Abby doubles room tax to 6%
By Kevin O’Brien
Abbotsford’s city council voted last week to double the room tax charged to local hotel guests and to keep 30 percent of that revenue for the city’s general fund.
These actions were done at the recommendation of city administrator Dan Grady, who said increasing the room tax rate will enable the city to retain roughly a third of the revenue going forward without shortchanging the room tax commission, which provides funding to the local event organizers and the Abby-Colby Crossings Chamber of Commerce.
“It would allow the city to keep 30 percent of the money while not hindering the work of the room tax committee,” he said. “It would actually give them more money too.”
Until now, 100 percent of the tax revenue was controlled by the commission, and did not go into the city’s general fund. However, $2,400 in room taxes were given to the city every year so it could pay annual dues to the Clark County Economic Development Corporation.
At 3 percent, the room tax brought it about $25,000 per year on average for the commission to spend. Grady estimates the 6 percent rate should generate closer to $50,000, with $35,000 for the room tax commission to spend, and $15,000 for the city’s general fund.
Grady told the council that 6 percent is still below what the city could charge.
“The statutory limit is at 8 percent,” he said. “Most municipalities are at 8 percent.”
Motions to double the tax rate and keep 30 percent of the revenue were made and passed without much discussion by council members.
Grady said his proposed 2020 budget will include $15,000 in room taxes as a new revenue.
“The money goes in the general fund and it can be used for any purpose the city council so desires,” he said.
Three local lodging establishments will be impacted by the tax increase.
When reached for comment, Krunal Patel, owner of Abby Inn, Rodeway Inn and the Home Motel, said he was actually the one who first suggested raising the tax rate as a way of providing more money for the room tax commission, of which he is a member.
As owner of all the local lodging establishments, Patel is guaranteed a seat on the commission under state law, so he is familiar with the funding difficulties it faces. He said he was willing to help out by supporting a rate increase.
However, Patel said he would have liked to see a more incremental increase, maybe 1.5 percent for the first year, rather than doubling it all at once.
Right now, under the 3 percent tax, a $70 room at Rodeway Inn comes with a $2.10 charge. That would double to $4.20 per room at 6 percent. For the $60 rooms at Abby Inn, the tax would increase from $1.80 to $3.60, and at the Home Motel, the $50 rooms would see the $1.50 tax go up to $3 even.
Members of the room tax commission started raising concerns last year that they were running out of available money to pay for promoting events and helping to cover the wages of chamber office coordinator Michelle Albrecht.
In response, the commission has cut its quarterly contribution to Albrecht’s wages from $3,750 to $2,500. Also, in February, the commission dipped into its “restricted” fund in order to provide money for the annual Abby Festival and to cover the chamber wages.
For the last several years, the commission has been setting aside 15 percent of its tax collections as “restricted” funds, to be used for a possible investment in new events or facilities.
With an average of about $25,000 in room taxes collected every year, chairman Eric Reis has said the commission is left with roughly $6,000 to spend after it pays the $15,000 in chamber wages and sets aside 15 percent as “restricted.”
However, Reis said the commission has also been spending around $11,500 every year on event promotions and other expenses. The result is a looming deficit in “non-restricted” funds.