If you had a chance to attend or watch the Jan. 7 Stillwater Economic Development Authority (SEDA) meeting (if you didn’t, you can find a recording on the City’s website), you saw a discussion of tourism development in Stillwater. There was some good information presented about the history of tourism spending and the various iterations of “destination marketing” that’s been done in Stillwater over the years. There’s also been some opinion shared in the newspaper and in various online forums, so I think it’s important to present the full picture of SEDA’s discussion and the current situation with tourism spending.
Since 1985, Stillwater has collected a 4 percent room tax on hotel stays in Stillwater. This tax money is dedicated “exclusively for the purpose of encouraging, promoting, and fostering conventions, conferences, and tourism development in the city” (City Code 39-272). Over the past 10 years, the hotel tax has collected just over $7 million in funds – an average of over $700,000 per year. The vast majority of this money has been spent on destination marketing (DM) activities. (The City has $450,000 in reserve and about $30k was spent under a prior City administration on a landscape beautification project.) DM promotes events and activities in Stillwater to out-of-towners and works with event promoters and organizations to bring their events to Stillwater. Since January 1, 2015, DM services have been provided under a contract with Visit Stillwater.
As part of this current City Council’s emphasis on budget efficiency and a general review of City spending, all the City’s third-party service contracts have been scrutinized recently. In conjunction with widespread budget cuts, contract fees paid to SASA, Lake McMurtry, the Arts Center, and other service providers have all been reduced in recent years. These cuts were not blindly made; we have carefully studied what could be done to save money while maintaining high levels of services. A review of spending on DM services provided by Visit Stillwater falls in line with this overall effort.
Since its inception in 2015, Visit Stillwater has received more than $3.5 million in fees to provide marketing services. The fees paid, in fact, exceed the actual hotel tax collections over the same period. SEDA has attempted to analyze the return that Stillwater has received for this investment, but the world of tourism marketing is notoriously difficult to measure in this way. Various assertions have been made: a speaker at the SEDA meeting claimed $40 million in return on this investment, while a letter to the News Press this week calculates $11 in return for every dollar invested. Based on this 11 to 1 ratio, that would mean that the $900,000 paid to Visit Stillwater in FY2018 returned $9.9 million to Stillwater coffers – more than the hotel tax has generated in a full decade and more than a third of all sales tax collections in that fiscal year! It is difficult for the SEDA Trustees to depend on such fantastic claims about return without significant evidence to back them up.
The historical numbers reflect a different reality. From 2010-2014, when the destination marketing function was provided by the Chamber of Commerce and the City, an average of less than $550,000 was spent each year. Over that same 5-year period, hotel tax collections averaged about $690,000 per year and sales tax collections averaged $25.5 million per year. In the past three full fiscal years with Visit Stillwater providing DM services, the yearly spending has increased more than 60 percent to an average of $887,000, yet hotel and sales tax collections have increased only 16 percent and 11 percent, respectively. Rather than each additional dollar spent on DM services generating 11 new dollars, Stillwater saw less than 30 cents of return.
When I look at these numbers, I feel it is my responsibility as your elected representative to do the hard work of figuring out whether we are effectively spending your tax money. That is what SEDA is currently doing. We worked with Visit Stillwater and a local accounting firm to review the financial records. That review raised some concerns, including bonus payments made to Visit Stillwater staff, reserve funds of nearly $300,000 that have not been spent on the services SEDA contracted for, and nearly 70 percent of 2018 funds spent on overhead, personnel and travel costs. In my view, this type of spending does not provide substantial benefit to Stillwater.
Many people have let us know how good the Visit Stillwater staff is at what they do, and I absolutely agree with this evaluation. The marketing services provided are high quality and the staff is friendly, experienced, and well-connected in the industry. None of SEDA’s review or comment has questioned the quality of the service. Similarly, many people have stressed the importance of marketing Stillwater to travelers and event planners, which is also an opinion that I share. But the quality of any product or service must be measured in relation to its value. Just as we cannot justify buying Rolls Royce police cars when a Ford can do the job for less, we have the responsibility to investigate whether we can attract similar tourism returns for a smaller investment.
I do not believe I was elected Mayor to carry on with the status quo in Stillwater. I believe the people of our community want their government to be efficient, effective, and objective in its spending decisions. This is not an easy or comfortable process, but it is necessary to ensure that our city is making the best possible use of our limited resources. As always, I am willing and available to discuss the issue in more depth with any interested Stillwater citizen.