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City Council Combined Special Meeting/Work Session

Meeting Date:

04/23/2024

Co-Submitter:

Rebecca Sayers

From:

Heidi Hansen, Economic Vitality Director

TITLE

Bed, Board, and Booze (BBB) Tax Renewal & Related Code Change Discussion

STAFF RECOMMENDED ACTION:

Inform the Council and public about the upcoming BBB Tax Renewal ballot measure, share the components of the informational outreach, as well as discuss recommended code changes related to the role of Commissions and Economic Development programs.

Executive Summary:

The Bed, Board, and Booze (BBB) is a 2% local transaction privilege tax (sales tax) on the gross revenues of every hotel/motel, campground, short-term rental, restaurant, and bar in the city. The BBB tax is in addition to the 2.281% local sales tax on all taxable business activities. Local sales taxes are set forth in Division 3-05-004 Privilege Taxes of the Flagstaff City Code.

The BBB tax was originally approved by voters in 1988 with a ten year sunset clause. In 1996, voters extended the tax for 15 years with a sunset in 2013. In 2010, it was passed for a third renewal for an additional 15-year period to sunset in 2028. Per the Flagstaff City Charter, Article VI, Section 2, the City Council has the power to levy a sales tax subject to approval of the voters in Flagstaff. There is no legal requirement as to sunset clauses or how long a sales tax may remain in effect.

Currently, the BBB tax generates revenues over $12 million dollars annually. The BBB tax provides a dependable source of revenue for parks and recreation, beautification, economic development, tourism and visitor services, and arts and sciences. BBB tax revenues are distributed per the Flagstaff City Code, Section 3-06-001-0002 Distribution of Hospitality Industry Tax Revenues. City staff is not proposing any changes to the categories of use or distribution percentages.

The Tourism Commission, Beautification and Public Art Commission, Parks and Recreation Commission, and the City's Economic Vitality Division all have a role in managing use of the funds along with the City Council. City staff is recommending relatively minor City Code changes related to their duties and that the Open Spaces Commission be included in managing use of funds.

City Council directed at both the January 2023 and February 2024 council retreats to place a BBB tax renewal on the November 2024 election ballot for voter consideration.

The timeline for the BBB tax renewal and recommended ordinance/code changes are as follows:
April 2024: Work session to go over BBB tax renewal information campaign and recommended ordinance/code changes.
May 2024: Ordinance 1st Read BBB Code Updates
June 2024: Ordinance 2nd Read BBB Code Updates
June 2024: City Council Calls the Election
November 2024: BBB tax renewal on the Ballot

Information:

Attached to the staff summary is a presentation that staff will share at the April 23, 2024 council work session. Included is a copy of the BBB ordinance as it is today to help guide City Council with the recommended code change discussion.

Attachments

BBB Tax Renewal and Code Change Recommendations

BPAC Authority

Parks and Recreation Commission Authority

Tourism Commission Authority