The hotel and restaurant excise tax revenue drop may look intimidating, but will not have any drastic impact on city budget

Although the large percentage drop in hotel and restaurant excise tax looked "daunting" when it was presented at the June 16 Montrose City Council meeting, the tourism budget was not majorly impacted by the decrease. 

The most recent City of Montrose sales, use and excise tax report presented a set of large negative percentages for hotel and restaurant excise tax collection, a result of decreased revenues to two of the hardest-hit industries during the COVID-19 pandemic. However, the percentages represent a small hit to the city’s tourism promotion budget and not a drastic impact to any major financial operations.

Hotel excise collection was at $3,528 this April compared to $6,868 in April of 2019, a 48.6% drop. It followed a 47.6% decrease in March and 19.7% decrease in February. Restaurant excise tax collected was $26,396 in April compared to $36,973 in April 2019 for a 28.6% decrease.

“The percentages look daunting, but dollar-wise it’s not a huge amount of money,” said Shani Wittenberg, City of Montrose finance director. “It’s a concern, but not something that we’re worried too much about.”

Before the pandemic began, the dominant trend in those revenues was increasing, with sales tax “all around going well.” The general fund is not affected by hotel and restaurant excise tax, and the tourism fund that the revenue does contribute to already had around $84,000 going into 2020, according to Wittenberg.

The tourism fund is used for promoting tourism and sales in Montrose, and Wittenberg said that in her experience, the excise taxes that fund it are low compared to surrounding communities.

“It’s something the voters agreed to increase taxes to fund tourism in Montrose. The hotel tax adds 0.9% to the sales tax, and the restaurant tax adds 0.8% to the sales tax,” Wittenberg said. “The restaurant and hotel excise tax goes into a special revenue fund, not the general fund. It funds bringing tourists to Montrose and helps promote sales in Montrose.”

Wittenberg estimated that the primary reason for the decrease was the drop in tourism that occurred amid travel and group restrictions, as the pandemic occurred in the middle of Montrose’s high tourist season.

“I really think that just because restaurants couldn’t be open — they were strictly carry out — and hotels just didn’t have any visitors, where this was really racking up to be part of our big tourist season with the end of ski season and beginning of summer… that’s the reason these are down,” Wittenberg said.

The overall budget variance for excise tax was a negative 6.5%, or about $10,000. While many areas of the city budget were hit by the pandemic, Wittenberg said that the funds are budgeted conservatively and city operations should be able to continue without major disruption.

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