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Virginia Senate Bill 942 (2018) increased the Virginia sales tax 1% in the Historic Triangle (James City County, York County, and the City of Williamsburg). A portion of that 1% goes to fund the Tourism Development Fund (TDF).
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The largest driver of Williamsburg’s economy is tourism. This industry gets the credit for keeping the real property tax rate in the City at one of the lowest in the Commonwealth of Virginia. The industry employs thousands and supports all of the quality of life we enjoy as residents. However, since the mid-1990’s we have seen a significant decline in visitation which results in fewer jobs, less tax revenue, and a reduction in programming.
It is difficult to credit one national trend or action for this reduction so we will not speculate. The community has spent years talking about the decline and trying to address it. However, ultimately every corrective action depends on additional revenue to add reasons for visiting Williamsburg, for advertising new and interesting events or activities, and for creating a place that people want to visit and remember.
The goal is to "kick start" private investment that will bring new and exciting projects to our destination. It is impossible to know just yet what specific projects might be submitted for consideration, but this is a list of some types of things we would expect:
The city budget cannot accommodate new expenses of nearly $2.1 million annually without new revenue sources or eliminating services and programs.
Yes, the funding is available for use by any project and applicant if approved by the City Council after review by the Tourism Development Fund (TDF) committee.
The program will work like a grant program meaning that interested parties would apply for funding. This includes establishing a review committee that would accept applications once annually. They would then review the applications and recommend a funding plan to the City Council for approval.
The committee will be appointed by the City Council. The application process will include two phases. The first phase is a preliminary review by staff to determine eligibility. The second phase, if eligible, would be more detailed requiring studies and analysis of the concept at the applicant’s expense.
The committee members serve two years and must be replaced or reappointed. A member may serve as many as three terms. This means that no one member’s terms on the committee shall exceed six years of service. The committee consists of three representatives of the tourism industry, two at-large community appointees, and two ex officio members (one from the Planning Commission and one from the Economic Development Authority. The committee will solicit project applications, review every Phase 2 Tourism Development Fund (TDF) application, and will make funding recommendations to City Council. City Council will make final funding decisions.
The private sector will invest in opportunities where return is certain and profit is likely.
The Williamsburg market is not as strong as it once was which hinders private investment in new products. This is particularly true in cases of newer concepts like boutique hotels, attractions, and mixed-use developments with integrated living and retail options. In communities where these types of developments are desired, the government’s role is to provide risk reduction to encourage this investment. This does not mean the government or the taxpayer has to fund the majority of the cost. It means we, the taxpayers, have to reduce the risk of investment to a point where the private sector is willing to invest. This threshold is different for each project.
Discussion began in the fall of 2016 as the City started developing the 2017 to 2018 Goals, Initiatives and Outcomes (GIOs) as City Council recognized the need for a renewed investment in tourism infrastructure, place, and attractions. This is reflected in the adopted 2017 to 2018 Biennial GIOs.
The conversation matured in January 2017 during the City Council budget retreat. City staff was asked to look for ways to finance the kind of projects the community lacks. This question was partially driven by the pending completion of the Williamsburg Downtown Vibrancy, Design and Marketing Plan, and the resulting question of how to implement the changes and improvements suggested.
During the April 2017 City Council Work Session, the concept of a Tourism Development Fund (TDF) was discussed. It was again reviewed in detail during the June 2017 City Council Work Session and Business Meeting. Council reviewed comparable programs from other tourism-based localities and considered operating models for a local TDF at a July 8 work session.
At the July 10 work session, the Council considered the existing budget and potential new revenue sources for funding the TDF. At the July 13 business meeting, the Council delayed action on the TDF and asked staff to organize a community forum to answer questions regarding the proposed TDF. That Forum was held on July 27 and was well attended generating lots of good comments and discussion. The Council then adopted components of the TDF in August and finalized the process in September.
Yes. Any unspent funds would be available in subsequent years for project awards. Additionally, if the committee realizes an inability to expend all of the revenue, they can recommend that the tax rate be reduced as needed or warranted.
We identified Asheville and Virginia Beach as similar markets. These are both competitive markets for Williamsburg and we compete for the same audience or visitor.
In Asheville’s case, we find that in the early 2000s the community, led by the hospitality industry, worked to create the Tourism Product Development Fund (TPDF). Funded using similar revenue streams this program has funded 31 projects with $27 million since 2001. It is credited as helping create Asheville which today welcomes record visitors and boasts a wealth of attractions. For more on Asheville’s program here is a video that describes tourism’s impact on their community.
Virginia Beach tells a similar story. Virginia Beach utilizes two programs aimed at boosting tourism. The Tourism Investment Program (TIP) is a discretionary funding tool utilized to jumpstart major projects in its market. Projects and events like the Rock’n’Roll Marathon and Beach Street USA benefit from the program.
While this is not conclusive data-driven proof of success, it is indicative of the efforts that create a successful tourism community.
Annual reporting and evaluation of the program staff and committee are an important part of this process. The City Council and the community have to consistently evaluate all City programs for effectiveness. Obviously, as with any program, there is a building period. The Tourism Development Fund (TDF) will take at least five years to reach a point of measurable outcome.