G-817 - 11/28/2006 - TAXES - Ordinances Supporting DocumentsIT17A i 10.11.1)
No
AGENDA ITEM
Regular Board of Trustees Meeting
of
November 28, 2006
SUBJECT: Ordinance Amending Section 5 -5 -2 Municipal Hotel Tax
FROM: Richard B. Boehm, Village Manager , �
/
BUDGET SOURCE /BUDGET IMPACT: $600,000 4700,000 in New Revenue
orl
RECOMMENDED MOTION: I Move to Approve Ordinance 2006 -G -817 Entitled "An
Ordinance Amending Section 5 -5 -2 ( "Tax Imposed ") of Chapter 5 ( "Municipal Hotel
Tax ") of Title 5 ( "Municipal Taxes ") of the Village Code of the Village of Oak Brook
Backeround/History:
At the October 25, 2006 Committee of the Whole meeting, the Board provided direction to staff
to prepare an ordinance that would increase the Oak Brook Hotel Tax by an additional 2% with
the intention of spending a portion of the new funds in the general area of the hotels for
implementation and maintenance of portions of the beautification master plan. To that end, an
ordinance has been drafted that includes an increase of the hotel tax to 3% and, included in the
ordinance, the establishment of a Hotel Beautification District.
The Board finds that the creation of a Hotel District and the installation and maintenance of
improvements will serve to promote tourism and conventions and will attract nonresident
overnight visitors to the Village
The Hotel, Convention and Visitors Committee (comprised in part by the hotel General
Managers) recently met and did not support the increase of the tax or the planned expenditures.
Because the Beautification Master Plan, as approved by the Board, does not include any design
work, there exists an opportunity to form a working group that could have hotel managers as
members to assist in making recommendations to the Village Board.
Last saved by Administrator J \2006 Board Transmittals\Hotel Tax - Beautification District agenda item doc
Last printed 11/17/2006 11 58 AM
Recommendation:
That the Village Board discusses its findings for the creation of a new district and that it adopt
the Ordinance increasing the Hotel Tax and the formation of a Hotel Beatification District.
Last saved by Administrator J \2006 Board Transmittals\Hotel Tax - Beautification District agenda item doc
Last printed 11/17/2006 11 58 AM
11/27/2006 15:30 FAX 630 954 1327 SELDEN FOX, LTD. 07]002/003
GREATER
OKC
Dk g�rook 619 Enterprise Drive
Chamber of Suite 100
Commerce Oak Brook Illinois 60523
November 27, 2006
P 630.472.9371
F 630.954.1327
W www.obchambercom
Dear President Quinlan and Board of Trustees:
On behalf of the Greater Oak Brook Chamber of Commerce, we are sharing otir
concerns about the Village of Oak Brook's proposed .25% sales and 2% hotel tax
increases to generate revenue for the Village's beautification and commercial
revitalization programs.
Sales Tax
Since 2003, several hundred local govern, ments across the nation have increa; ;ed
their sales tax rates, while state sales tax rates have decreased. According to JSA
today, local governments have used these increases to fund "everything from roads to
community centers and parks."
The U.S. Bureau of Economic Analysis reports that in 2006, alone, local sales tax
revenues rose 7.2 %. The Bureau notes that this is "more than twice the rate oi'
inflation and faster than the growth rate for property or state sales tax collections."
The Bureau also reports that one of the problems with local sales tax increases is that,
once in place, they seldom decrease. Lobal governments have raised sales to K rates
6,256 times in the last decade, but only cut them 693 times.
In response, the National Retail Federation is working to make local governments
aware of the danger of increasing sales tax rates without careful planning. The
Federation says high sales tax rates prompt consumers "to make black - market
purchases, shop on tax -free websites ortake business to states that have lower rates
or no tax." This movement away from retail store shopping toward on -line shopping
can cripple local businesses and jeopardize the economic stability of the communities
in which they operate. ,Oak Brook retail businesses share the National Retail
Federation's conclusions.
Hotel Tax
In addition, the Village's proposed 2% hotel tax increase, combined with the proposed
sales tax increase, will mean a sudden and dramatic leap in price for the mane
national and regipnal organizations who hold conventions and meetings at Oak Brook
11/27/2006 15:30 FAX 630 954 1327 SELDEN FOX, LTD. 003/003
-2-
hotels. For example, a national group that spends $25,000 for food and beverages at
an Oak Brook hotel will now pay an additibnal $1,500 in hotel and sales taxes.
The bottom line is: an increase in hotel tak will decrease the competitive advantage for
Oak Brook hotels. Additionally, hotel tax increases will adversely impact the th.n
monthly and quarterly profit and loss margins of hotels, especially during an eci)nomic
downturn like the one hotels experienced ifrom 2001 -2004.
Summary
While the Chamber supports the goals of -the Village's beautification and commercial
revitalization programs, we encourage the Village to develop a long -term revenue
resource strategy that includes diversified revenue streams and careful expense
planning before it initiates tax increases.
If the Village continues to increase the sales and hotel tax without a comprehensive
revenue plan, the Village will soon be taxing consumers at a rate that may drive them
from shopping at Oakbrook Center and other Oak Brook retail stores, and conducting
meetings and conventions at Oak Brook Motels.
We urge the Village to consider the direct impact of sales and hotel tax increases on
Oak Brook retail businesses and hotels. Any increase in these taxes means that the
Village is charging retail and hotel customers more to shop or stay overnight at these
area businesses. This will always have a .direct budgetary and operational impact on
those businesses and may result in a business' relocation to a community with lower
taxes. This also may discourage new businesses from coming to Oak Brook.
REQUEST
The Greater Oak Brook Chamber of Commerce, on behalf of the Oak Brook business
community, strongly requests that the Village of Oak Brook board not increase the
hotel tax rate or the sales tax rate for 2007 and not until a comprehensive long.-term
revenue plan has been developed that carefully balances the interests of both
residents and businesses.
Respectfully submitted by:
Tracy Mulqueen
President & Chief Executive Officer
Greater Oak Brook Chamber of Commerce