AB 655

This bill changes the definition of "tourism promotion and tourism

development" under the room tax to include within that definition economic

development. The effect of this change is to authorize a municipality that imposes

a room tax to spend any amount that must be spent on tourism promotion and

development to be spent by the municipality on economic development. Amounts not

spent by the municipality on economic development are forwarded to a commission

or tourism entity to be spent on other aspects of tourism promotion and development.

Generally under current law, a municipality may retain a certain percentage

of room tax revenues to be spent by the municipality for any public purpose, and the

remainder of the revenue must be forwarded to a tourism commission, if the

municipality has created one, or to a tourism entity, to be spent on tourism promotion

and development. Current law defines "tourism promotion and tourism

development" as expenditures by a commission or tourism entity on items including

tourism marketing projects, tourist information services, and tangible municipal

development that are significantly used by transient tourists and are likely to

generate paid overnight stays at hotels and motels.

Generally, a municipality may retain approximately 30 percent of the room tax

and must forward approximately 70 percent to a commission or tourism entity,

although that ratio will begin to change somewhat beginning in 2017 such that an

increasing percentage of room tax revenue must be spent on tourism promotion and

development.

Under this bill, out of the approximately 70 percent that must be spent on

tourism promotion and development, a municipality may spend any amount of that

revenue on economic development and amounts not spent for that purpose must be

forwarded to a commission or tourism entity. The bill defines "economic

development" as development designed to promote job growth or retention, expand

the property tax base, or improve a municipality's overall economic vitality.

Beginning in 2017, a municipality must certify each year to the Department of

Revenue the amount of room tax revenues it spends on economic development.