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Floridians for Responsible Policy Warns Against Money Grab of TDC

August 2nd, 2013
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BACKGROUND: Elected officials have always faced a difficult time when it comes to convincing their constituents that continued infrastructure investments in their communities (i.e. more spending on government projects), is critical to a city’s long term viability. Roads, schools and jails are traditional infrastructure needs that most citizens agree are best supported by the use of general tax dollars. Beyond those traditional expenditures, the common denominator dissipates. What is one person’s worthy project or program is another’s “boondoggle.”

The exercise becomes increasingly more difficult when general tax revenue is falling or not keeping up with failing infrastructure. This has led those interested in funding important projects or initiatives to pressure their elected officials to focus on their desires and, more specifically, convince elected officials to support their projects from so-called “dedicated funding sources.”

Those having the most success usually bring something to table, primarily in the form of additional revenue (i.e. recommending that higher sales taxes be levied on their customers or products), to achieve their goal, thus creating a revenue stream for their objectives. Elected officials have a much easier time supporting higher taxes when citizens, special interests or industries request a tax on themselves. For example, lottery dollars support education, gas taxes build more roads, certain impact fees can only be spent on wastewater, documentary stamps may help purchase environmentally sensitive land, CRAs only invest in certain geographical boundaries and so on. One downside of a dedicated funding source is that it can also become a de facto limit of how revenue is spent on specific programs, as elected officials cease allocating general tax dollars to that purpose. This is the risk most of those seeking dedicated funding are willing to take in order to be able to plan and fund the future.

The Orange County Tourist Development Tax (TDT) is an example of this conundrum. The TDT is an additional tax added to hotel rooms, originated by the Florida Legislature and with the support of the Central Florida tourism, convention and hotel communities. It was designed to generate additional revenue to help build and maintain the Orange County Convention Center, bolster marketing for the tourism industry and invest in “community venues” such as stadiums and performing arts centers.

ANALYSIS: The TDT generates large sums of revenue, almost exclusively from visitors, to re-invest into our community. But it is important to note that this is not revenue that can be put into roads, schools or more police officers; it can be used only to fund specific projects. When advocating that this tax revenue should only be used for dedicated needs in the tourism industry, the industry’s rationale has always been that while tourists contribute in many other ways to the tax base, generally speaking they do not burden our school system, jails or many of the roads used by local residents.

As envisioned, the TDT has created one of the largest and most successful convention centers in the country, supported marketing efforts resulting in Orlando being the number one tourist destination in the world and contributed millions to community venues such as the Dr. Phillips Performing Arts Center and the Citrus Bowl. The TDT has delivered as promised and created a “win-win” funding mechanism for the region’s most important industry – tourism. In fact, according to a recent study, almost 1.7 million visitors come into the market each year due to convention business, resulting in 2.5 million room nights and generating in excess of $25.7 million annually in TDT revenues.

Recently, the TDT has been targeted as a “pot of gold” that should be used to fund projects well beyond its intended purpose. One local State Senator has recently advocated using TDT dollars to fund more traditional needs such as more police, roads and schools. The law and implementing legislation clearly prohibits such funding activity. Like other dedicated funding sources, the TDT has become an easy target for such calls. Why not fund more projects? Why not spread the revenue to other needs in the community? Why not change the rules?

FFRP believes that while dedicated funding sources can have negative consequences to a government’s ability to manage changing needs, if created in harmony with the impacted communities they should not be used as a “slush fund” for general infrastructure improvement projects.

Return on Investment: The TDT has been prolific. Created at the urging of Central Florida’s tourism industry and funded almost exclusively by visitors, our community and local economy has benefited greatly from its implementation. Local businesses have thrived due to our area’s record setting popularity with visitors. And the citizens of Central Florida have also enjoyed the funding of local community venues such as the new performing arts center and expanded Citrus Bowl.

A Deal is a Deal: When the TDT was first introduced as a potential funding mechanism for the convention center, tourism marketing and community venues; it was done so with the support of the industries it impacts most. In return, the tourism industry received specific assurances and legislation was written in such a manner that was very specific as to the permissible uses of TDT dollars. Any attempt to change the rules of the game is unfair.

A “False Choice”: When politicians advocate using TDT dollars to fund general infrastructure and revenue needs, it is a “false choice”. It may sound good to suggest that by raiding the TDT, certain revenue shortages could be solved, however it is nothing more than suggesting a false solution to appease voters. The law strictly prohibits such use and while politicians know this, it sounds good to voters.

If Not the TDT then Local Taxes: Though collections are up in recent months over previous years, TDT dollars are almost entirely obligated for various commitments. Without the TDT either local residents would have paid for the doubling of the convention center or we would have a sub-par center. The TDT funds specific and financially necessary budget items, items that would need to find funding elsewhere without it.

Competitive Advantage, Not a Burden: Central Florida is especially fortunate to have the TDT, which raises enormous sums of money from visitors that is put back directly into our community. Although there is a limit in what tourists are willing to pay, the TDT has not reached that level. They keep coming and TDT keeps raising money.

SUMMARY: There will always be a need for additional tax dollars to better fund our infrastructure, schools and police. Elected officials are constantly balancing the needs of government against the willingness of taxpayers to fund those needs. The TDT is successful, gives our community an edge, creates thousands of jobs and tax revenue and was implemented in harmony with the industry that is impacted most – the tourism community. To change the rules of the game would be unfair and misguided.

Floridians for Responsible Policy supports the current funding and operation of the TDT as it was originally envisioned and implemented. To change that formula would be bad public policy and threaten the long-term viability of the TDT’s current record of success.

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