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Home My WebLink AboutCOUNCIL - AGENDA ITEM - 01/24/2006 - UPDATE FROM THE FORT COLLINS CONVENTION AND VISITO DATE: January 24, 2006 WORK SESSION ITEM STAFF: Kelly DiMartino FORT COLLINS CITY COUNCIL SUBJECT FOR DISCUSSION Update from the Fort Collins Convention and Visitors Bureau. GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED For the past 20 years, the City has contracted with the Fort Collins Convention and Visitors Bureau (FCCVB) to provide various convention and visitor services. The FCCVB is now in the process of developing a strategic plan for the next several years. For the past two months the FCCVB has been conducting community focus groups and stakeholder meetings to gather input. The purpose of this Work Session is to review the impact of the efforts by the FCCVB to date and seek input from Council on the following questions: 1. Is the FCCVB headed in the right direction with its strategic plan? 2. Does City Council agree with the priorities identified by the FCCVB? BACKGROUND The City of Fort Collins adopted a lodging tax on March 31, 1984. The tax was to be used by the city for the purpose of acquiring facilities and promoting tourism, conventions and other activities which utilize public accommodations within the city and for the purpose of studying and reducing the impact of such activities upon the facilities and infrastructure of the city. City Code Section 24-24 (b) Use of the Lodging Tax states that 25% of the revenue received by the City from lodging tax shall be utilized for cultural development and programming activities and 75% of the revenue received by the City from lodging tax shall be utilized for the promotion of convention and visitors activities. hi 1996, Resolution 1995-177, set the amount of the annual service agreement for 1996 through 2000, at $250,000 with increases allowed for inflation, and the FCCVB was directed away from the promotion of convention and conference marketing toward general tourism. The City Manager directed the balance of the 75% of the lodging tax, minus the $250,000 for the contract to be split 25% for cultural development programming directly related to tourism special events. The remainder went to fund the joint City/CSU/State of Colorado Welcome Center project. In 2001, after a request for proposal process for the period 2001 through 2005, the FCCVB was again given the direction to resume proactively promoting conventions. The City Manager authorized the contract amount to increase to $400,000 per year. Because of the reduction of lodging tax after September 11, 2001, the contract amount has remained below $400,000 until 2005. However, the formula used to determine the distribution of 75% of the lodging tax has January 24, 2006 Page 2 remained in place. The project amount available for contracting from the 2005 lodging tax collections is attached. Within its contractual services, the FCCVB has developed a sales and marketing program for the City that produces approximately $17.5 million in group, meeting and convention sales. The FCCVB also services over 100 groups annually that meet in Fort Collins, including such large organizations as Campus Crusade for Christ. The FCCVB also provides information services for visitors and local citizens receiving over one million requests per year. 100,000 Fort Collins Visitor Guides are produced annually, and the FCCVB responds to over 15,000 individual requests through advertising and promotion. Currently, the FCCVB has 180 member business that participate in collective advertising, marketing and sales programs. A study, "Tourism in the Local Economy", was completed in 2005. The results show a significant contribution to the local economy from the hospitality sector. It also suggests that there is room for significant improvement in this sector of the economy. The FCCVB contract is set to expire on March 31, 2006. The city will be issuing an RFP for Convention and Visitors' services within the next 4 weeks. ATTACHMENTS 1. Lodging tax amounts for 2006 2. "Tourism in the Local Economy" Study by Dr. Harvey Cutler 3. Copy of slides from the recorded presentation ATTACHMENT t 01/18/06 LODGING TAX ALLOCATION $668,499.18 2006 Actual Distribution (= Actual 2005 revenue) CVB = 305,559 + Denver/Boulder CPI 1.7% Estimated TOTAL $310,754.00 CDP = Tax ' 25% 167,124.80 CDP visitor events = 25% of remainder 47,655.10 CAPITAL = Remainder after CVB and CDP $142,965.29 CVB + Capital 453,719.29 less budget CVB 401,000.00 Balance 52,719.29 CPI = Consumer Price Index CDP = Cultural Development and Programming G:\MEETING\WS 2006\0124\Lodging Tax Collections 2005.attachment Attachment 2 Tourism in the Fort Collins Economy Harvey Cutler Department of Economics Colorado State University Fort Collins, Colorado 80523 (970) 491-5704 (voice) (970) 491-2925 (fax) email: Harvey.cutler@colostate.edu Perry Burnett Colorado State University Ray Thresher Colorado State University Center for Research on the Colorado Economy October 20, 2005 1 Executive Summary The purpose of this document is to provide an analysis of the tourism industry in the City of Fort Collins. Tourism can be divided into conventions, business travelers, leisure travelers and households that reside outside of Fort Collins but shop within the city. This study presents two perspectives on this industry that highlights the role of tourism in the local economy. The first is the current level of tourism emanating from the above sources in terms of contributing to economic activity and tax revenue for our city. The second perspective emphasizes the role of the Fort Collins Convention and Visitors Bureau(FCCVB) in terms of attracting new conventions and other events to the city. Total tourism is responsible for 2.2% of economic activity in Fort Collins and 16.6% of tax revenue collected by the city. Tourism expenditures are made in lodging, restaurants and retail, which all charge a sales tax and thus contribute significantly to city tax revenue. The FCCVB is responsible for attracting religious conventions, agricultural events, youth sport events and association meetings. The table below presents the economic impact for each of the four events in terms of the tax revenue earned and also the increase in household income for local residents. The last row sums the two values and represents a measure of the economic gain. As an example, a single youth sport event contributes $0.309 million in tax revenue and $1.78 million in household income for Fort Collins residents. The youth sports event has the largest economic impact of$2.1 million while the association convention has the smallest total impact of $96,000. These conventions/events also contribute to increases in tax revenue at a faster rate than the growth in the number of new households migrating into the city. This results in the city having the opportunity to increase the quality of city service such as police and fire. There are a multiple number of these conventions and sporting events each year in Fort Collins and the total economic impact for all events is $17.5 million. Our analysis reveals that the FCCVB generates significant tax revenue for the city as well as contributing to income for all levels of households. An important outcome of expanding tourism in Fort Collins is housing becomes more affordable for lower income earning groups and reduces income inequality in the city. Religion Agricultural Youth Association Convention Convention Sorts Convention Tax Revenue mil of$ 0.284 0.076 0.309 0.015 Household Income 1.71 0.45 1.78 0.081 mil of$ Total Economic Gain 1.99 0.526 2..1 0.096 mil of$ 2 I. Introduction The purpose of this document is to provide an analysis of the tourism industry in the City of Fort Collins. Tourism can be divided into several different categories. The city hosts a variety of conventions that brings in people from all over the country and the associated expenditures helps stimulate the economy. A second component is business travelers that visit our city in order to conduct business with local commercial entities. The third component is the leisure traveler that visits our city for recreational interests. A fourth factor is households that live outside of Fort Collins but do some shopping in our city. This study presents two perspectives on this industry that highlight the role of tourism in the local economy. The first is the current level of tourism emanating from the above sources in terms of contributing to economic activity and tax revenue for our city. The second perspective emphasizes the role of the Fort Collins Convention and Visitors Bureau (FCCVB) in terms of attracting new conventions and other events to the city. The FCCVB plays an important role in helping maintain economic growth for the city as well as contributing substantially to growth in city tax revenue. The method we use to address these issues is a computable general equilibrium (CGE) model for the City of Fort Collins. A description of the model is in appendix A. This model has been used by the city to evaluate use tax rebates, the impact of sales tax rate increases, past tourism issues and the choice of whether to zone undeveloped land for retail or manufacturing uses. In addition, this model has been used to produce four Ph.D. graduates at Colorado State University, eight current students in process of completing their dissertations and six peer reviewed journal articles. The remainder of the report is divided into several sections. Section II presents the impact of the current level of tourism on economic activity and tax revenue in the Fort Collins economy. Section III examines the four primary types of tourism that can be attracted by the FCCVB and the associated economic impacts. Section IV is the conclusion. II. The Economic Impact of Tourism It is important to define the sectors that make up the tourism sector in the Fort Collins economy. It is assumed that all economic activity and tax revenue generated by the lodging sector is a direct result of tourism. This includes the full service hotels, the limited service hotels and the motels in the city. The other two primary sectors that also reflect the level of tourism is the retail and restaurant sectors. Most studies on tourism conclude that expenditures are made on lodging, retail and restaurants. Our analysis follows this logic. 3 Tourism is an interesting sector in Fort Collins given that it is small in terms of employment and output but it contributes a significant component to total tax revenue for the city. The number of workers in the lodging sector combined with approximately 35% of employment in retail and restaurant accounts for 4,538 workers of the 64,284 total workers in the economy.' The tourism sector employs 7% of the workforce in our economy and accounts for 2.2% of total production in the economy. An important characteristic of the tourism sector is that it is tax intensive since lodging, retail and restaurants all charge a sales tax. Our estimates indicate that the tourism sectors accounts for 16.6% of total tax revenue for the City of Fort Collins. III. Direct Contributions of the Fort Collins Convention and Visitors Bureau The FCCVB expends resources to attract a variety of different events that draws individuals, families, conventioneers and athletes to Fort Collins. There are four particular events that Fort Collins specializes in. They are religious conventions, specialty agricultural and animal events, youth sports and association functions.' Data was collected by the FCCVB on the expenditure patterns for lodging, retail and restaurants by all four events. The data was initially collected for expenditures per participant for each of the four functions.' The expenditures were scaled by the number of participants for each function. The expenditure patterns appear in Table 1. The youth sports events result in the most expenditures and the religion convention is second. ' It has been estimated that approximately 35 %of the workers in retail and restaurants accommodate the tourism sector in the Fort Collins economy. This has been determined by some informal surveying by the Finance Department in 1998. 'The appendix contains a more complete description of the four events as well as specific expenditure patterns per participant. The expenditures collected per participant were reasonable given my experience in tourism analysis. 4 Table 1 Initial Expenditures by Each Conference 1. Religion Conventions Sector Expenditures mil of$ Lodging 1.27 Restaurants 1.17 Retail 0.903 Total 3.34 2. Specialty Agricultural/Animal Events Sector Expenditures mil of$ Lodging 0.392 Restaurants 0.297 Retail 0.213 Total 0.902 3. Youth Sports Sector Expenditures mil of$ Lodging 1.04 Restaurants 1.42 Retail 0.996 Total 3.46 4. Association Sector Expenditures mil of$ Lodging 0.091 Restaurants 0.061 Retail 0.038 Total 0.19 5 IV. Simulation Results This section presents the economic impact of the expenditure amounts from the four types of functions that were presented in Table 1. We consider the economic impact from two perspectives. First, we examine each single event with an emphasis on the effects on employment, general economic activity, household income and tax revenue. The next exercise emphasizes that there are multiple events for each category in a given year, so we also provide the economic impact of all events in the city. As an example, the city averages 2.7 religious conventions annually, with Jehovah's Witnesses occurring annually, and Campus Crusade for Christ occurring every other year. Due to the extended length of the Campus Crusade event, it is factored as an average of 1.5 events. In addition, the city averages 3 agricultural events, 2.5 youth events and 3 association events annually. Convention bookings are based on the last year's bookings of the FCCVB. Table 2 presents the economic impact of the four single events. The youth convention has the largest impact in terms of employment, general economic activity and tax revenue. This is due to the large number of participants in this event. Tax revenue per new household is $8,584. Given that tax revenue per household in the base data is $2,178, all four cases result in larger tax revenue per household, which could increase the quality of city services for all residents. The model predicts that 36 new households will locate in Fort Collins due to the youth convention and given that there are 40,119 households in the city, the addition of the new households is relatively small. The religion convention has the second largest impact of the four events. Table 3 presents the results regarding the change in household income for the Fort Collins residents. Table Al in the appendix provides a description of the six household groups. The religion convention causes household income to increase by$1.71 million or a 0.10% increase. An interesting aspect of all four scenarios is that income increases by a greater percentage amount for the lower income earning households (HH1- HH3) since most workers in the tourism industry are low wage earners. The increased demand for low wage workers as the tourism sector expands drives up wages for this labor group. As an example, in the religion convention case, real household income increases by 0.34% for HH1, 0.19% for HH2 and only 0.08% for HH6. An important outcome of expanding tourism in Fort Collins is housing becomes more affordable for lower income earning groups and reduces income inequality in the city. Table 4 presents summary results for all four cases. This table sums the increase in household income and total tax revenue, which is the direct gain to the city and its residents. Consistent with previous arguments, the youth event results in a$2.1 million increase for the city and its residents, the religion convention results in a$1.99 million increase, the agricultural event results in a $0.526 million increase and the association convention causes a $0.096 million increase. The total impact of all four events is $4.72 million. 6 Table 2 The Economic Impact of One Religious, Agricultural,Youth Sports, and Association Event in the Fort Collins Economy Religion Agricultural Youth Sports Association Convention Convention Event Convention 86 87 5 Employment (0.13%) 23 (0.14%) (0.001%) 0.04% GCP 1.48 0.37 1.52 0.08 mil of$ 0.06% 0.02% 0.07% 0.001% Sales Taxes 0.145 0.037 0.156 0.007 mil of$ 0.38% 0.10% 0.41% 0.02% Use Taxes 0.016 0.004 0.015 0.001 mil of$ 0.20% 0.05% 0.20% 0.01% Property Taxes 0.087 0.026 0.1 0.005 mil of$ 1.I% 0.32% 1.2% 0.03% Total Taxes 0.284 0.076 0.309 0.015 mil of$ 0.33% 0.09% 0.35% 0.02% New Households 36 10 36 5 Tax Revenue Per New $7,979 $7,940 $8,584 $7,638 Household 7 Table 3 (Continuation of Results) Impact on Real Household Income Values are in Mil of$ Religion Agricultural Youth Convention Association Convention Convention Convention Amoun Percentag Amoun Percentag Amoun Percentag Amoun Percentag t e t e t e t e Change Change Change Change HHl 0.064 0.34% 0.017 0.09% 0.07 0.36% 0.037 0.20% HH2 O.196 0.19% 0.052 0.05% 0.21 0.20% 0.004 0.00% HH3 0.426 0.16% 0.113 0.04% 0.44 0.16% 0.000 0.00% HH4 0.104 0.08% 0.028 0.02% 0.11 0.09% 0.011 0.01% HH5 0.330 0.09% 0.087 0.03% 0.34 0.10% 0.024 0.01% HH6 0.592 0.08% 0.154 0.02% 1 0.62 0.08% 0.006 1 0.00% aTota1 1 1 1.71 0.10% 0.450 0.03% 1.78 0.11% 0.081 0.005% 8 Table 4 Final Results Religion Agricultural Youth Sports Association Convention Convention Convention Tax Revenue mil of$ 0.284 0.076 0.309 0.015 Household Income 1.71 0.45 1.78 0.081 mil of$ Total Economic Gain 1.99 0.526 2..1 0.096 mil of$ Notes: 1. These values are obtained by summing the increase in tax revenue and real household income. 2. The total economic gain for all four simulations is $4.72 million. 9 As stated above, the City hosts multiple conventions and events in a given year. The FCCVB has calculated that on average the City hosts 1.5 religious conventions, 3 agricultural events, 2.5 youth events and 3 association events annually. Tables 5, 6 and 7 provide the economic impact of the multiple events in all four categories. When considering the total impact of all conventions/events per group, the religion conventions contributes slightly more than the youth sports events in terms of economic growth, household income and tax revenue. However, the differences in tax revenue per new household across the four cases have diminished significantly. Tax revenue per new household for youth sports, religious conventions, agricultural events and association events are $4,623, $4,362, $4,306 and $4,031. The compression of these results is due to the nonlinearities of the model. Table 8 indicates that the total economic gain to the city and residents for all events is $17.5 million. IV. Conclusion Our analysis concludes that the tax intensive nature of tourism sector provides an efficient method for the city to collect tax revenue. Conventioneers and tourists come to the city and their expenditures on lodging, retail and restaurants results in significant gains in tax revenue. Tourism also results in larger percentage gains for the lower income earning households, which reduces income inequality. In times of increased competition for retail sales tax dollars with respect to the growth in retail outlets in the I-25 corridor, tourism offers an additional source of tax revenue. Increasing the number of conventions in the city can provide important tax dollars for the city. 10 Table 5 Simulation Results Religion Agricultural Youth Association Convention Convention Convention Convention Employment 357 99 324 21 % Change 0.56% 0.15% 0.50% 0.03% GCP(mil of$) 6.67 1.73 6.05 0.36 % Change 0.29% 0.08% 0.27% 0.02% Sales Taxes(mil of$) 0.44 0.123 0.44 0.02 % Change 0.76% 0.21% 0.76% 0.04% Use Taxes(mil of$) 0.067 0.015 0.06 0.003 % Change 0.71% 0.20% 0.72% 0.03% Property Taxes (mil of$) 0.024 0.007 0.025 0.001 % Change 0.19% 0.09% 0.22% 0.01% Total Taxes(mil of$) 0.69 0.185 0.655 0.04 % Change 0.54% 0.21% 0.52% 0.03% New Households 157 43 142 95 Tax Revenue Per New $4,362 $4,306 $4,623 $4,031 Household 11 ) r7779777 Nr / / } � / } / \ \ / \ � \ } / eeaeee ) ° 77774J7 _ ® u — = = cc 0 CD / 2 . 3 ] ) r c < / 2 w )\ ® A r ° § m \ 7774777 cc § a § ej \ \ \ \ \ \ \ ¥ { d ) ) > ƒ 0 } cc ) \ � 7 % > $ 7 2 ° 7977777 \ e « \ ) \ \ ) \ . = e / Seaseae \ \ � � \ 2 , j j \ \ \ \ ) / / G2 § § § 5 Table 7 Final Results Religion Agricultural Youth Association Convention Convention Convention Convention Tax Revenue 0.69 0.19 0.655 0.04 mil of$ Household Income 7.04 1.94 6.52 0.41 mil of$ Total Economic Gain 7.7 2.1 7.2 0.45 mil of$ Notes: 1. These values are obtained by summing the increase in tax revenue and real household income. 2. The total economic gain for all four simulations is $17.5 million. 13 Appendix A Table 1 presents a brief description of the model. The model has 17 sectors such as manufacturing, retail, several service categories, lodging and restaurants. The tourism sector can be examined by looking at the lodging, retail and restaurant sectors. All 17 sectors hire labor, which are divided into three groups, workers that make less than $20,000 a year(Ll), workers that earn between $20,000 and $50,000 annually(L2) and workers that earn over$50,000 a year (LI). There are six household groups distinguished by different levels of annual income. The City of Fort Collins collects sales, property, use and other taxes If any reader is interested in a more complete description of the model,we will provide further documentation. 14 Table Al Structure of the System Profit Maximizing 1) Agriculture services 10) Transportation and utilities 2) Agricultural production 11) Lodging 3) Agricultural processing 12) Wholesale 4) Low services—hair, cleaners, etc. 13) Retail 5) High services—legal, medical 14) Finance, insurance and real estate(FIRE) 6) Construction 15) Restaurants 7) Manufacturing 16) Universities and JCs 8) Mining 17) School District 9) Computer Manufacturing Housing Market Local Government HS1 < $120,000 1) Services: Police, Fire, Transportation, $120,000<HS2<$200,000 Library, Parks and Recreation, and $200,000 <HS3 Administration HS4-multiple units 2) Taxes: Sales, Use, Property and Other Household Groups: HH1 < $10,000 $10,001 < HH2 < $20,000 $20,000 <HH3 < $40,000 $40,000<HH4 < $50,000 $50,000<HH5 <_ $70,000 $70,000<HH6 Factors of Production: Labor Groups Capital Stock Land $20,000 z L, K—buildings and factories Land—land used by the $20,000 < LZ < $50,000 used by the productive, productive,residential, $50,000 < L3 residential and public use and public use(acres) 15 Appendix B Description of the four conventions 1. Religious Convention Groups are also known as assembly religious groups. Spending estimates were based on 2005 Christian Church of Jehovah's Witnesses convention, utilizing local hotel rates. Spending for retail and restaurants was reduced from the 2005 ExPact Study based on interviews with local hotels and restaurants. Expenditures per participant per day are: Sector Expenditures per person Lodging 88 Restaurants 81 Retail 63 Total 232 2. Specialty Agricultural/Animal Events The anticipated 2007 German Shepherd Dog Club of America event in Fort Collins was used as the model of this type of function. Hotel expenditures were based on room rates quoted for the 2007 event. Other expenditures were based on the 2005 ExPact Study conducted by the International Association of Convention and Visitor Bureaus. The groups either utilize CSU facilities or The Ranch. Expenditures per participant per day are: Sector Expenditures per person Lodging 101 Restaurants 76 Retail 55 Total 231 3. Youth Sports Youth sports include events such as large soccer tournaments, softball, basketball or other youth or amateur sporting events. Expenditures based on 2005 USSSA (United States Specialty Sports Association) 14 and under Girls Softball, held in Fort Collins and Loveland this year. Expenditure patterns were based on 2003 Colorado Tourism Office Economic Impact of Tourism report for Larimer County, CO, prepared by Dean Runyon and Associates. Expenditures per participant per day are: 16 Sector Expenditures per person Lodging 65 Restaurants 89 Retail 62. Total 216 4. Association convention The participants of association conventions are smaller in number and therefore lodging and the meetings occur at a single hotel in Fort Collins. It is common that these functions consist of either state or national groups. Expenditures were derived from the 2005 ExPact Study conducted by the International Association of Convention and Visitor Bureaus. 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