Proposed Hotel/Motel Tax increase basics

Guest Column
Doug Herman
Monticello City Administrator

     On Tuesday, Nov. 6, all residents of Monticello will have the opportunity to vote on the question of whether or not the local Hotel/Motel Tax rate should be increased from 5 percent to 7 percent.

     The City of Monticello receives Hotel/Motel taxes based largely upon occupancy and taxes paid by users of the Boulders Inn & Suites. After the Blue Inn closed, the Hotel/Motel taxes received by the city largely dried up.

     For example, the city received $19,899.15 in Fiscal Year 2005, between $9,000 and $15,000 between the years of 2006 and 2009, approximately $5,000 in Fiscal Year 2010, and between $400 and $700 in years 2011 through 2015. Boulders’ opening brought with it an increase in Hotel/Motel Tax revenues with almost $3,000 in receipts in Fiscal Year 2016, and just over $15,000 in Fiscal Year 2017. Projected revenues for 2018 total $18,000 to $20,000.

     Monticello’s current Hotel/Motel Tax rate of 5 percent is 2 percent under the State Code allowed maximum of 7 percent. A recent review of Hotel/Motel taxes imposed in Iowa disclosed that 151 cities imposed a rate of 7 percent, one city imposed a rate of 6 percent, 24 cities imposed a rate of 5 percent, and one city imposed a rate of 4 percent. The cities of Anamosa, Dyersville, Marion, Maquoketa, Manchester, and Cedar Rapids all assess a Hotel/Motel Tax rate of 7 percent.

     If the Hotel/Motel Tax rate had been 7 percent instead of 5 percent in Fiscal Year 2017, the tax receipts would have increased by approximately $6,000, a 40 percent increase.

     If the proposed increase is approved by a majority of those voting, it would take effect Jan. 1, 2019.

     The Iowa Code requires that at least 50 percent of the revenue derived from Hotel/Motel taxes shall be spent for the acquisition of sites for, or constructing, improving, enlarging, equipping, repairing, operating, or maintaining of recreation, convention, cultural, or entertainment facilities of the payment of principal and interest, when due, on bonds or other evidence of indebtedness issued by the county or city for those recreation, convention, cultural, or entertainment facilities; or for the promotion and encouragement of tourist and convention business in the city or county and surrounding areas. The remaining revenues may be spent by the city or county, which levies the tax for any city or county operations authorized by law as a proper purpose for the expenditure within statutory limitations of city or county revenues derived from as valorem taxes.

     The Boulders Inn & Suites local board of directors, the primary generator of Hotel/Motel Tax, has no objections to the proposed increase.


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