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June 16, 2021

Scotts Valley delays tourism district deal

What appeared to be a smooth path through the picturesque Scotts Valley hills for Visit Santa Cruz County turned out to be a rocky road. 

A proposed seven-year extension of the Tourism Marketing District (TMD) hit a pothole when Scotts Valley City Councilman Randy Johnson raised questions about a 25% fee hike, and asked why hotel owners tried to get a local nonprofit wellness resort to be included.

The Santa Cruz County Board of Supervisors already approved the renewal for the TMD on May 11, but they also adopted a resolution asking the county’s four cities to grant consent. If they do not do so, a city’s hotels won’t be featured in Visit Santa Cruz County’s marketing campaigns. A public hearing on the item has been scheduled for later this month.

The expectation was the extension would be rubber-stamped, but Johnson pulled the item from the consent agenda—where uncontroversial and/or routine items are typically placed—to voice concerns about an early version of the plan that sought to include nonprofit 1440 Multiversity, located at 800 Bethany Drive, as one of the organizations that must give up a portion of its revenue to the group for promotion.

It’s not that Visit Santa Cruz County hasn’t been delivering the visitors. As local branding spread far and wide, total TMD collections rose to $2.7 million in 2018-19, more than double the $1.2 million raised in 2013-14. When the novel coronavirus came for an unwelcome extended stay, their balance sheet felt the pain. But even during Covid-19, the group was able to collect $2 million in 2019-20. It wanted to up that to $2.4 million for 2020-21. And, in an effort to take advantage of pent-up demand for global travel, it set its sights on achieving the record-breaking $3 million mark by 2022-23.

“Our community’s become quite dependent on international markets,” said Maggie Ivy, CEO of Visit Santa Cruz County, during the meeting, adding local officials are “looking for a very strong recovery.”

The TMD decided to remove an exemption for nonprofit groups, hoping to cash in, for example, on the backpackers from around the world who stay at the Hostelling International location in Santa Cruz, which books around 7,000 guests a year and is run as a nonprofit, according to a Santa Cruz Public Libraries database.

In a follow-up interview, Ivy said the current plan is to continue to exempt the hostel. No other nonprofits would’ve been affected, she said, adding fee hikes won’t go into effect until summer 2022.

On Monday, Rich Larson, a Santa Cruz Hostel Society board member, said he was unaware the hostel nearly was to start pitching in toward destination marketing, adding the cost likely would have been passed on to travelers.

Different types of lodging will see varying fee increases under the plan, with hotels that charge at least $100 per night for a room forking over $4 of that—up from $3.20. Municipalities get a 1% “processing fee” back.

Initially impacted was 1440, which requires guests to be part of a “learning” or “wellness” experience, such as the retreats it currently hosts for frontline healthcare workers burned out by the pandemic. By the time the TMD plan made it up the hill to Scotts Valley, the tourism group had already agreed to make an exception for 1440, although mayor Derek Timm pointed out the nonprofit still seemed to be on the calendar for an assessment.

Ivy said the TMD would delete this entry once the current plan—including the exemption—gets approved.

No members of the public spoke during the public comment period.

Cities in the region are hungry for cash from the forecasted wave of tourists, and they’re counting on Visit Santa Cruz County to make the case travelers should spend their vacation funds here. The TMD money is separate from the transient occupancy tax (aka “hotel tax”) collected by Scotts Valley. It pulled in $1.9 million in 2018-19 from the tax, and had budgeted to have $2.3 million the following year from this revenue stream. Instead, it only pulled in $1.5 million in 2019-20, which will likely drop to $1.1 million for this past fiscal year—less than half what local planners hoped for.

Councilman Johnson also brought up complaints he hears from residents that the proportion of cash Scotts Valley puts into Visit Santa Cruz County is greater than what it gets back in publicity. Councilor Donna Lind said the parks and recreation department used to be more proactive about sending event information to the TMD, but noted this fell off with the Covid-19 staffing crisis, leading to less promotion for the community.

Ivy said Scotts Valley hotels are well-represented on its board.

Johnson made repeated attempts to figure out who came up with the idea to start collecting revenue from nonprofits—and 1440 in particular—in his questioning.

Ivy said that, while there wasn’t a specific vote on including nonprofits, the overall plan that was approved—with the support of all three Scotts Valley hotels—did include that language. And 1440 wasn’t initially exempted, because management at some hotels, frustrated during difficult times, became confused by reports the center might be hosting weddings and other functions in direct competition with their business, she said.

Mayor Timm emphasized that 1440 was struggling, too, adding when it holds large retreats, the spillover actually benefits local hotels.

“They were shut down completely,” he said. “They laid off all their staff.”

Vice Mayor Jim Reed offered to agree to a two-week delay on making a decision, in order for Johnson to seek answers about the issues he raised during the meeting.

Johnson made a motion to defer a vote on the extension, with Reed seconding it. It was approved unanimously.

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