Cape May to Put Tourism Revenue/Expenses in Dedicated Account

CAPE MAY – The city is beginning the process to create a tourism utility.
The account, like the city’s beach and water/sewer utilities, will break out expenses of the recreation department, special events and Convention Hall.
The purpose would be to take the burden off taxpayers for tourism-related expenses and match them up with tourism related revenue, according to Mayor Edward J. Mahaney Jr.
The mayor, City Manager Bruce MacLeod, Auditor Leon Costello and City Solicitor Tony Monzo presented two hours of information on the proposed tourism utility at a Tue., Oct. 4 City Council meeting.
Mahaney said a new city tourism utility would be responsible for the functions of managing and operating all recreation programs, special events, a public information office, the new Convention Hall, and the marketing and promotion of tourism for the city.
Individuals, groups, and organizations that utilize and benefit from these recreation and tourism activities and events would be the users paying the costs for the programs and initiatives. The cost burden would not fall on the non-participating taxpayers through the city’s annual current fund budget and related capital improvement budget, said Mahaney.
He recommended that debt service for the new Convention Hall should remain assigned to the city’s current fund debt service and not be assigned to a new tourism utility because of the magnitude of the debt service for the construction.
“This is strictly a budgeting and accounting technique, it is nothing more than that,” said Mahaney. “There are no taxes involved, there are no surcharges on business…”
He said the tourism utility funds would grow gradually over the years. It must be solvent and self-sustaining or at the end of the year, taxpayers would be required to cover the shortfall by transferring money from the general fund.
“We don’t want to do that,” said the mayor.
Among the funding sources for the utility would be fees from city recreation programs and rental fees for Convention Hall, said Mahaney.
He said he was recommending that council eliminate the city’s Tourism Commission and in its place create a Tourism Advisory Committee made up of representatives of civic, residential, business and military groups.
He said the city wanted to partner with all the groups that are tourist related in the town. Each group has a certain amount of money to promote and market Cape May, said the mayor.
“No one group has enough money to handle this…” said Mahaney.
He suggested an umbrella agency where all the groups cooperate on such items as a citywide events calendar and coordinate marketing and advertising efforts.
Mahaney said funding for marketing and tourism would continue to come from a portion of mercantile license fees as it did for the Tourism Commission.
Auditor Leon Costello offered a “wild guess” that the city would find $500,000 of revenue for the tourism utility. He said it could not spend more than what is in the fund.
Costello predicted the city would collect more than $500,000 for the utility. As the tourism utility grows, it will be permitted to make a contribution to the city’s current fund for the debt service on Convention Hall, he said.
The city’s portion of the hotel-motel-lodging room tax brings in about $1 million per year which has been going into the general fund to offset property taxes, said Costello. He said council could vote to place some of that money into the tourism utility.
Under current state cap laws, it would be impossible to move all that money to the tourism utility, said Costello.
Monzo said four ordinance changes would be needed to establish the new utility. He said user fees would need to be set for Convention Hall.
MacLeod proposed an establishing ordinance for the tourism utility be introduced November 1 with a public hearing and adoption December 6. The utility would be in place for 2012.