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UP Reps call for short-term rental taxes to fund tourism management

Sara Cambensy and Greg Markkanen says the revenue from their proposed bill would stay within the Upper Peninsula
Published: May. 12, 2022 at 3:57 PM EDT|Updated: May. 18, 2022 at 8:39 PM EDT
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MARQUETTE, Mich. (WLUC) - Representatives from Marquette and Hancock asked the commerce and tourism chair for taxes on short-term rentals this week.

Representative Sara Cambensy (D-Marquette) and Representative Greg Markkanen (R-Hancock) sent a letter to Commerce and Tourism Chair Pauline Wendzel urging her to take up HB 5521 for a hearing. This legislation would allow Upper Peninsula counties to capture a 6% excise tax on short-term rentals.

Currently, only designated hotels are allowed to charge up to a 6% room assessment fee as part of their County Convention and Visitor’s Bureau. The bill, sponsored by Cambensy, came after U.P. counties have seen exponential growth in tourism numbers over the last 10 years, and a strain on public safety services, trails, and local housing by non-local residents. Alger County, which has Pictured Rocks National Lakeshore, and Keweenaw County have been particularly busy, seeing a record number of visitors to their small communities.

While the increase in visitor spending is helpful for local businesses, it’s beginning to put major strains on local taxpayer resources that can leave public safety officials stretched way too thin, Cambensy said.

“Tourism is a great economic driver for our small businesses and restaurants. My bill doesn’t take a penny away from the marketing and promotional things that our Convention and Visitors Bureaus and the Pure Michigan campaign help our U.P. communities do through their hotel assessment fee,” said Cambensy. “My bill simply looks to apply a similar tax on short-term rentals in order to help our local communities manage the increased number of visitors.”

Markkanen says this tax would benefit local resources, including first responders.

“Even if it’s $100,000 for a county like Keweenaw County, it would be very significant for their EMS, search & rescue, and law enforcement, which they’re very limited,” Markkanen said.

Cambensy also says the bill is meant to be an extra tax on people from outside the area.

“They use these short-term rentals as they vacation here,” said Cambensy. “We’re trying to preserve our taxpayer base and create a different fund that we have available to actually handle our tourists and their public safety needs.”

Local Convention and Visitors Bureaus are allowed to use a room assessment fee to pay for the bureau’s operations and the marketing and promotion of tourism to Michigan. These room assessment fees are prohibited from being used for government purposes and restrict their ability to help our local communities manage tourists, pay for infrastructure or invest in our trail network.

HB 5521 would allow local counties to bring the question to their residents and ask them for the ability to levy a 6% excise tax on short-term rentals, with the local counties being able to use it for the following purposes: 3% for public safety services and infrastructure, 1% for trail emergencies, upgrades or maintenance, .5% for Michigan State Police for additional highway road patrol, .5% for additional DNR conservation officers, and 1% for local housing needs. Due to each county having unique differences in who offers public safety services, every county is expected to work with their cities, townships and villages to determine ballot language on how the 3% revenue will be shared.

Similarly, each county will have the ability to create a trail committee with representation from both motorized and non-motorized sports organizations to determine where that funding goes.

Right now, the 6% room assessment fee brings in almost $8M annually to U.P. Convention and Visitor Bureaus. Cambensy expects the annual amount to be similar for short-term rentals in each county. She also believes the taxation would bring in $7-10 million a year for the U.P.

“We’ve gotten phone calls and emails. I just want to make perfectly clear that the counties and townships would be deciding where that money goes,” Markkanen added.

There is competing legislation that looks to take the additional 6% currently not being collected on short-term rentals and allow local Convention and Visitors Bureaus (CVB) state-wide to collect it as a room assessment fee, having it go towards more marketing and promotion of tourism. Markkanen says the money from this tax would stay in the U.P.

“I don’t think you will find many local residents who think we need to double our promotion and marketing of the U.P. right now. From the feedback I’m getting, locals want to see tourism managed better, their public safety services protected, a local housing fund created to help build more affordable houses or apartments that short-term rentals are taking off the market, and their trails maintained better from having more users on them,” Cambensy said.

Cambensy and Markkanen hope to get a hearing on HB 5521 this spring. They are also working with Senator McBroom to see if senators are open to exploring a regional approach to the short-term rental excise taxes, allowing each region to use the 6% tax in ways that allow their locals to best manage the tourists to their areas.

“We’re hoping that, before (the Senate) passes (short-term rentals bill) out, they will consider the taxation piece,” said Cambensy. “Otherwise, we feel like we might not ever get this chance to really go after this unclaimed revenue.”

Below is a copy of the letter to the chair of commerce and tourism.

Below is CVB revenue from 2019 in the U.P.

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