Tourism tax may soon be used for public services

By Erick Winterkamp

Officials in Okaloosa County recently diverted $2.5 million of Tourism Development Tax (TDT) revenues to pay for beach patrol and lifeguards, a move that Florida’s powerful tourism lobby contested. Tourism industry interest groups like the Florida Association of Destination Marketing Organizations and the Florida Restaurant and Lodging Association claimed this was an improper use of TDT funds, which are reserved for tourism-related projects only. County officials argued the allocation was appropriate, since increasing security personnel would increase safety and encourage more visits. This incident and others like it raise the question of how counties should be allowed to spend TDT funds.

The rules for appropriation of TDT funds laid out in section 5 of Florida State Statute 125.0104 have been a source of contention for policymakers and interest groups. Overall, the law makes clear that TDT revenues should be used for projects meant to increase future tourism, primarily convention centers, stadiums, and advertising. Clause 5.5 states that counties may also use TDT to fund facilities, improvements, and “renourishment” as long as it pertains to the preservation of beaches or inland lakes, rivers, and streams. The language leaves some room for interpretation, and has led to conflict between tourism industry groups and county officials.

More recently, Jackson County applied for TDT funding for a “boat ramp and elevated platform used as an observation area for viewing birds and the natural landscape” on the Chipola River. The tourism lobby again raised its ire. Florida Attorney General Pam Bondi  issued an advisory legal opinion in favor of the project but stressed that TDT funding must be “…primarily related to the advancement and promotion of tourism.”

Differences in a law’s interpretation are to be expected, but some challenge the very premise that TDT funds should be devoted to tourism-related projects. Former state Rep. Linda Stewart (D-Orlando) has said, “The general public feels strongly that there has to be other ways to better spend that tourist tax.” Orlando Sentinel columnist Scott Maxwell doubts the need for additional tourism spending in a state already flush with theme parks and hotels. Indeed, a large body of economic research finds that convention centers, stadiums, and other large public spending projects bring little economic benefit to their communities. Rep. Brad Drake of Eucheeanna recently filed a bill that would allow counties to spend up to 10% of TDT revenues on public services unrelated to tourism. However, the bill only applies to counties with populations of less than 225,000, limiting it to Bay, Okaloosa, and Walton Counties.

The tourism industry argues it pays more than its fair share of taxes already. Richard Maladecki, president and CEO of the Central Florida Lodging Association, believes that TDT should remain devoted to promoting tourism. “That’s why it’s called the tourist development tax, to have a tax specifically earmarked for tourism promotions.” Hoteliers already pay ad valorem and sales taxes which go to fund road construction, public transit, and police/fire services. Reallocating TDT for general services would be in conflict with what economists call the principle of benefit taxation, in which taxes to fund public goods are paid primarily by users. The potential problem with shifting the tax burden onto the tourism industry is that people may overuse publicly provided goods (transportation, law enforcement, infrastructure, etc.). Still, as it stands now the tourism industry has a great deal of control over how TDT funds are spent, potentially opening the door to cronyism.

The restrictions on Florida’s TDT were set over 35 years ago and in some cases leave too much room for interpretation, leading to conflict among differing interest groups. Changing these rules would have important implications for Florida’s economic growth. With growing public and legislative support for some liberation of TDT funds pitted against the interests of Florida’s tourism industry, intriguing political theatre is sure to follow.