Dixon creates 5% hotel tax

DIXON – The Dixon City Council has created a 5% municipal hotel tax to take the place of a 5% hotel tax that Lee County has been imposing countywide on hotel operators that, to start, could bring an estimated $120,000 annually into the city’s coffers.

The new tax, which takes effect Dec. 1, will be imposed on hotel owner/operators engaged in renting, leasing or letting hotel rooms and airbnbs within Dixon’s corporate limits at a rate of 5% of the gross rental receipts.

Dixon’s tax will take the place of the 5% tax that hotel operators in Dixon have been paying to Lee County for many years under an intergovernmental agreement. In May, city officials successfully sought to terminate that agreement.

“Earlier this year, the city notified the county of its intent to terminate that agreement, effective the end of November,” Dixon city attorney Rob LeSage said. “What this ordinance does is it authorizes the city to impose the hotel/motel tax, effective Dec. 1. The county collected before; now the city is going to collect it itself.”

Mayor Glen Hughes said there will be no change in the amount hotel owners and operators are taxed.

LeSage agreed, saying the only thing that will change is the check will be made out to a different governmental entity and mailed to a new address.

“The amount is exactly the same as it was previously,” LeSage said.

The council approved the new ordinance on a 5-0 vote.

The history

Since its formation in 1988, the Lee County Tourism Council has promoted the county’s lodgings; restaurants; attractions; conventions; expositions; and theatrical, sport and cultural activities. Its funding has come from the 5% hotel tax imposed countywide, except in municipalities that have their own hotel tax.

On Dec. 2, 2004, Dixon and Lee County entered an intergovernmental agreement in which the Lee County Tourism Council and the city would split 98.5% of the hotel tax revenue 50-50; 1.5% of the revenue goes to the county treasurer for administration.

The city currently collects an estimated $75,000 a year through the tax, and although it will increase to an estimated $120,000, it again will increase when two new hotels open their doors in Dixon’s Gateway Development area, City Manager Danny Langloss said.

Dixon earlier this year moved forward with its plan to withdraw from the intergovernmental agreement, effective Nov. 30. The decision was finalized May 1, when Dixon City Council members unanimously voted to terminate the agreement.

City officials first notified county officials of the change late last year, as previously reported. Lee County was notified again May 10 after the City Council’s vote.

The loss of Dixon-based hotel tax revenue will result in an estimated 73% decrease in funds, according to an ordinance the Lee County Board unanimously approved July 20. The ordinance amended the Lee County Code to reflect changes from the ending of the intergovernmental agreement and dissolution of the Lee County Tourism Council.

Come Dec. 1, Lee County will continue to impose a 5% hotel tax on all applicable people and/or businesses outside of Dixon, according to the ordinance.

Lee County Board members also unanimously approved a memorandum of understanding between the board and the Lee County Tourism Council at the July 20 meeting. The memorandum lays out the provisions of the dissolution process.

Dixon’s use of the hotel tax

Under the ordinance approved by the Dixon City Council last week, proceeds of the tax are to be deposited into a separate account established and maintained by the treasurer within the city’s general fund.

The City Council can spend the funds in a manner such that the council may determine necessary to promote tourism and conventions within the city and attract overnight visitors. For that purpose, the city council may from time to time enter into contracts or agreements with other people, organizations or agencies to provide services or products intended and designed to accomplish those goals.

Under the ordinance, every contract or agreement the City Council authorizes is to include a prohibition against the use of any of the funds generated by the tax for advertisement or promotion of new competition in the hotel business.

LeSage said city officials will begin doing outreach to Dixon hotel owner and operators to let them know the city will be administering the tax beginning Dec. 1.