty to
thirty mile range where they are traveling to maintain those homes. We in
Sunriver have 3,300 acres. Black Butte is in the same situation.
Minutes of Public Hearing regarding Proposed Changes to Deschutes County's Transient Room Tax Ordinance
Tuesday, February 18, 2004 Page 30 of 36 Pages
It is not as easy, and should be looked upon differently than simply pushing a cart
down a hallway. If I could have that happen, believe me, my expenses would
decrease by probably 99%.
DALY:
Assuming that we don't tax cleaning fees anymore, what if the operators then
decide to charge $75 for cleaning and $25 for the room? Where do we go then?
BROWNING:
Well, that's why we go back to the suggestion and proposal we made earlier. Let
us decide what we want to do with that allowance. You don't have to worry about
it. You know that you are going to get a - you know you will receive your funds
on let's say 90% of whatever monies are taken in. And then we can keep our
individuality.
DEWOLF:
If what you are suggesting could be done once the State rules are finished, you're
talking about a percentage. If someone rents a room for $80 a night normally,
there's $8 with which to clean the room and offer continental breakfast; if someone
rents a room for $200 a night, that's $20 to do that. Would it make more sense to
have a fixed amount?
BROWNING:
No, I think the percentage works well. We debated that but, again, we haven't met
for some time. I guess the point I am making with that is that we did bring options
to the table. We brought options that we could all agree on. And when we brought
those options to the table, we got back an answer that no, we're going to stick with
non -optional fees.
What I was hearing in this meeting is that you met with the groups and tried to
come up with an answer and couldn't come up with one. I'm here to tell you, I was
at these meetings and we came up with an answer.
DEWOLF:
And just to reiterate what has been stated, the goal has been to try to stay consistent
with State law. If we need to wait a few more months for State law to get resolved,
I'm fine with doing that. Whatever we do, I don't want to be in conflict with State
law.
Minutes of Public Hearing regarding Proposed Changes to Deschutes County's Transient Room Tax Ordinance
Tuesday, February 18, 2004 Page 31 of 36 Pages
Even though I may have personal conflicts with certain individuals related to this,
in general I feel like I've got a great relationship with most of the operators and
with COVA (Central Oregon Visitors Association). I'm very supportive of the
tourism industry. I just don't like the way that some people deal with other people,
but that's a whole separate issue. I feel great about everything that you've said, and
if there is a way to do that, I'm certainly willing to consider it. But if it is in
conflict with State law, I couldn't do that.
BROWNING:
Again, the frustration with this is that particular opinion that we came up with was
six months ago, before the State law was passed. So we did have some options
then. Again, I'd like to go back to the table and discuss different options, and I
think that we are rushing into this.
DEWOLF:
So you would support waiting until the State is done as well?
BROWNING:
I would. Throughout those meetings, I always maintained that we do have a
definition of rent, at least for my industry. I'm sitting here speaking for my
company and my own business; I manage vacation homes. That definition of rent
is a 1099. We in the vacation industry answer to, believe it or not, a higher power
than you. It is our homeowners. Our homeowners have to be provided with a
1099 every year. That is what the federal government looks at as rents received.
With 1099's, all other fees are not included. If you were to ask, that's where I'd
start.
DALY:
I guess what I am hearing here is that most of you want to wait until the State law
is finished. I guess my question is, when the State law is all done and you don't
agree with that, are you going to be willing to accept whatever they do? Because
that is kind of what you are telling us.
DEWOLF:
But at that point, quite honestly, that wouldn't be so relevant, if what we do is
consistent with State law and State law is the law of the land. There are lots of
laws I don't agree with, but I have to abide by them.
DALY:
I understand. That's why I'm asking.
Minutes of Public Hearing regarding Proposed Changes to Deschutes County's Transient Room Tax Ordinance
Tuesday, February 18, 2004 Page 32 of 36 Pages
BROWNING:
Well, I guess I have trust in the industry that brought this bill to the forefront, and
the industry said basically that we want to put some more money in your coffers,
and that it will go in a way that is favorable to the industry. So I'm confident of
that.
And I want to pay my taxes. I want the County to grow, and this shouldn't be an
adversarial situation. We all know from living here, and I've been here for
eighteen years now, that if you feed the cow it will grow. And we depend on those
funds. The Sheriff was in there asking us for money the other day, and 80% of
those funds go to the Sheriff. That's huge. I would like to see more of those funds
go to our industry, though.
Optional versus non -optional, again, I think that dips into free enterprise. I think
that it is telling me how to run my business. I don't want to be like my
competitors, and I don't think they want to be like me. And in ways it is trying to
force us into that. Thanks for your time.
CLARENCE HOFHEINS:
My name is Clarence Hofheins, and I'm the General Manager and Vice President
of the Inn of the 7th Mountain. I'll be very brief. I want to thank you for allowing
me to give testimony. I just have a couple of points. I think my colleagues here
have pretty much gone through a lot of the issues that I agree with.
My first point is defining the rent. I do agree that with these changes that you have
redefined what rent is, and I'm not against that. I just think that if you do that, you
need to take it to the public and let them vote on it. I think by doing that you are
developing a new tax.
I do want to address the comp rooms. The problem with the verbiage on the comp
rooms, especially in my situation, comp rooms are the essence of what I am trying
to do at the Inn of the 7th Mountain. I have charities that I give comp rooms to for
promotional reasons, I have groups when the group coordinators and the people
come out and give them comp rooms, I have travel agents, I participate with
COVA and other entities to bring FAM trips to Central Oregon. It is an avenue for
me to get business, not only to my resort but to all of the restaurants, Mt. Bachelor
and other entities around me.
The two problems that you have with this is, number one, how do you define the
rate of what you are going to charge the tax on when it is a zero rate. I've heard
discussion on that, and it's very difficult to do.
Minutes of Public Hearing regarding Proposed Changes to Deschutes County's Transient Room Tax Ordinance
Tuesday, February 18, 2004 Page 33 of 36 Pages
The second thing is that most likely that cost, whatever you define that rate to be,
won't be passed on to the person staying in the room. The operator will have to
pay that. Surely, that is what I would be doing. I've been in the industry for
twenty years, throughout the U.S. and on the island of Bermuda, and I've never
seen something like this where you get taxed on comp rooms. I think it just opens
up a big can of worms.
The last thing I want to state is that I agree with Larry's definition of rent, the 1099.
Although the Inn of the 7th Mountain may look like a hotel, it is a condominium. I
have homeowners and an individual contract with each of them. We do a revenue
split, and I have to provide 1099's to them for the rent. That is a great starting
point on defining what rent is. I support that.
For the record, I also support the statements that Scott (Pence) made, and that Brett
(Evert), Tom (Luersen) and Loy (Helmly) made. I am in agreement with all of
them. I think we should wait until the State defines what they need to define and
then go from there. That's all I have. Thank you for your time.
W800
We have a lot of good resorts here. I'm really glad to see that the Inn is coming
back, although I will miss the harvest gold carpet. They've been here a long time
and provide a lot of great service. We're glad you are bringing it back.
HOFHEINS:
Thanks. We appreciate the support we've been getting. We're excited for the
future of the Inn of the 7th Mountain.
DALY:
Is there anyone else who wishes to testify?
LUKE:
Could we leave the record open until next Friday?
DALY:
I intended to do that. Anyone who wants to submit written testimony should get
that to us by 5:00 p.m. on Friday, February 27.
AUDIENCE MEMBER:
(Off the microphone.) I have a procedural question. Where does the process go
from here?
Minutes of Public Hearing regarding Proposed Changes to Deschutes County's Transient Room Tax Ordinance
Tuesday, February 18, 2004 Page 34 of 36 Pages
DALY:
We'll probably set other meetings for further discussion.
LUKE:
There have been some relevant questions brought up here today that we'll want to
go over with staff. There will be more discussions.
(Off the microphone) The same mailing list for vendors can be used for
notifications as well.
Being no further discussion or testimony offered, the hearing adjourned at
11:45 a.m.
DATED this 18th Day of February 2004 for the Deschutes County Board
of Commissioners.
ATTEST:
Recording Secretary
Michael M!Daly,
Ddnnis R. Luke, Cdinmissioner
i
Tom DeWolf, C issione
Minutes of Public Hearing regarding Proposed Changes to Deschutes County's Transient Room Tax Ordinance
Tuesday, February 18, 2004 Page 35 of 36 Pages
Attachments
Exhibit A: Sign-in sheets (2 pages)
Exhibit B: Summary of proposed changes, dated February 18, 2004 (2 pages)
Exhibit C: Letter from Scott West of the Oregon Lodging Association, dated
February 17, 2004 (2 pages)
Exhibit D: Statement provided by Scott Pence of Sunset Realty, dated February
18, 2004 (4 pages)
Exhibit E: Statement provided by Jeff Colburn of Eagle Crest Resort, dated
February 18, 2004 (3 pages)
Exhibit F: Letter from Michael Carrier of Oregon Parks and Recreation
Department, dated February 9, 2004 (1 page)
Exhibit G: Letter written by Tom Luersen of Sunriver Resort, dated February 18,
2004 (5 pages)
Exhibit H: Letter from Loy Helmly of Black Butte Ranch, dated February 1,
2004 (2 pages)
Minutes of Public Hearing regarding Proposed Changes to Deschutes County's Transient Room Tax Ordinance
Tuesday, February 18, 2004 Page 36 of 36 Pages
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Exhibit
f
;Page-
2/18/04
SUMMARY OF PROPOSED REVISIONS TO DESCHUTES
COUNTY ROOM TAX ORDINANCE
Section Proposed Change
4.08.010 Notices Clarifies how notices may be given (personal
delivery or first class mail) and when notice is
deemed delivered.
4.08.065 Definition — Clarifies that "rent", for purposes of assessing room
Rent tax, includes all charges for occupying a room
which are not optional for the hotel guest. Any
charges other than charges for providing a room
which are optional for the guest do not need to be
included in "rent" for assessment of room tax.
It will be up to the hotel operator to decide
whether to include charges such as cleaning fees,
recreation fees or facilities use fees as part of the
mandatory (non -optional) charge for the room or
to give the guest an option to rent the room without
paying those fees.
Example: A hotel operator charges $100 for
a room and the rate includes continental
breakfast and use of the hotel's bike paths,
swimming pools, tennis courts and spa. If the guest
does not have the option of renting the room at a
lower rate that does not include these extras, the full
$100 is subject to assessment of room tax. If the
operator chooses to make these extras available at
an additional charge which is optional to the guest
- e.g. room charge is $80 and the guest has the
option to pay an extra $20 for breakfast and use of
the recreation facilities - then only $80 is subject to
assessment of room tax.
4.08.070 Definition — For hotels that offer "package" plans (e.g. room
Rent Package Plan plus golf for a package rate), clarifies that the
amount charged for the package plan above the
regular rate charged by the operator for just
room rental is not considered "rent" for assessment
of room tax.
Exhibit 6
Page �_ of Z
Example: The basic charge for a room is $100. The
hotel offers a package of a room plus two rounds of
golf for $125. Only $100 is subject to assessment of
room tax.
4.08.085 Definition — Clarifies that the owner of a hotel or private
Transient residence used as a hotel is not considered a
"transient" and is not subject to room tax when the
owner occupies the owner's residence or a room in
the owner's hotel. Also clarifies that any rental of
lodging on a monthly basis or longer is not subject
to room tax.
4.08.070 Operator — Clarifies that room tax must be paid, based on the
Collection — regular rate charged by the operator for a room,
Amount if the operator chooses not to charge the guest
for occupying the room.
4.08.120 Operator — Provides that each operator may retain, as a fee for
Collection — collecting room tax, up to five percent (5%) of
Procedures — the room tax revenues collected by the operator.
Operator Fee
4.08.130 Exemptions Clarifies that employees of the Federal Government
who are on government business and employees of
Federally chartered organizations (such as the Red
Cross) who are on organization businesses, are
exempt from payment of room tax. This is in
conformance with IRS regulations.
4.08.150 Returns and Clarifies when returns and payments are due.
Payments
4.08.230 Fraud Clarifies penalties for fraud; makes fraud a Class A
Violation.
4.08.300 Recordkeeping Clarifies that room tax records must be retained by
an operator for a minimum period of three years and
six months.
Exhibit 66
Page Z- of z—
oregon lodgingassociation
,7In7
February 17, 2004
Deschutes County Commission
1340 NW Wall Street
Bend, OR 97701
Dear Deschutes County Commissioners:
During the last legislative session, a broad coalition of divergent industry
types came together to support the passage of HB 2267; the Tourism
Investment Proposal. The intent of the bill was to provide a consistent
revenue source for the Oregon Tourism Commission to stimulate
Oregon's tourism economy. This was achieved by the implementation of
a 1% statewide lodging tax. In addition, the bill created a consistent
distribution framework for existing and future local tax revenues in the
local jurisdictions.
After passage of the bill, the industry went to work with the Department
of Revenue (DOR) to create administrative rules under which the tax
would actually be collected. Temporary administrative rules were created
to ensure that the tax collection could begin on January 1, 2004 as
directed by statute. These temporary rules will be in place until the
public, permanent rulemaking process can occur. Currently, the public
process is scheduled to begin in March. Unfortunately, the temporary
administrative rules did not reflect the entire legislative intent of the bill.
In particular, the intent of HB 2267 was to cover all aspects of lodging,
including vacation rentals. We strongly believe the inclusive nature of the
definitions and the legislative advocacy and intent included vacation
rentals as a taxable lodging segment. This view was shared by the
Governor's office. We believe this difference of interpretation has caused
some confusion. It is our position that the vacation rental industry was
expecting the advent of the tax even though the Department of Revenue
determined through emergency rule that they were exempt. We
understand that this may be causing some confusion in the marketplace
as operators are having trouble understanding the interpretation and
consumers are perplexed by the inconsistency of the application. We
intend to pursue the inclusion of vacation rentals through the permanent
rulemaking process.
Another issue that has arisen as a result of the temporary rules is the
Deschutes County interpretation surrounding resort fees. It has come to
Exhibit
Page of Z
8565 SW Salish Lane, Suite 150 ■
Wilsonville, Oregon 97070 ■
ph. 503.682.4422 ■
f. 503.682.4437 ■
www.oregonlodging.com ■
�i
our attention that these fees are being considered for taxation by the
county as a result of a reading of the temporary rules. Once again, it is
our clear understanding that the legislation enacting the state lodging tax
dealt exclusively with taxing the cost of lodging; period. The intent was
that only the lodging portion of any bill to the consumer was to be taxed.
Therefore, resort fees would not be considered a taxable transaction
according to the intent of the bill. Once again, we intend to try and
remedy this through the permanent rule making process.
In addition, the DOR originally determined that the full value of packages
offered with a lodging component was to be taxed at the full package
value. Subsequent discussions with the DOR resulted in them agreeing
that the intent was only to tax the value of the lodging component within
that package. Therefore, according to DOR the permanent rules will
reflect this change. Also, it appears that Deschutes County is planning to
tax the lodging component of packages at their stand alone rate, not the
actual (and oftentimes discounted rate) transacted lodging value. This is
in direct conflict with the DOR position and the legislative intent.
We also understand that the Deschutes County proposal includes the
taxation of complimentary rooms. This proposal is outside the realm of
rational consideration and should be dismissed immediately as poor
public policy.
Lastly, we would like to address a procedural matter regarding the
proposed change in the Deschutes County room tax ordinance. We
understand that the county has interpreted the proposed changes as
merely administrative, not substantive. This interpretation would allow
the changes to occur without a vote of the electorate. After an initial
review by our legal counsel, we believe the proposed changes to the
ordinance do create an effective increase in the lodging tax. This
increase would therefore trigger a public vote on the matter.
Thank you for your consideration on this matter. If you have any
questions, please let us know.
Sincerely,
Scott West
Executive Director
Exhibit d
Page ::1— of v
Sunset Realty
P.O. BOX 3515 • SUNRIVER, OR 97707
www.sr-sunset.com • sunset@sr-sunset.com
TO: Deschutes County Commissioners
FROM: Scott Pence — Sunset Realty
RE: Public Input Regarding the Proposed Revisions to Deschutes
County Code Title 4.08 — Transient Room Tax
DATE: February 18, 2004
Dear Commissioners,
I would like to thank you for taking the time to hear my input and reviewing
the enclosed information. Let me start by stating that I am in support of a
revision to the current room tax ordinance, as I believe that a consistent
taxing practice should be applied to all operators. A level playing field is
necessary for all operators to fairly compete in the marketplace. I am aware
of the difficulties you are facing in navigating through this process, as I was
one of the individuals asked by the county to participate on the "Room Tax
Ordinance Task Force".
I would like to make it known that I am absolutely opposed to the proposed
revisions being considered at the present time. While recognizing the need
to create a consistent practice, I must say that the answer is not to simply tax
everything thereby creating consistency. This is an easy way out which will
impact Central Oregon's ability to remain competitive as a tourism
destination. As a result, I believe my business will suffer and the value of
my client's assets in Sunriver will decline. All of the local contractors,
vendors, restaurants, gas stations, convenient stores, and so on, that my
40,000 out of town guests per year financially support will suffer as well.
It is my understanding that you have been informed that the overall financial
impact of proposed revisions is in the neighborhood of $50,000.00, in terms
of the net dollars to the county. According my calculations, this information
incorrect. The net gain to the county from my company alone is
approximately $19,938.70 (I have enclosed a spreadsheet to show how I
arrived at this number). During the last calendar year, my company
represented approximately 8.2% of the total room tax collections in
Exhibit, 3)
Page of _
VACATION RENTALS, PROPERTY MANAGEMENT AND SALES • (541) 593-5018 • 800-541-1756 • FAX (541) 593-6864
Deschutes County. Assuming that the impact of this change on my business
is somewhat reflective of the norm for operators here in Deschutes County,
one can mathematically determine that the potential impact could be as large
as a $243,154.87 net gain to the county. The point being, this issue cannot
be trivialized in any way to say that it is "only" a small amount of money.
It is my understanding that the public hearing process is not designed for
questions and answers, therefore I will simply ask questions which I believe
should be considered by the commissioners in this process. Are you aware
that HB2267 is still in the process of revisions to clarify the language in a
number of areas? Are you aware of all of the impacts that HB2267 will have
on local governments such as Deshutes County? For example, are you
aware that per HB2267, 70% of new money collected must be earmarked to
go back to the industry and only 30% is to go to local government? In my
example of numbers above, that would mean that $170,208.40 would need
to go back organizations such as COVA or local chambers of commerce.
Are you prepared to administer the allocation of these funds with this
revision? Who would the recipients be and how have you drawn these
conclusions?
Under this new law, it is my opinion that any competent attorney is going to
have a field day if engaged by the industry to legally battle this proposed
revision to the transient room tax code. Deschutes County has
inconsistently, therefore unfairly been collecting room tax for 30 years. In
two separate meetings in the last year, which were attended by many of the
people in the industry, I have asked the question that if the county decided to
pursue a "Tax Everything" policy, would they be willing to contribute to a
fund to engage legal counsel and fight it. Both times when asked the
question, every single person in the room raised their hand.
This is not a direction that I want things to go and I am sure you do not wish
to be involved in a nasty public battle either. I believe that a very simple
solution is out there. Let us wait until the State of Oregon has made all of
their revisions to the new state transient taxing law, get back together to see
if the county and the industry can live with the final state law and adopt
policies which are consistent. There should be no sense of urgency on
anyone's part, due to the fact that the practices, which are going on here
locally, have been established for 30 years. In addition, it has been at least
14 to 16 months since this discovery of inconsistencies took place. In my
opinion it is not in anyone's best interest to create two different taxing
Exhibit 7i
Page � of �f
policies, one for the state and one for the county. The accounting nightmare,
which exists in the proposed change is enough to worry about without even
considering two distinctively different policies. We should not rush to adopt
the state taxing policies until they have finalized the law. It is also my
opinion that the last thing any of us want, is to engage in a very public battle
over an issue, which most likely has a clear answer in the not to distant
future through the state of Oregon.
Sincerely,
S ence
Owner — Sunset Realty
Exhibit 7)
Page 3 of _�
Sunset Realty - Financial impact of the proposed transient room tax change
2003 Room taxes submitted to Deschutes County $ 259,329.00
Additional taxes which would be required to be submitted under the proposed revisions:
Recreation Fee $ 20,746.00
Cleaning Fee $ 13,891.00
TOTAL $ 293,966.00
Operator's fee back to my company = 5% of $293,966.00 $ (14,698.30)
NEW TOTAL NET TO COUNTY $ 279,267.70
Original net amount of revenue to Deschutes County paid under current ordinance $ 259,329.00
New net total amount of revenue to Deshutes County under proposed changes $ 279,267.70
Net financial gain to Deschutes County on Sunset Realty under proposed changes $ 19,938.70
Exhibit
Page of Lf
EAGLE C RE S T
R_ E S O R_ T
February 18, 2004
TO: County Commissioners
FROM. Jeff Colburn, Eagle Crest Resort
RE: Proposed Revision of Room Tax Policy
I am writing you today to urge you to wait until the state tourism tax bill is finalized to
adopt a new county room tax revision.
The new state tax is in the review process currently with the revenue committee
interpreting the spirit and intent of the tax. From this process should come clear. and
concise details about what should and should not be taxed. It appears that this county
revision tried to mirror the state law to some extent, but until the state law is finally
interpreted, it does not make sense to more forward on the county level for the following
reasons:
Computer System: Having two different taxing systems is almost impossible to
accomplish in a computer system. Mirroring the county tax after the state tax would
make sense from an operational standpoint. Especially in the current reading of this
revision, no computer system in the world would be able to accomplish the task that you
are asking.
Packages: Under the current revision, you are taxing the room, on packages at the
current market value of what a room would be without the package. The hotel industry has
changed over the past few years and now "yield management" plays a big role in how we
price rooms. Prices of rooms can change from day to day or hour to hour depending on the
demand. Under the current writing, it would be if I went to Target and bought something
on sale, I would be taxed at the original price. This needs to be reviewed before moving
forward.
Eagle Crest
1522 Cline Falls Hwy.
Redmond, OR 97756
(541) 923-2453
Exhibit Z5
Page _� of 3
1
EAGLE C RE S T
K E S O R. T
Complimentary Rooms: They should not be taxed. What is the value of a complimentary
room in January? If there is not enough demand to fill that room, is the county out any
tax money for us giving a room away? When we give rooms away to charities, should we be
penalized for that? A government employee can stay tax-free in a room, but if we want to
give a room away we pay tax? This is a poorly thought out provision of the ordinance.
Sales Tax: Are we not bordering on sales tax when we try to tax everything associated
with a room? Resorts are a different business than a hotel and have additional cost. This
needs to be reviewed as well.
We started working on this process with Marty and Mark over a year ago. It is a complex
issue to resolve and there are no easy answers. Unfortunately, the state law was not well
written and many of its components, you have tried to incorporate in this revision. There
should be no rush now to put this in place until the state resolves the language and spirit
and intent of their new tax. Once that takes place then we should move forward on the
county level. This is a case where we need to step back and take our time and do the right
thing, which is wait for the state. The current revision is not a workable document for
lodging industry or the county. I urge your patience to wait and lets get it right the first
time.
Eagle Crest
1522 Cline Falls Hwy.
Redmond, OR 97756
(541) 923-2453
Exhibit E
Page 2— of ,3
Luxor Resort & Casino Reservations
Yage 1 of 3
-i.fl..Itwp�f_ istu:�4iIT-1 IPPli`
Mook lets you reserve a room in three simple
steps all on a single page.
1. Select your dates and room type
2. Fill out your personal information
3. Click the submit button
It's that simple and Luxor guarantees you the
lowest rate when booked online.
Select Preferred Dates and Room Type
Rates listed are based on double occupancy for deluxe rooms.
These internet only rates reflect a per night discount of $10 off call-in rates. Luxor.com rates only
available by booking online.
FEBRUARY 2004
S
M
T
W
T
F
S
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
$89
18
$79
19
$69
20
$149
21
$199
22
$109
23
$179
24
$139
25
$99
26
$69
27
$119
28
$139
29
$89
29
$79
30
$79
31
$79
APRIL 2004
S
M
T
W
T
F
S
1
$89
2
$159
3
$179
4
$79
5
$79
6
$79
7
$79
8
$79
9
$99
10
$99
11
$69
12
$79
13
$79
14
$79
1516
$89
$169
17
$189
18
$129
19
$129
20
$129
21
$129
22
$89
23
$139
24
$159
25
$89
26
$89
27
$89
28
$89
29
$89
30
$139
29
$189
L$1393
31
$69
Arrival Date 12004 February 18
Choose Number Of Nights
For Your Stay 01
Choose Number Of Adults
MiARCH 2004
S
M
T
W
T
F
S
1
$119
2
$119
3
$69
4
$69
5
$189
6
$269
7
$149
8
$89
9
$89
10
$89
11
$89
12
$169
13
$189
14
$89
15
$99
16
$109
17
$119
18
$169
19
$229
20
$249
21
$99
22
$99
23
$99
24
$89
25
$89
26
$149
27
$169
28
$79
29
$79
30
$79
31
$79
MAY 2004
S
M
T
W
T
F
S
1
$159
2
$89
3
$89
4
$89
5
$89
6
$89
7
$99
8
$99
9
$79
10
$89
11
$129
12
$129
13
$109
14
$129
15
$149
16
$119
17
$119
18
$119
19
$119
20
$99
21
$129
22
$149
23
$129
24
$129
25
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Drecon
T'e e y Theodore R. Kulongoski, Governor
February 9, 2004
Marty Wynne
Deschutes County Finance Department
1340 NW Wall St
Bend, OR 97701
Parks and Recreation Department
725 Summer Street NE, Suite C
Salem, OR 97301-1271
Regarding: Proposed Revisions to the County's Room Tax Ordinance
Dear Mr. Wynne:
(503) 986-0707
FAX (503) 986-0794
www.oregonstateparks.org
Thank you for the opportunity to review the proposed revisions to the County's Room
Tax Ordinance (Deschutes County Code Title 4.08). Our overnight parks in
Deschutes County are subject to this code, and I wanted to voice my concern over
the new section related to tax liability for space occupied for which there is no
payment (section 4.08.110 C).
By statute, we offer free camping in our state parks to a variety of groups. For
example, families with foster children stay for free and we also provide free camping
for veterans and active military personnel on leave on three special holidays. We
also provide free campsites for hosts and volunteers in our parks. We currently
calculate and pay lodging taxes based on the total overnight revenues for each park.
I believe that as stewards of public funds we cannot support paying the county taxes
we do not collect from these individuals.
I am asking that you remove this proposed new subsection of your code. Please
contact me if you wish to discuss this issue in detail.
Sincerely,
Michael Carrier, Director
Cc: Jana Tindall, Assistant Director, Administration
Tim Wood, Assistant Director, Operations
Elizabeth Harchenko, Director, Oregon Dept. of Revenue
OREGON
STATE
PARKS
73410-0806
Exhibit r— 115
Page ! of
RESORT
PO Office Box 3609 Sunriver, Oregon 97707
Telephone 541-593-1000 Reservations 800-547-3922 www.sumriver-resort.com
February 18, 2004
Deschutes County Board of Commissioners
1130 N.W. Harriman
Bend, OR 97701
Re: Draft Transient Room Tax Ordinance
Dear Commissioners:
On behalf of Sunriver Resort, this letter outlines a variety of issues and concerns
that relate to the proposed revisions to the Deschutes County transient room tax. While we have
been engaged in an extensive process for over a year with the County Treasurer, your legal
counsel, and representatives of the County's hospitality industry, the draft ordinance does not
resolve the myriad issues related to its application, collection and the mechanics for auditing the
tax receipts.
Your intent to simplify the process by proposing to incorporate language from the
state's new 1% transient room tax imposed by House Bill 2267 may have been laudable,
however, as discussed below, numerous complications and inconsistencies in the new state law
are causing the Department of Revenue to revise its temporary rules and prompting the prospect
of new legislation to address the problems of House Bill 2267. The proposed new legislation is
intended to correct basic application and interpretation problems in House Bill 2267. In addition,
the differences between the new state law and the proposed Deschutes County ordinance will
cause significant complications if we are required to implement the tax provisions as proposed in
your current draft.
In an effort to provide a complete review of the County's draft ordinance, we
consulted with Mr. Scott West of the Oregon Lodging Association. We have attached a copy of
his letter in which he identifies the issues that exist with House Bill 2267 and concerns we have
about the proposed Deschutes County ordinance. Please make his letter a part of the record for
the hearing. We have also had extensive discussions with Mr. Don Jones at the Department of
Revenue ("Department") and Mr. Todd Davidson at the Oregon Tourism Commission. It is clear
to us from those conversations that the existing temporary rules on which you are basing this
Exhibit_ G
Page 1 of 5
Deschutes County Board of Commissioners
2/18/2004
Page 2
draft ordinance have created significant confusion in the industry, the Department, and with the
Oregon Tourism Commission, the ultimate beneficiary of HB 2267. As detailed below, changes
in the existing temporary rules of the Department are expected in 2004.
The following summary of issues should be resolved prior to the adoption of a
new ordinance:
• Clarification needs to be made on the amount of tax to be charged on
package plans (e.g., ski package, golf package, romance package) where a
single rate is charged for a combination or bundled package. In our view,
only the lodging component should be taxed and the other components of
the package should not be taxed by a transient room tax. On the basis of
current information, this approach may be consistent with the Department
of Revenue's permanent rules that are under consideration and will be
adopted this first quarter of 2004.
• The ordinance needs to include a provision to ensure that the lodging
component of packages is taxed at the actual (oftentimes discounted) rate.
• Since the permanent rule-making process for the Department of Revenue
is scheduled for March 2004, the county should ensure that its ordinance is
consistent with the state regulations (which may differ from the temporary
rules now in effect). In any event, at this juncture, a county ordinance
cannot be implemented prior to those rules.
• The county provisions need to have real-world application and
implementation. We should work toward an ordinance so that its
provisions can be applied consistently across the board and not require
wholesale changes to the recordkeeping process. However, merely
adopting what is now viewed as a flawed state process is not a viable
option.
• The term "regular rate" is used in the ordinance without definition. Given
the room rate management sophistication of the lodging industry which is
modeled after the airlines industry's yield management philosophy, the
County's proposed language makes the process of calculating "regular
rates" a very difficult manual process, both for the operator and the
County's audit staff. This is a critical issue at the crux of your draft
ordinance in its definition of rent, its calculation of taxes dues and its
application to complimentary rooms. Further, the taxing of a room that
has no revenue is inappropriate.
In Summary, we request that the Board of Commissioners address these issues,
along with other issues that arise in the public meeting today, by working with the Oregon
Exhibit
Page of S
Deschutes County Board of Commissioners
2/18/2004
Page 3
Lodging Association and representatives of the lodging industry in Central Oregon.
Additionally, we request that the Board defer any action until the permanent rules implementing
HB 2267 are adopted later this year. I apologize that I am unable to attend your hearing on
February 18th. I must be in Salem for an Oregon Tourism Commission meeting and Sunriver
Resort owner's meeting that has been scheduled for over a year in advance. The concerns we
have about this proposal are significant and have direct consequences to our management
practices and client relationships. In part, the concerns relate to the provisions you have added
recently in response to House Bill 2267. Other issues relate to its application, management and
auditing mechanics. In addition, given that any new county tax needs to have a significant lead
time for its implementation, we should collaboratively work to develop an ordinance that will
function under the system that will be adopted by the State Department of Revenue (by
permanent rule) and by any revised legislation.
Sincerely,
Th / � �-
omas Luersen
Managing Director
Sunriver Resort
Enclosure
Exhibit �5
Page 3 of S
02/17/04 17:53 FAX 541 593 4286SUNRIVER ADMIN
February 17, 2004
Deschutes County Commission
1340 NW Wall Street
Bend, OR 97701
Dear Deschutes County Comrnissioners:
Ia OO2/003
P.01,-02
oregonlodgingassociation
During the last legislative session, a broad coalition of divergent industry
types came together to support the passage of HB 2267; the Tourism
Investment Proposal. The intent of the bill was to provide a consistent
revenUe source for the Oregon Tourism Commission to stimulate
Oregon's tourism economy. This was -achieved by the implementation of
a 1% statewide lodging tax. In addition, the bill created a consistent
distribution frarnework for existing and future local tax revenues in the
local jurisdictions.
After passage of the bill, the industry went to work with the Department
of Revenue (DOR) to create administrative rules under which the tax
would actually be collected. Temporary administrative rules were created
to ensure that the tax collection could begin on ,January 1, 2004 as
directed by statute. These temporary rules will be in place until the
public, permanent rulemaking process can occur. Currently, the public
process is scheduled to begin in March. Unfortunately, the temporary
administrative rules did not reflect the entire legislative intent of the bill.
In particular, the intent of HB 2267 was to cover all aspects of lodging,
including vacation rentals. We strongly believe the inclusive nature of the
definitions and the legislative advocacy and intent Included vacation
rentals as a taxable lodging segment. This view was shared by the
Governor's office, We believe this difference of interpretation has caused
some confusion. it is our position that the vacation rental industry was
expecting the advent of the tax even though the Department of Revenue
determined through emergency rule that they were exempt. We
understand that this may be causing some confusion in the marketplace
as operators are having trouble understanding the interpretation and
consumers are perplexed by the inconsistency of the application. We
intend to pursue the inclusion of vacation rentals through the permanent
rulemaking process.
Another issue that has arisen as a result of the temporary rules is the
Deschutes County interpretation surrounding resort fees. it has come to
8565 SW Solish Lone, Suile 130 M
Wilsonville, Oregon 97070 ■
ph_ 503.682.4422 ■
E. 503.682.4437 ■
www.oregonlodging.com a
Exhibit
Page 14 of S
02/17/04 17:53 FAX 541 593 4286 _. SUNRIVER ADMIN
our attention that these fees are being considered for taxation by the
county as a result of a reading of the temporary rules, Once again, it is
our clear understanding that the legislation enacting the state lodging tax
dealt exclusively with taxing the cost of lodging; period, The intent was
that only the lodging portion of any bill to the consumer was to be taxed.
Therefore, resort fees would not be considered a taxable transaction
according to the intent of the bill. Once again, we intend to try and
remedy this through the permanent rule making process,
In addition, the DOR originally determined that the full value of packages
offered with a lodging component was to be taxed at the full package
value. Subsequent discussions with the DOR resulted in them agreeing
that the intent was only to tax the value of the lodging component within
that package, Therefore, according to DOR the permanent rules will
reflect this change. Also, it appears that Deschutes County is planning to
tax the lodging component of packages at their stand alone rate, not the
actual (and oftentimes discounted rate) transacted lodging value. This is
in direct conflict with the DOR position and the legislative intent.
We also understand that the Deschutes County proposal includes the
taxation of complimentary roams. This proposal Is outside the realm of
rational consideration and should be dismissed immediately as poor
Public policy.
Lastly, we would like to address a procedural matter regarding the
proposed change in the Deschutes County room tax ordinance. We
Understand that the county has interpreted the proposed changes as
merely administrative, not substantive, This interpretation would allow
the changes to occur without a vote of the electorate. After an initial
review by our legal counsel, we believe the proposed changes to the
ordinance do create an effective Increase in the lodging tax. This
increase would therefore trigger a public vote on the matter.
Thank you for your consideration on this matter. If you have any
questions, please let us know.
Sincerely,
$-r-� bVswk
Scott West
Executive Director
2003/003
P. 02/02
TOTAL P.02Exhibit
Page S of S-
k� black butte raneh@
Post Office Box 8000
Black Butte Ranch, Oregon 97759
Phone: (541) 595-6211
Fax: (541) 595-1299
www.blackbutteranch.com
February 18, 2004
Honorable Mike Daly
Honorable Dennis Luke
Honorable Tom DeWolf
Deschutes County Commissioners
1340 NW Wall St.
Bend, OR 97701
RE: Deschutes County Code Title 4.08
Dear Commissioners:
The recently proposed revisions to Deschutes County Room Tax Ordinance have
raised serious concerns for the rental accommodations of Black Butte Ranch
Corporation, which I represent. Because other tourism representatives here today
also have presentations to make, I will keep my comments brief.
First, the definition of 'Rent" has been altered dramatically from the definition to
which the lodging industry and the general public are accustomed. The normal
definition is for the amount paid to stay in the lodging unit itself, whether it is a hotel
room, a condominium unit or a vacation home. The revisions recommended by your
staff are not acceptable and must not be approved.
Second, to include other fees and services, especially package plan elements such as
restaurant meals, rounds of golf, ski lift tickets, rafting trips, etc., as taxable lodging
components, appears to be a thinly veiled attempt to create a sales tax focused on the
tourism industry. In the case of Black Butte Ranch, it may even be questionable for
Deschutes County to tax lift tickets for Hoodoo, a Jefferson County business.
Third, expanding the definition in such a broad manner for vacation unit rentals as to
include housekeeping fees, resort fees or, in the case of Black Butte Ranch, access
registration fees, makes it appear that, at worst, the county is exceeding its authority
as a taxing entity or, at best, the tax is excessive and inappropriate.
Fourth, expanding the definition of the tax ordinance to include so many elements
other than lodging costs could make the tax objectionable to our customers, who have
other vacation alternatives from which to choose. They might take their business
elsewhere and, by so doing, reduce our business and your future tax collections.
Exhibit
Page of
Deschutes County Commissioners
February 18, 2004
Page 2
I believe that you, as commissioners, understand the value of tourism to Central
Oregon. For you to approve an ordinance that is poorly crafted and may harm our
industry would seem to be unwise.
I support the position of the Oregon Lodging Association, described here today, that
you delay any decision to revise the Deschutes County Room Tax Ordinance, until the
State of Oregon corrects inaccuracies in their own tax ordinance. At that time, it
would likely be appropriate for the county to follow the pattern of the state ordinance.
Until then, I respectfully request that you do not approve the revisions to the county
room tax ordinance, as presented to you.
Exhibit_
Page of �)--