The Reno County Commission had a study session last week to continue discussions of a possible countywide transient guest tax—a tax on stays in hotels, motels, bed-and-breakfasts, hunting lodges, etc.—and a charter resolution that would be necessary to have a tax above 2%.
This started as part of an incentive package for Salt Lick Golf and Hunting Resort, now under construction east of Hutchinson. The county commission has supported Salt Lick LLC’s plans for sales tax and revenue (STAR) bonds and approved industrial revenue bonds—with a 10-year property tax abatement—and a special sales tax district to help with the financing of the resort.
And in May, the county commission passed a charter resolution, giving itself the authority to charge a 10% guest tax, with the ability to charge different rates in different locations, with the intent of charging the full 10% at Salt Lick only, and using that revenue to further help with the resort’s financing.
The commonality of these incentives is that they don’t involve the county turning over funds it currently gets in support of economic development. STAR and industrial revenue bonds are based on sales and the property value of the affected property increasing. It’s an alphabet soup of acronyms with STAR bonds, IRBs, a CID and TGT, but the gist is that the county is willing to wait to get increased tax revenue in order to help development happen now. That isn’t an unreasonable tradeoff for a development that is expected to cost between $70 million and $80 million on ground that was appraised under $1.5 million before.
The end goal is a resort with three golf courses, a clubhouse and restaurant, and around 200 units of lodging to attract golfers from all over the country. While we aren’t in a position to judge the viability of this specific plan, we know destination golf tourism is a real thing. We don’t even have to look outside Reno County to see that there are people willing to fly somewhere for a day or a weekend of golf.
We’ll take projections about how many visitors the resort anticipates annually, how many jobs it will add and its total economic impact with a grain of salt. But the former Cottonwood Hills site has a lot of unmet potential.
The guest tax portion of the resort financing hit a snag, though, because of a policy change at the Kansas Department of Revenue. The state will not collect the guest tax for the county if the rate isn’t equal across the county, or even if the county can (but doesn’t) set different rates in different places (except for in cities with their own guest tax, in Reno County’s case, Hutchinson and South Hutchinson).
So now the county commission is being asked to consider a guest tax throughout the county (minus Hutchinson and South Hutchinson), and that’s where things get hairy.
Salt Lick’s attorney says the guest tax is critical to the STAR bonds financing around a third of the project. The Kansas Department of Commerce wants significant local support for the project in return for the state giving up its 6.5% sales tax in the STAR bond district.
The county could charge a guest tax only at Salt Lick, but it would have to collect the tax itself, at its own cost, which County Administrator Randy Partington said would require hiring someone. It also would affect the tax-exempt status of some of the bonds for the project, resulting in a higher interest rate and less money for the construction. A countywide guest tax wouldn’t cost the county, and it would result in better bond terms for Salt Lick, but it would affect other businesses: bed and breakfasts, hunting lodges, and Airbnbs and VRBOs with more than two guest rooms.
Officially, guests are the ones who pay transient guest tax, but a 10% tax could still put Reno County small businesses at a competitive disadvantage, with pressure to lower their room rates or risk losing some customers who are flexible about where they stay.
At last week’s meeting, Visit Hutch presented a concept for how to use the guest tax revenue from other Reno County businesses—no tax receipts from other lodging businesses would be used for Salt Lick’s financing—by marketing tourism specifically in rural Reno County and small towns and by making grants for events and improvements to attractions.
If the county goes ahead with a countywide transient guest tax, it is essential that the revenue be used, as directly as possible, to promote and support those independent businesses affected by it.
Anything else would amount to picking winners and losers to the benefit of big, out-of-county business at the cost of local entrepreneurs.
– The Hutchinson Tribune Editorial Board