Caught uncomfortably between the rock of higher taxes and the hard place of declining revenues — the Payson council unanimously voted to boost the hotel bed tax by 2 percent.
The increase will add about $1.70 a night to the cost of the average Payson hotel room, said Payson Mayor Kenny Evans.
Evans said the estimated $85,500 increase the new room tax will bring in will all go to promoting tourism — replacing general fund money the town now uses.
“All the money will go to increasing tourism and offsetting what’s already being spent from the general fund. We’re trying to close that gap, so the people who will benefit the most will pay the tax.”
The town had to drop another money-raising idea — a new tax on car rentals — because state law only lets a town impose a rental car tax if it has a sports stadium.
Tourism remains the mainstay of the town’s economy — especially now that the housing market has all but collapsed.
Tax revenue from hotel rooms has dropped 10 to 15 percent from last year, a steeper decline than sales tax revenue overall.
Moreover, room surveys issued by the Arizona Department of Tourism indicate that Gila County has one of the highest hotel room vacancy rates in the state — near 50 percent.
However, town officials hope that the increase in the bed tax won’t discourage tourists.
Evans said that he didn’t think the small increase in the cost of a room would discourage visitors.
“If that’s the difference in whether they’re going to come or not, I fear we have the wrong people coming to town,” said Evans.
Councilor Ed Blair said bed taxes on hotel rooms have been on the rise nationally, as towns scramble to bolster recession-battered revenues. For instance, he said the bed tax revenues in Scottsdale dropped 26 percent this year as occupancy declined 8 percent — prompting the city to boost the bed tax by 2 percent.
The town has steadily cut spending on promotion and tourism in the past year as it has struggled to balance its budget in the face of a big overall drop in revenue.
For instance, the town merged the once separate tourism and parks and recreation departments, when the council approved the layoff of the then-parks and recreation director. Cameron Davis, who had previously spent all his time promoting tourism, took over the job of running of the departments.