City officials will re-evaluate a newly imposed innkeeper revenue tax that put Provo's total hotel tax among the highest in the nation.
Mayor Mike Hill, who recommended this spring that the City Council adopt the tax, now says the council overdid it."Where they've gone is further than they should have gone," he said.
Two weeks ago, the council voted to collect 4.35 percent per room beginning Oct. 1. The figure would be added to the 6.25 percent sales tax and 3 percent Utah County transient room tax already in place. The 13.6 percent total exceeds that of cities such as Los Angeles, Chicago and Salt Lake City.
At Hill's request, the city will form a task force comprising council members, city administrators, corporate officials and innkeepers to rethink the tax.
The committee will study the impact on the hotel industry and determine whether the tax is too high or not. The estimated $685,000 revenue, earmarked for additional police and fire protection, did not include money Brigham Young University would contribute in renting its dormitories for events such as athletic summer camps. BYU already pays the transient room tax and would likely also pay the city's innkeeper revenue tax.
"Part of the problem is we didn't get the real numbers," said Councilman Jim Daley. The council made its decision based on figures supplied by the administration, which were limited to projected revenues based on rates of 2 percent and 4.35 percent.
The tax skirts the electorate, but hits local businesses. The majority of Provo's hotel business is generated by corporations such as Novell and WordPerfect, not tourists.
Still, hotel and tourism officials predict Provo will lose money. Innkeepers complained that the tax makes the city's hotel and motel business less competitive with the Salt Lake area's.
"This is not a positive step for this industry," said Steve Densley, executive director of the Provo/
Orem Chamber of Commerce. "We have to be really cautious as a city. We're not a destination point yet."
Densley said the chamber has not taken a position on the tax, but its Government Review Council plans to evaluate it next week. "I think the chamber membership is deeply concerned," he said.
Utah Travel Council executive director Michael Mack agrees the tax could be costly to Provo. "I don't think it's going to help the tourism industry any," he said.
A 1990 Purdue University study found that for every 10 percent of room tax, the hotel industry loses five rooms per inn per day.
Daley said he's not buying any of the claims that hotel business will suffer in Provo. He wants to see a comparative analysis of occupancy rates before and after the tax.
Mack said that if the city wants to collect money from hotels and motels, it should consider putting the money back into the industry as does the transient room tax.
The county receives about $400,000 annually, which is turned over to the travel council to promote tourism. Provo, which contains 87 percent of the county hotel and motel rooms and the main tourist attractions, is the greatest beneficiary of the tax.