SUPPORTS ITEM NO. 1
CS&B COMMITTEE AGENDA
NOVEMBER 7, 1996
ADMINISTRATIVE REPORT
Date: October 9, 1996
TO: Standing Committee on City Services and Budgets
FROM: General Manager of Corporate Services
SUBJECT: Tourism Vancouver - Interim Payments of 2% Hotel Tax
and Amendment of 1996 Work Plan and Budget
RECOMMENDATION
A. THAT the Director of Finance be authorized to remit the
first three months of the 2% Hotel Tax revenues for 1997,
the amounts of each remittance not to exceed actual receipts
from the Province of the 2% tax, in advance of Council's
consideration of the Association's 1997 Business Plan.
B. THAT Council approve Tourism Vancouver's amended 1996
Business Plan, which increases the portion funded by the 2%
hotel tax by $900,000 to a total of $7,709,629 for the 1996
tax year.
COUNCIL POLICY
City Council must approve the business plan of Tourism Vancouver,
which details the allocation of the 2% Hotel Tax.
Council has authorized release of funds prior to approval of the 1992,
1993, 1994, 1995 and 1996 Business Plans, and approved adjustments to
the 1996 Business Plan to recognize unexpected Hotel Tax revenue
increases.
PURPOSE
This report seeks approval for early release of the first three months
of the 1997 Hotel Tax proceeds, in accordance with prior years'
policy. In addition, it seeks approval to increase the current 1996
Hotel Tax funding to compensate for increased workloads and resource
consumption due to significantly higher activity this year. This
higher level of activity has also generated a significant projected
surplus in the 1996 Hotel Tax proceeds, sufficient to fund the
requested increase.
INTERIM RELEASE OF FUNDS FOR 1997
In accordance with Council policy, Tourism Vancouver will be
submitting its 1997 Business Plan for Council's consideration and
approval in the new year. Prior years' experience has shown that it
will not be possible to prepare the 1997 Business Plan before March.
In order to properly plan and launch the Tourism programs and projects
planned for 1997, various up-front commitments are necessary, which
must be funded in the latter part of the current year. Tourism
Vancouver has therefore requested an advance on 1997 operations until
its 1997 Business Plan has been approved by Council.
The General Manager, Corporate Services believes an appropriate
advance would be to forward the first three months of 2% Hotel Tax
proceeds applicable to 1997 as and when received from the Province.
This would be approximately $350,000 per month. Council has recognized
this problem in the past, and has authorized the interim release of
funds in prior years. Release of these funds does not represent
pre-approval of Tourism Vancouver's 1997 Business Plan.
INCREASE IN 1996 HOTEL TAX BUDGET
In addition to the early release of funds for the next business year,
Tourism Vancouver is requesting an increase in the Hotel Tax component
of their current 1996 business plan. The following Table, attached as
Appendix I, indicates that a surplus of at least $900,000 is expected
for 1996. This estimate is conservative, as it is based on the prior
year's activity levels. The current year is well ahead of last year
due to more hotel rooms, and a robust industry. Occupancy for August
and September is good, so it is likely that Hotel Tax receipts for
these two months will be well in excess of the prior year and should
easily exceed the estimates. This surplus is directly related to the
level of activity in the Tourism sector, which directly impacts
Tourism Vancouver's operations.
Tourism Vancouver has experienced a significant increase in demand for
their services which has depleted their resources and is jeopardising
their ability to continue their programs. Key areas of need are
additional visitor publications, staff time to service enquiries, and
maintenance and continuity of promotional programs. In order to
accommodate additional demand for services, Tourism Vancouver is
requesting an increase of $900,000 to their 1996 business plan which
would be funded out of the projected increase in 1996 Hotel Tax
proceeds. Tourism Vancouver's submission and detailed
breakdown of the revised budget and expenditure areas is attached as
Appendix II. Given that the conservative estimate of additional
revenues covers the requested increase in the 1996 budget, and that
the extra activity has depleted Tourism Vancouver's resources, it is
prudent to increase this year's budget in order to preserve programs
and maintain services. This request is consistent with the 1995
request for additional release of funds, which Council approved.
CONCLUSION
For a variety of legitimate reasons, Tourism Vancouver cannot produce
a Business Plan earlier than March. Since the prior year's
instalments of the 2% Hotel Tax end in November, there is up to a four
month lag between the last instalment and approval of the next year's
Business Plan. In the past, Council has recognized the problems
created by this lag and has authorized interim releases of the next
year's Hotel Tax receipts to bridge this gap.
The General Manager, Corporate Services recommends that the 2% Hotel
Tax revenues applicable to the first three months of the 1997 business
year again be released to Tourism Vancouver in order to accommodate
their up-front commitments for the 1997 business year.
Further, increased activity has both provided more room tax and
depleted Tourism Vancouver's resources. It is prudent to use this
surplus to maintain programs and service levels in the current year.
Council supported this approach in 1995, and therefore, the General
Manager of Corporate Services recommends that Council approve an
additional $900,000 of Hotel Tax funding for the current year.
* * * * *