January 07, 2003 11:00 pm

By Ray Linker

Observer Staff Writer

A proposal by the Oregon tourism industry would institute a 1 percent room tax statewide on top of what cities and counties now collect from travelers.

It would also freeze local room tax rates at their current levels, if the proposal gains approval from the Legislature. That is conjecture at this point, those close to the situation are saying now.

A statewide room tax, to be proposed during the state legislative session which begins Monday, would raise an additional $7 million per year and make the industry self-sufficient in terms of promotion, industry spokespersons say.

Under the proposal from the Oregon Lodging Association, the Oregon Tourism Commission budget will retain its present funding from the Oregon Lottery. Now the lottery is the sole source of the commission's budget.

The proposal, unless modified by the Legislature, would remove some of the local control of existing taxes, said Janet Dodson, executive director of the La Grande-Union County Visitors and Conventions Bureau.

"Local entities could increase the local room taxes, but the new dollars would have to go to support tourism," she said.

Dodson emphasized that the plan is just a proposal and could face changes before adoption as state law.

Some local transient room taxes collected by cities or counties across the state now go for things other than tourism, she said.

"There are arguments for both sides, but the Oregon Lodging Association feels the dollars should go to support the tourism market," Dodson said.

For its 2002-2003 $7.7 million budget, the City of La Grande used $75,000 in transient room tax to balance its budget rather than cut services in other areas.

The city has collected between $166,000 and $196,000 in the room taxes each year over the past three years, providing 40 percent to "emerging economic development opportunities," 40 percent to the VCB, 15 percent to the Blue Mountain Conference Center. Five percent, distributed by the VCB, is for local projects.

The local tax has created some contention between tourist officials and the city. In 2000, Dodson asked for $111,00 for tourism from the tax — only 60 percent of the tax collected in the previous year — but was granted only 40 percent of her request or $73,000. During the same year, Union County at first held back $10,000 of the requested $35,000 by the VCB, but later granted the full request.

The City of La Grande collects a 5 percent tax on all money paid for stays at hotels, motels and bed and breakfasts. The county collects a similar tax of 2.5 percent.

The OLA statement on its Web site said, "In increasing numbers, local jurisdictions are turning to room taxes to fund local projects historically funded by property taxes or the local government's general fund. When local governments either increase local room taxes or redirect these resources away from promoting the local destination, it makes it difficult for the jurisdiction to compete for visitors."

The proposal on the table is for the new statewide tax to start being collected Jan. 1, 2004.

The plan would make the state tourism budget $8 million annually beginning with the 2003-2005 biennium, including allowing the commission to commit an additional $4.7 million per year to advertising.

The new media funding would generate an additional $550 million in visitor expenditures annually in Oregon, the OLA states. Visitors would generate $16 million in state tax revenues and $8 million in local tax revenues annually, according to the OLA.

Dodson said the OLA would like to see local taxes collected as of June 30, 2002, to be earmarked for the tourism industry.

The proposal would dedicate all state room tax revenues to the Oregon Tourism Commission, to fund its base marketing operation as well as a cooperative regional marketing program.