Legislature votes to give cities, counties more flexibility in using lodging tax revenue

Most of the year, the coastal city of Newport is home to 11,000 residents. In peak tourist season, the number of people staying overnight can rise as high as 40,000.

The same drastic swing in population is true in cities up and down the Oregon Coast, and small cities in the state’s wine country and mountains see similar influxes of tourists. Cities and counties that welcome large numbers of tourists benefit from higher spending at local businesses and from state and local transient lodging taxes, charged when people stay overnight at hotels, short-term rentals and campsites. 

But for more than two decades, state law has required most of the proceeds of those taxes go toward attracting more tourists. Tourism-heavy cities for years have argued for more flexibility, reasoning that visitors are more likely to return to cities with pothole-free streets, clean and well-lit parks and enough police, fire and emergency medical personnel to respond quickly to incidents. 

“My communities are drowning,” Sen. Suzanne Weber, R-Tillamook, said on the Senate floor Thursday, March 5. “We’ve had consistent reductions of revenue and simultaneous massive increases to demands on services.” 

The tourism industry maintains that any reduction to tourism spending will hobble the industry and ultimately cost communities. Those arguments succeeded last year in blocking legislators’ efforts to change a 2003 law requiring 70% of transient lodging taxes proceeds go toward tourism.

But the Oregon Legislature landed on the side of local governments this year, passing House Bill 4148 to reduce the share of transient lodging tax that must be used for tourism promotion or tourism-related facilities from 70% to 50% and let cities and counties use up to half the proceeds for services, beginning next January. The Senate voted 23-6 to pass the bill on Thursday, after it passed the House on a 40-12 vote last week. 

Weber, who can’t run for reelection this year because she ran afoul of a voter-approved constitutional amendment blocking lawmakers with 10 or more unexcused absences from seeking another term, represents a city of 5,000 that for many is synonymous with cheese and ice cream. The Tillamook Creamery welcomes an average of 1.3 million visitors each year – on par with the Space Needle in Seattle, Northern California’s Redwood National and State Parks and Florida’s Kennedy Space Center.

“What doesn’t increase with the population is the budget of our first responders, our police departments, our fire departments, our road departments,” Weber said. “All operate on the same number of dollars they get, whether we have 100 tourists or 1 million tourists.”

In letters submitted as legislative testimony, other cities and counties across Oregon described their pride in hosting events that draw visitors, as well as the toll those tourists take on local services. 

Albany, for instance, spends approximately $10,000 in overtime for police and emergency services during its River Rhythms summer concert series. Central Point, home to the Jackson County Expo, saw supplemental staffing costs exceed $5,000 during the 2024 Jackson County Fair and $9,000 during that year’s Fourth of July parade. 

And Seaside has a roughly $11 million surplus in its lodging tax revenues that must be dedicated to tourism, while struggling to maintain community infrastructure, Mayor Steve Wright wrote.

“Today, the question is no longer how to bring visitors to Oregon,” Wright wrote. “The question is how to sustain the communities that make those visits possible.” 

The bill also would allow for some of the proceeds earmarked for tourism to go to resiliency grants for small businesses in the restaurant and lodging industries. Sen. Dick Anderson, R-Lincoln City, proposed and later withdrew an alternative version that would keep a 50-50 split between tourism and local services but eliminate resiliency grants.

Anderson, who voted for the measure, said he supported the split but wanted local governments to know that legislators will be closely watching how they use money meant for tourism. 

“Unfortunately, we have a history in Oregon of swiping revenue streams for uses other than originally intended,” he said.

Sen. Todd Nash, R-Enterprise, said greater flexibility in how to use transient lodging tax would have been helpful in his prior role as a Wallowa County commissioner. The northeastern Oregon county has about 7,400 residents and an outsized role in search and rescue because of the Hells Canyon National Recreation Area, Wallowa Lake State Park and Eagle Cap Wilderness. 

“We were taxed pretty heavily with a county the size of the state of Connecticut and a sheriff’s department that was funded by the 7,400 people only,” Nash said. 

Sen. Sara Gelser Blouin, D-Corvallis, was the only Democrat to join Republican Sens. Fred Girod of Silverton, Cedric Hayden of Fall Creek, Diane Linthicum of Beatty, Mike McLane of Powell Butte and Art Robinson of Cave Junction in voting against the measure. 

She said she heard significant opposition from the tourism community in her district and mixed support from local governments. Corvallis instituted its 9% lodging tax before the 2003 law, so the city already dedicates 70% of its lodging tax revenue to general city services and 30% to tourism. 

“I wish that this could have been narrowed to those coastal areas,” Gelser Blouin said. 

Sen. Jeff Golden, D-Ashland, voted for the bill but warned his colleagues that they’ll likely continue debating how to collect money from visitors to pay for their impacts.

“Unless we say, ‘We don’t care if visitors pay for any of the services they use. We’re such good hosts, we’re going to pick it up altogether,’ I believe this conversation is going to recur again and again,” Golden said.