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Officials Say Hotel Bed Tax Increase Could Be ‘Transformational’ For Arts Groups, Convention Center

The Long Beach Convention & Entertainment Center has gained a healthy collection of accolades over the past few years, having been recognized by multiple meetings industry organizations for contemporary upgrades that have refreshed the center with glitzy, yet cost-effective, venues readily equipped with lighting, décor and furniture.

Now that the center has been appropriately decked out with modern flair, Charlie Beirne, the facility’s general manager, says it’s time to focus on “the back of the house” – specifically, $50 million worth of needed infrastructure improvements to functional equipment at the center, including boilers, HVAC systems, escalators and other apparatus. The price tag comes from a city report assessing the center’s immediate needs.

Long Beach Convention & Entertainment Center 2018
This December 2018 image depicts the Long Beach Convention & Entertainment Center, an aging facility that would benefit from an increase in transient occupancy tax, should voters decide to approve the proposal in March 2020. According to the center’s general manager, equipment such as escalators, HVAC and other items need upgrading. (Business Journal Photograph)

“The facilities are old. I think our guys . . . have been able to keep the mechanics working well without people noticing,” Beirne said. “Don’t forget, we have about anywhere from 1.4 to 1.6 million visitors a year through the facility. That’s a lot of wear and tear on the escalators, elevators, carpet – [and the] air conditioning is on constantly.”

Steve Goodling, president and CEO of the Long Beach Area Convention & Visitors Bureau (CVB), added that replacement parts for many pieces of equipment at the center are no longer available because they aren’t being manufactured anymore.

The convention center also has needs related to preparing for the 2028 Olympics, as it will host multiple games. Improvements must be made to the seating in the arena, as well as the venue’s escalators, according to Goodling, whose organization is dedicated to growing tourism, meetings and conventions in Long Beach.

To help fund these projects, as well as to provide increased funding for local arts and cultural organizations, Mayor Robert Garcia proposed putting a 1% increase to Long Beach’s transient occupancy tax (TOT) on the March 3 municipal ballot. The Long Beach City Council approved the proposal at the body’s November 12 meeting, directing the city attorney to draft an ordinance for placement on the ballot.

The TOT, which is currently set at a rate of 12%, is charged to overnight visitors staying at local hotels and short-term rentals like Airbnbs. Ultimately, it will be up to Long Beach voters to approve or reject the increase.

If approved, half of the 1% increase would be earmarked for the convention center, while the other half would be dedicated to local arts and culture organizations.

To a visitor renting a room, the increase in TOT would equate to about $1.80 to $2 more per night, according to Acting City Manager Tom Modica, who gave a presentation at the council meeting. The tax would generate an estimated $2.8 million annually both for the convention center and for local arts organizations.

Half of the city’s TOT revenues are deposited in the city’s General Fund, while the other half go to the Special Advertising and Promotions (SAP) Fund, which is dedicated to advertising and promoting the city. TOT revenues in the General Fund are not earmarked for a specific purpose, according to Grace Yoon, budget manager for the City of Long Beach.

“For the Special Advertising and Promotions (SAP) Fund, the TOT revenue makes up the majority of the fund’s revenue,” Yoon wrote in an e-mail to the Business Journal. The major expenditures of this fund include support for the arts, the CVB, community events and other efforts related to tourism and promotion of the city.

Goodling pointed out that the convention center is home to two major theaters – the Beverly O’Neill Theater and the Terrace Theater – which several Long Beach performing arts groups call home. An increase in TOT would help fund some of the improvements to equipment needed in those theaters – lighting dimmers, chillers and so on, per Beirne’s description.

The higher TOT would also benefit arts and culture groups with direct funding for educational programming. According to a staff report from the mayor’s office, the city received a letter on October 22 from the CVB, local hotel managers and arts organizations requesting an increase in TOT to fund “a need for expanded student and family arts education in Long Beach” as well as improvements to the convention center.

Executives from these organizations, including the Long Beach Museum of Art, the Long Beach Playhouse, International City Theatre, and others appeared before the city council on November 12 to advocate for the tax increase.

“$1.80 seems pretty inconsequential when you look at the return on investment and the impact you have a chance to make on the arts and on this community,” caryn desai, artistic director for International City Theater, said regarding the proposed TOT increase.

In his address to the council on the TOT proposal, Garcia said that he had been in discussions with Goodling and arts leaders for the past couple of years about how to best provide a more stable, long-term funding source for the arts and the convention center. He called the proposal to increase the TOT a “transformational opportunity to support the arts and tourism in Long Beach.”

Garcia said the arts are a “public good,” and noted that it is necessary for the government to invest in the arts in order for those organizations to succeed. “It is something we have done in Long Beach, but it’s also something that we can do better,” he said. He also pointed out that the convention and tourism industries in Long Beach serve as major economic drivers for the city.

In order to ask voters to increase the tax, the council first had to declare a state of fiscal emergency that indicated the city did not have the means to pay for the necessary convention center improvements. The council unanimously approved this emergency as well as the ballot measure on November 19.

At the meeting, Modica pointed out in a presentation that the total rate taxed on overnight visitors is actually about 15%, when accounting for the 3% tax assessed by downtown’s tourism business improvement district. If the TOT increase passes, the total tax rate would be 16%.

As a point of comparison, the City of Los Angeles charges a combined rate of about 15.75% on overnight visitors – however, due to higher room rates in L.A., Long Beach rooms are expected to cost visitors on average $100 less per night, Modica explained. Long Beach’s tax rate will still be about 1% lower than the City of Anaheim’s, he noted. Both of these cities directly compete with Long Beach for conventions and meetings.

Competition for conventions is only growing, according to Goodling. He cited planned improvements to the convention center in Sacramento, new hotels planned in Anaheim, and a large “big box” hotel with the same amount of meeting space as Long Beach’s convention center being built in Chula Vista. That hotel is part of Marriott’s Gaylord brand of massive hotels spreading throughout the country.

Gaylord hotels are making for stronger competition because, due to their presence in the western, middle and eastern parts of the U.S., they are able to book annual conventions for three years out by rotating them through each location. In doing so, the event planners are able to package lodgings, meeting space and food service under one roof, which they can’t do in Long Beach, Goodling explained.

This increasing competition is one reason Goodling is emphasizing the need to reinvest in the convention center. However, he emphasized, the CVB and the center itself have been recognized for the past three years running for their service and upgrades, respectively, illustrating that the city has been able to maintain its competitive edge. Both the CVB and convention center have been repeatedly recognized by the Stella Awards, annual awards given out by the NorthStar Meetings Group, which owns two of the top meetings industry publications.

Goodling reflected, “It just goes to show that we are on trend, we are on target, we are hitting our marks and we are delivering.”

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