Curses! Minneapolis will lose nearly $2M in hotel taxes next year

While it may be good news for those arriving for the Super Bowl, that's not much consolation to the people of Minneapolis.

While it may be good news for those arriving for the Super Bowl, that's not much consolation to the people of Minneapolis. Elizabeth Flores, Star Tribune

The looming flood of Super Bowl tourists is a prime opportunity for Minneapolis to make some money on lodging taxes -- cash used to bolster city services for residents, courtesy of out-of-town guests.

But instead of maximizing this revenue ahead of the biggest event of 2018, Minneapolis’ lodging tax was inadvertently reduced on October 1. The result: a projected loss of $1.6 to $1.8 million per year. The missed opportunity in a Super Bowl year could be even greater.

So how did this happen?

It all started last year when Republican legislators resisted funding light-rail projects. That led to the breakup of the regional, five-county Counties Transit Improvement Board, which raised money for public transportation. To make up for the difference in funding that supported metro projects, Hennepin County imposed a 0.5 percent sales tax.

State law caps the city’s cumulative state and local sales, entertainment, and lodging taxes at 13 percent. Lodging tax has a maximum rate of 3 percent. So when Hennepin County introduced that extra half-cent sales tax, the Minneapolis lodging tax was forced to drop by the same amount, from 2.625 percent to 2.125 percent.

The tax had been reduced once before in 2009 after voters approved the Legacy Amendment, a 0.375 percent tax that funds state-wide environmental conservation. Minneapolis could have asked the legislature for an exemption from its lodging tax cap then, but failed to do so. The city has now failed again.

“This is a particular concern for the city’s current 2017 and future budgets, as well as with the upcoming Super Bowl,” according to a memo from city staff, which accompanied an October 6 letter from Council President Barb Johnson to the Hennepin County Board.

In that letter, Johnson appealed to county commissioners to support a legislative change restoring the city’s lodging tax to 3 percent.

But that’s nearly impossible to pull off ahead of the Super Bowl, which is February 4. The legislature reconvenes on February 20. Short of getting Governor Mark Dayton to call a special session, Minneapolis is out of luck.

“[Lodging taxes] are dollars that are important to us and they're dollars that can then be used to reduce the need for more property taxes,” Johnson says. “We want to capture revenue from people that visit us. That's part of our reason for being in the convention industry. It's an industry that people spend a lot of money and don't draw on city services as much.”

Meanwhile, the city council recently approved new regulations on short-term rentals. People who rent out their entire homes to guests will now have to apply for a $46 annual license, while small hosting platforms would pay a $630 licensing fee, and large hosting platforms would pay a $5,000 licensing fee.