WORK SESSION ON HB 2267  

 

TAPE 223, 224 AB

 

HOUSE REVENUE COMMITTEE

JULY 23, 2003   8:30 AM   STATE CAPITOL BUILDING

 

Members Present:                        Representative Lane Shetterly, Chair

                                                Representative Wayne Scott, Vice Chair

                                                Representative Joanne Verger, Vice Chair

                                                Representative Phil Barnhart

                                                Representative Vicki Berger

                                                Representative Pat Farr

                                                Representative Mark Hass

                                                Representative Elaine Hopson

                                                Representative Max Williams                                               

 

Witness Present:                        Ken Strobeck, League of Oregon Cities

                                                Doug Riggs, Central Oregon Cities Organization

                                                Michelle Deiser, League of Oregon Cities

                                                Larry Campbell, Oregon Lodging Association

 

Staff Present:                            Paul Warner, Legislative Revenue Officer

                                                Richard Yates, Legislative Revenue Office

                                                Kathy Tooley, Committee Assistant

 

TAPE 223, SIDE A

 

004

Chair Shetterly

Calls meeting to order at  8:41 a.m.

 

WORK SESSION ON HB 2267

 

006

Chair Shetterly

Discussed -13 amendments (Exhibit 1) as superseded by the -14 amendments (Exhibit 2), replacing “primary” to “substantial”; described with amendment from Rep. Wayne Scott, -15 amendments (Exhibit 3), makes clarification on retroactivity date.

 

022

Richard Yates

Described differences between the -15 amendments and -14 amendments.

 

036

Rep. Scott

Described the -15 amendments as providing clarification regarding the definitions of retroactivity date.

 

048

Chair Shetterly

Stated for the record, his intention to make a conceptual amendment to delete on line 8 of either of the -14 or -15 the language “other transportation facilities” described as extraneous to the requested amendments (Exhibit 4).

 

059

Ken Strobeck

Stated he did not believe local governments have had collaborative and productive negotiating effort, discussed surprise insertions in new versions of amendments.

 

074

Strobeck

Responded to questions asked of industry representatives in the prior hearing that he felt were not adequately answered.

 

080

Strobeck

Discussed question regarding who is considered an eligible entity to receive money from the 1% tourism tax and would the lodging association meet that definition.

 

095

Strobeck

Discussed issue regarding definitions of conference center and convention center you were told it is in current law and it is but refers to nothing, there is no money to be appropriated to these entities they are simply definitions.  Discussed only two centers in Oregon meet the definition, Cautioned Committee that most local convention/conferences do not meet the criteria.

 

116

Strobeck

Discussed definition of convention center, explained why he doubted the Salem Convention Center would qualify.

 

147

Strobeck

Described tourism commission as dominated by the lodging industry and exempt from legislative oversight.

 

168

Strobeck

Said local governments have serious objections to legislature telling them how to manage local affairs, particularly when relating to taxation. Discussed support for 1% statewide tax for tourism promotion.  Described opposition to pre-emption as an inappropriate intrusion on local authority. In good faith effort to compromise, supported the Governor’s proposals in the  -10 amendment which stipulated a 60/40 split with 60% going to tourism promotion/tourism facilities; and 40% to public safety.  Said -10 were presented as final compromise, not starting point for beginning negotiations.

 

170

Strobeck

Discussed changes in amendments since -10 and their impacts.

 

175

Strobeck

Discussed Cannon Beach’s system of appropriation, said comments that none of its lodging tax goes to tourism as untrue.

 

205

Strobeck

Discussion regarding treatment of local government and restrictions to authority. Described lack of legislative oversight and accountability in HB 2267.

 

223

Strobeck

Discussed preemption as an area of contention between the lodging industry and local government that could kill the bill, jeopardizing the 1% statewide tax to stimulate the economy.  Discussed limitation on tourist tax proceeds to those areas that cater to tourists that travel more than 50 miles.  Contrasted amendment to the -10 amendment from the Governor which allows for construction on real property and facilities that support regional tourism and those from long distances.  Described resistance to the word “substantial” in the amendments, warned of possible court cases.

 

242

Strobeck

Described the bill as a complete win for the lodging industry; with the -14 and -15 amendments, the lodging industry will control how new statewide tax is spent including locally raised money.

 

270

Strobeck

Discussed retroactivity issue.

 

283

Strobeck

Referred Committee to June 24 handout regarding Governor’s principles for the -10 amendments which includes reference to avoidance of retroactivity, the -14 and -15 amendments do not uphold spirit of the Governor’s request.

 

290

 

 

294

Strobeck

 

 

Strobeck

Said state government should not tell local governments how to run their business.

 

Described imbalance between the lodging industry and local governments in negotiations. Said local governments in good faith agreed to -10 amendments including a 60/40 split.  Said the -14 and -15 amendments give the lodging industry control of state tax funds and restrict local governments.  In his opnion, money would not be spent to improve “mom and pop” operations but money will be spent on out of state and country visitors to large tourist areas.

 

314

Strobeck

Urged rejection of the -14 and -15 amendments as bad public policy, bad tax policy and urged the committee to adopt the -10 amendments.

 

306

Doug Riggs

Strongly supports the 1% increase. With associated tourism costs, need to be able to pay for police, fire, sewer and other activities.  Said Bend and Redmond might be grandfathered in under -15 amendments. Concerned regarding restrictive definitions, new restrictions on roads and other transportation facilities, sewers or sewer plants that are important in addressing the needs of the tourism industry.  Concerned about retroactivity and the definitions in the bill.

 

371

 

Questions and discussion regarding retroactivity date as it affected Bend and Redmond.

 

380

 

Questions and discussions as to whether, a small town like Brownsville could attract transient lodging.

 

 

TAPE 224, SIDE A

 

010

Chair Shetterly

Disagreed with Strobeck’s strict interpretation of “substantial”.

 

047

Rep. Berger

Discussed issues with the exclusion of Salem’s new Convention Center, reading the definitions, believe Salem Center would qualify as a substantial purpose.

 

057

Strobeck

Discussed new restriction on local government spending; establishment of a test where “substantial” must be proved.  On page 1 of the bill current law describes how 1% of statewide tax can be spent where the definition will create a hurdle, have to have room block relationship, and generate a majority of business income from people more than 50 miles away.

 

069

Chair Shetterly

Would you agree for local tax dollar, that a convention center would qualify as a substantial purpose?

 

074

Strobeck

The issue is somebody has to go out and prove that, it puts up a barrier that doesn’t exist currently.

 

085

Rep. Berger

That would be only for new taxes imposed by the city?

 

090

Strobeck

Answered affirmatively, that would be the test for new or additional.  In all versions of the bill there is agreement to a “maintenance of effort” clause; local government is doing this currently.

 

098

Rep. Farr

Commented on “substantial” vs. “primary”, believes the Hult Center would continue to qualify.  Far more honorous is reaching back and undoing local decisions that have already been made.  Which local jurisdictions would be undone with the retroactivity clause?

 

110

Strobeck

Not sure if affected by the clause:  Redmond, Bend, Hermiston, Joseph, Lakeside and Gates.

 

119

Rep. Farr

Pre-empting local decisions is one of the worst things this body can do and will affect decisions made on this bill.  Is there anybody that can answer the question of who is going to be preempted?

 

125

Michelle Deiser

According to their survey that did not have a 100% response rate, since January 1, 2003, it affects cities of Gates, Joseph, Hermiston and Lakeside  would be affected by retroactivity.

 

140

 

Questions and discussion regarding Bend’s effective date.

 

154

Riggs

Local communities are expanding sewers around tourism facilities, as a result of tourism. In Redmond, as defined none of lodging tax revenue could be used for that purpose.

 

167

 

Questions and discussion regarding specific reference Legislative review in the amendments.

 

187

Rep. Scott

There will always be argument whether “substantial” meets the criteria of primary, but is convinced it will alleviate many of the problems.  What has to be remembered is all cities that imposed tax prior to the effective date will not be affected by what may happen.  Discussed Gates, Joseph, Lakeside and Hermiston.

 

215

Rep. Scott

Salem is clearly covered, and there are several other facilities that will qualify, there is always the ability to contest it.  Need dollars to market the state of Oregon.  We have people that come farther than 50 that don’t stay in the rooms and generate the tax. This is a huge step in the right direction.

 

244

Strobeck

Regarding the issue of addressing the problem, contends there is not a problem, 50% is already being spent on tourism promotion and facilities and the other half on sewers, police; local governments have already shown there isn’t a problem. The existing tax will be affected by these bills because it requires “a maintenance of effort”.

 

266

Rep. Scott

Agreed with Strobeck’s definition of what is done locally.

 

279

Larry Campbell

The language in -14 amendments regarding “substantial” is not language the lodging association is particularly happy with, but see the need for compromise.  Discussed City of Bend agreement, with incremental increases going to tourism each year and have asked that it be included in the -15 amendments.

 

299

Campbell

Regarding retroactivity, attempted to honor the communities that passed a tax increase before the bill was introduced.  Reason for retroactivity is important because some communities were going to move forward with a tax increase in order to beat the date of the bill. Intent not to stop Medford, Bend, or Redmond and supports protecting those cities. Doesn’t stop Gates and Hermiston from increasing taxes, interested in seeing local communities use it for tourism related activities.  In the bill 70% is identified as to use, 30% can be used by community for anything.  The idea behind the 1% tax is for marketing Oregon.

 

380

Rep. Verger

Why no oversight on 1% tax?

 

385

Campbell

Believes there is oversight. The Governor reviews and approves* (See Tape 223, Side B, Meter 045) the Tourism Commission budget.  Cities in difficult position in getting monies to operate, discussed continued erosion of dollars.  Want tourism dollars at state level spent on tourism, if funds are easily available, the state is liable to spend the money other than intended.  Discussed Oregon’s spending on tourism ranking as 48th and the desire to improve that ranking.

 

427

Rep. Verger

Why shouldn’t there be legislative oversight just as there is on anything else? It doesn’t have the nexus to be able to skim off for the general fund.  The Governor looking at the budget is fine, but what could be done if he didn’t approve?

 

445

Campbell

The Governor controls the commission by its appointees.

 

465

Rep. Verger

You are talking about the Legislature, I thought you were talking about the cities. In Coos Bay, where there is a Tourism Commission, that money is not eligible for the general fund.  That can clearly be understood.

 

450

Rep. Farr

Would the Hult Center qualify?

 

489

Campbell

Not an attorney, but seems that is a tourism destination.

 

497

Rep. Farr

In Eugene room taxes are dedicated to the Hult Center currently.  For the record, said his wife has starred in numerous productions at the Hult Center.

 

 

TAPE 223, SIDE B

 

040

Rep. Williams

The Governor can just review the tourism budget, not review and approve?

 

045

Campbell

Answered affirmatively, (See Tape 224, Side A, Meter 385).

 

048

Chair Shetterly

It’s not in Constitution, if the Commission is there by statute, it can change by statute.

 

056

Rep. Berger

What about the proposed Salem convention center, do you think it is excluded?

 

058

Campbell

I can’t answer that question, there has to be a way to find tax dollars from the entire community rather than focus on lodging industry tax.

 

069

Rep. Hass

Has supported, but has received pressure regarding “other transportation facilities and sewers”, what can you say to allay fears about excluding those.

 

076

Chair Shetterly

Told of his intent to remove “other transportation facilities”.

 

075

Rep. Hass

Sewers?

 

077

Campbell

Our position is that the hotel facilities pay a substantial amount for sewer usage and property taxes, which is the reason this is a restriction.  Do not believe these facilities should pay in addition to fees they are already paying. It’s too easy to raise taxes on lodging industry, should tax all businesses rather than one.

 

106

 

Discussion regarding Salem Conference Center and qualifications for the transient lodging tax.

 

114

Campbell

Emphasized 30% can be used for any purpose including convention center, and sewers.

 

120

Rep. Berger

Have been a proponent of this concept, Salem is making a substantial investment in urban renewal funds to build a convention center, regional  in nature that would draw tourism and conventions; would hope funds would be available under this proposal and not be restricted.  If they are excluded I am very bothered that it is too restrictive. The reason for supporting this bill is the global vision of promoting the State of Oregon.

 

150

Rep. Scott

Believes Rep. Berger’s concerns have been answered. It is important to remember the whole purpose of 1% tax is statewide. Salem currently collects a sales tax which is unrestricted, the new bill allows 30% as discretionary to cities, 70% to be spent on tourism.  The important part is what it does for the whole state.

 

178

Sen. Dukes

Tillamook feels it won’t be getting anything out of collecting the tourism tax. Discussed communities in her district market areas that are not 50 miles away, and therefore not eligible. Discussed affects Seaside on spring break and long range plans for adequate policing and the limitations from state tax. Astoria is building a convention center, if Salem doesn’t qualify it would not as well. Cities are going to ask not to tie the hands of the local officials.

 

274

Rep. Scott

MOTION:  MOVED ADOPTION OF A CONCEPTIONAL AMENDMENT TO THE -15 AMENDMENTS INTO HB 2267.  ON LINE 8, DELETE “OTHER TRANSPORTATION FACILITIES,”.

 

287

Chair Shetterly

ORDER:  HEARING NO OBJECTION, THE CHAIR SO ORDERS. ALL MEMBERS PRESENT.

 

288

Rep. Scott

MOTION:  MOVED ADOPTION OF THE –15 AMENDMENTS AS CONCEPTUALLY AMENDED INTO HB 2267.

 

291

Rep. Barnhart

MOTION:  MOVED ADOPTION OF THE –10 AMENDMENTS AS A SUBSTITUTE FOR THE -15 AMENDMENTS INTO HB 2267.

 

299

 

Discussion on parliamentary procedure.

 

300

Rep. Barnhart

This motion allows those that oppose the -10s and favor the -15s to vote no.  It allows those that support the 10s and oppose the 15s to vote yes, it allows those that support either to vote yes.

 

312

Chair Shetterly

Recessed 9:55 a.m.

 

314

Chair Shetterly

Reconvened 10:00 a.m.

 

315

Chair Shetterly

Accepted Rep. Barnhart’s motion to amend Rep. Scott’s motion.

 

328

Rep. Barnhart

The -10 amendments have the advantage of a clean definition of tourism-related property; it fixes issues regarding roads and sewers; it provides for a statewide tax that everyone is interested in; and addresses retroactivity by taking affect the date it becomes law. The -10 re-establishes the 60/40 split, municipalities agreed to, but maintains “maintenance of effort” issues in the original bill.  It establishes a governance board which represents the state and the state’s tourism needs.  The Governor and cities support the -10s rather than -15.  Said -10s represent the interests of state in a broader way than the -15s, and only partially restricts the cities.  Problem with -15s is no one can describe how a city can raise a tax locally and spend 70% on tourism related activities and facilities due to restrictions, even with the conceptual amendment.

 

407

Rep. Hopson

Supported -10 amendments although not perfect, but felt it was a well worked-out compromise; thoroughly supports 1% tax for furthering Oregon’s economy.  Would vote against the whole concept with limitations on roads and sewers and sewer plants. Concerned for the need to get movement, it would be a tragedy for this bill to be bottled up.  Would strongly support the  -10s to get the movement and honor the 1%.

 

436

Rep. Scott

Would not support the -10s, don’t think there was agreement on the proposals. Feels the -10 has additional problems that will be harmful to the industry.

 

 

TAPE 224, SIDE B

 

010

Rep. Verger

Strongly supports the -10s, could move to 70/30, but then it couldn’t be used for roads and sewers, and there is no oversight, so can no longer compromise.

 

023

Rep. Farr

Concurred with Rep. Hopson, 1% absolutely important.  The Chair placed on record that he feels “substantial” includes the Hult Center, Deschutes and Astoria facilities and felt having that on record goes a long way to the intent and language of the bill.  There is gubernatorial oversight on how the 1% is spent. Oregon has a wonderful product here; we have to sell this product. The -10s are fine, but will vote against them because of language the Chair has placed on the record, which he felt satisfies the intent of the bill.  Will make a conceptual amendment to the -15s to change the retroactivity date to July 2.

 

052

Rep. Hass

Would support -15s if it were not for the wording that includes roads and sewers. Would like discussion to modify the language on the -15s that would allow him to support.

 

060

Chair Shetterly

Issues are “retroactivity” and language in the ( c ) on -15s.

 

064

Rep. Berger

There is the governance issue, concurred with Rep. Verger on governance.

 

070

Rep. Williams

Strongly hoped for a compromise on this bill believe in 1% in promoting brand Oregon. Disappointed in the -15 that it is not in a form he could support. Believes fundamentally the degree of preemption is too large, not sure an over-riding state interest has been satisfied.  Concerned about issues of retroactivity and “substantial” language, modifying word tourism, worried about independence issue with budget and oversight with no legislative control.  Hesitant on -10 which he could support, suggest Rep. Barnhart withdraw his motion and allow the Chair to work with Committee members to see if there are amendments that could be fashioned to gain the support of the committee.

 

107

Rep. Barnhart

Given concerns from several people, if chair’s intent to continue discussions about possible amendments would withdraw the motion.  Would prefer a bill the committee would support. If followed the procedure recommended by Rep. Williams would withdraw motion.

 

 

Rep. Barnhart

Withdrew motion to approve -10 amendments.

 

 

Rep. Scott

Withdrew motion to approve -15 amendments.

 

 

 

139

Chair Shetterly

Closed work session on HB 2267.

 

 

 

140

Chair Shetterly

Meeting adjourned at 10:20 a.m.

 

 

Tape Log Submitted by,

 

 

 

Kathy Tooley, Committee Assistant

 

Exhibit Summary:

1.       Chair Shetterly, “HB 2267-13”, 7 pages

2.       Chair Shetterly, “HB 2267-14”, 7 pages

3.       Rep. Scott, “HB 2267-15”, 7 pages

4.       Chair Shetterly, “Memo HB 2267-14”, 1 page

5.       Claire, Written Testimony on Tax Reform Discussion, 1 page

6.       Haack, “Written Testimony on Tax Reform Discussion, 1 page