SUPPORTS ITEM NO. 1
CS&B COMMITTEE AGENDA
OCTOBER 26, 1995
ADMINISTRATIVE REPORT
Date: September 25, 1995
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 1995 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 1996,
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 1996 Business Plan.
B. THAT Council approve Tourism Vancouver's amended 1995
Business Plan, which increases the portion funded by the 2%
hotel tax by $850,000 to a total of $6,151,936 for the 1995
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 and 1995 Business Plans.
PURPOSE
This report seeks approval for early release of the first three months
of the 1996 Hotel Tax proceeds, in accordance with prior years policy.
In addition, it seeks approval to increase the current 1995 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
1995 Hotel Tax proceeds, sufficient to fund the requested increase.
INTERIM RELEASE OF FUNDS FOR 1996
In accordance with Council policy, Tourism Vancouver will be
submitting its 1996 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 1996 Business Plan prior to March.
In order to properly plan and launch the Tourism programs and projects
planned for 1996, 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 1996 operations until
its 1996 Business Plan has been approved by Council. The Director of
Finance believes the appropriate advance is to forward the first three
months of 2% Hotel Tax proceeds applicable to 1996 as and when
received from the Province. This would be approximately $320,000 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
Business Plan. Normally, this request would not have been put to
Council until November, but in the interest of efficiency, it is being
submitted together with the Tourism Vancouver request for additional
funding for 1995.
INCREASE IN 1995 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 1995 business plan. The following Table attached as
Appendix I, indicates that a surplus of at least $1,100,000 is
expected for 1995. 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. 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. There is no
question that increased activity has strained their resources.
Tourism Vancouver is requesting an increase of $850,000 to their 1995
business plan which would be funded out of the projected increase in
1995 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 is well in excess of the requested increase in the 1995
budget, and that the extra activity has depleted Tourism Vancouver's
resources, it is rational to increase this year's budget in order to
preserve programs and maintain services.
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.
Therefore, the Director of Finance recommends that the 2% Hotel Tax
revenues applicable to the first three months of the 1996 business
year be released to Tourism Vancouver in order to accommodate their
up-front commitments for the 1996 business year.
Further, increased activity has both provided more room tax and
depleted Tourism Vancouver's resources. It is sensible to use this
surplus to maintain programs and service levels in the current year.
Therefore, the General Manager of Corporate Services recommends that
Council approve and additional $850,000 of Hotel Tax funding for the
current year.
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