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County chair vows to fight cities over hotel tax revenues

Hillsboro stands to benefit if it follows Beaverton's lead

The Beaverton City Council has directed its staff to take a hard look at taking over collection of hotel-motel taxes in the city to pay for the arts and culture center they have long craved.

But if they were to do so, they might be picking a fight with Washington County.

The county has collected those dollars, known as transient (temporary) lodging taxes or TLTs, since the 1970s. The rate has grown several times over the years, with voter approval, to the current 9 percent of the bill visitors pay at hotels and motels throughout the county.

TLTs the county collects support promotion of county-wide tourism through the Washington County Visitors Association (3 percent), the county fairgrounds in Hillsboro (1 percent) and the general operating budgets for both the county and city (2.5 percent apiece).

While council members said they have no intention of cutting the percentages going to their partner agencies, they were in consensus that they want to take on tax collections to increase the rate enough to pay for the center, tentatively planned at The Round in the city’s Creekside District.

“There’s no need for us to get into their business,” said Council President Marc San Soucie. “There’s a bunch of (details) to be worked out.”

Mayor Denny Doyle said the plan would allow the city to build the center with tourism money instead of raising taxes on its own residents, a goal for the city’s elected officials who also must find a way to build a new police station.

“This is a normal way of doing business” to support tourism, Doyle said. “No burden on the taxpayer and fair to our partners. That’s the key.”

The Council did not discuss the details of the tax, but in adding a comment Doyle said: “I can’t resist adding my 3 cents. I may be hinting at a number,” indicating a future increase in the TLT within Beaverton might be about 3 percent.

Andy Duyck, chairman of the Washington County Board of Commissioners, isn’t buying it.

First of all, Duyck doesn’t think Beaverton can raise enough money for an arts and culture center with 3 cents of every dollar spent on lodging in the city.

“We’re trying to work with them, but the reality is they simply can’t do what they want to do without taking all of it,” Duyck said.

Extrapolating from a city document, 3 percent of lodging taxes paid by hotels and motels inside Beaverton would have raised about $800,000 in fiscal year 2014-15.

The cost of the arts and culture center has been estimated in the $40 million range. An anonymous donor has pledged a sizable portion of the cost and officials are seeking additional non-tax sources, but the majority would still come from public coffers.

But there are far larger issues at play than a few million in lodging taxes, Duyck said.

For one, he argued that the city’s plan to go its own way undermines a spirit of cooperation between the county and its cities. That situation could worsen if a city such as Hillsboro, which has more hotels than Beaverton, follows suit.

“I’m disappointed that this is happening here in Washington County,” Duyck said. “I thought we had better working relationships.”

Duyck said if Beaverton cuts the county out of tax collections that support countywide services, the ripple effect could threaten critical funding the county currently splits with its cities. Potentially at risk, he said, are significant dollars supporting Washington County Cooperative Library Services and Major Streets Transportation Improvement Funding.

There are complex legal issues wrapped up in state law and more than 40 years of evolution of lodging taxes in Washington County.

Beaverton City Attorney Bill Kirby said his interpretation of the law is that the city’s “home rule” status and other arguments allow the city to assume the role of TLT collector.

But Duyck said the county also has “home rule” status that his own legal staff says would trump Beaverton’s in this case.

“We’re going to have to fight them on that,” Duyck said.

Duyck also questioned whether a center offering performing arts and cultural activities fits the legal definitions of promoting tourism, as Kirby has determined it does. State law requires much of TLT money to be used to promote tourism.

“That will be challenged in court,” Duyck predicted. “I can almost guarantee you.”

Washington County’s charter would not allow it to raise lodging taxes it collects without a public vote, but Beaverton officials say they could do so on their own.

Duyck said it’s still an open question whether Beaverton would decide to collect all lodging taxes inside the city or just the additional dollars it wants to fund the center.

City Finance Director Patrick O’Claire said that having control of the income designated to pay for the center would, over time, save the city up to $1 million in bonding to finance it.

Duyck said he meets often with Doyle, who has reassured the county chairman that Beaverton intends to maintain support for services already funded by lodging taxes. Both said they would continue to talk.

“I respect that position, but we are now at the point where actions speak louder than words,” Duyck said.

After the council meeting, Doyle was questioned further about the impact on the county and again asserted his city’s intention: “We’ve got to make this happen so nobody gets hurt.”