By Raiza Giorgi
The Solvang City Council slashed its funding to outside agencies while adopting its 2019-20 budget Monday night, and the hardest hit were the Solvang Conference and Visitors Bureau (CVB) and the Chamber of Commerce.
The chamber’s original request for $300,000 was cut in half, to $150,000, and the CVB’s was cut from $880,000 to $600,000.
The council has long funded the CVB, its tourism promotion agency, based on the knowledge that sales tax and hotel “bed tax” revenue account for more than half of the city’s general fund.
This year, the city’s general fund revenue is close to $9.5 million, of which sales and transient occupancy taxes (TOT) make up more than 65 percent, according to the budget. TOT has increased 5.6 percent year over year for the past five fiscal years to almost $5 million annually, and sales tax has increased year over year 5 percent to $1.5 million.
The city’s overall budget of $19 million for the coming fiscal year is balanced with a surplus of about $575,000.
“Naturally, we’re disappointed to have a 25 percent budget reduction for 2019-20 to market, promote and bring revenue to the city of Solvang. Only time will tell the impact of this decision, since it is proven by the USA Travel Association that slashing marketing costs visitors, which costs their spending, which costs tax revenue,” said Tracy Farhad, executive director of the CVB.
“The Solvang CVB has always been and will continue to be accountable and provide specific and measurable metrics, and welcome the opportunity to work with all council members and staff,” she continued.
The CVB’s annual budget has been between $735,000 and $800,000 for the past several years. The chamber’s funding requests in 2016-17 was $16,000, but since then it had increased to $85,000 and a year ago it received $250,000 to step up marketing and educational programs for local business owners.
“The need for a visitors bureau is significant but the problem I have as-is, is the structure and performance metrics expected of it. There’s something wrong with the way … they didn’t deliver for that amount of money. My feeling is we should consider reorganizing this entity and defund it temporarily until we get the organization we like as a council,” said Councilmember Chris Djernaes.
“I am a big supporter of the visitor’s bureau and the chamber. In the mindset of saving money, on this I would be looking fora significant amount. They are very important and can’t be overlooked, and we need to give them money to keep this going,” Councilmember Karen Waite said.
Councilmember Robert Clarke said he had spoken with several cities and that “Solvang is nuts for the amount of money we give away to grants and organizations like the visitor’s bureau.”
Councilman Daniel Johnson said there are three organizations doing the same things, with three administrative costs, so there has to be a better way of funding.
Mayor Ryan Toussaint agreed in keeping some funding for the chamber and visitors bureau, saying they both operate vital programs.
Djernaes then said he was looking at the city of Carmel, which is similar in size and tourism as Solvang, and they spent only $120,000 on their visitors bureau and $30,000 on their chamber.
Carmel operates with a $24 million budget and hosts nearly 2 million visitors annually. It spends $1.2 million on marketing, which includes its visitors bureau and chambers at $150,000. While its agencies don’t get as much in funding, the city spends $750,000 subsidizing the Sunset Center, which is the biggest draw for tourists in that area. Hospitality provides two-thirds of Carmel’s revenue, according to Carmel City Administrator Chip Rerig.
Waite said it wasn’t the right time to reorganize because the issue was already in front of the council for the fiscal year that begins July 1.
“The top hotels don’t rely on the SCVB, they told me in private. I asked them what they recommended which isn’t being done by the SCVB. We have no oversight. We get to approve two board of directors. To me it’s like we need one more responsive to this council to have more supervision and oversight,” Djernaes said.
Waite moved to approve $600,000 for the SCVB, which was approved 3-2 with Djernaes and Johnson dissenting.
There was an equally lengthy discussion and confusion about the chamber in which the chamber was ultimately funded at $150,000. Solvang Chamber Executive Director Tracy Beard lowered her amount to $200,000 just before the meeting in an effort to help the council reduce spending.
“After having talked to 25 cities at various functions, the average spend on chambers is $25,000,” Djernaes said.
“How did we get to this point? Other cities think we are a laughing stock for giving this amount of money to the chamber,” Clarke said.
Beard said she was thankful to the city council for their funding and said the chamber wants to help further the council goals.
“In the past several years we have started education for not only our members, but members of all the chambers and businesses in the valley for various aspects from business development, economic growth, women in business, human resources, entrepreneurship and others. We want any business in Solvang to come in and be able to have services and benefits to being here,” Beard said.
“When Councilmember Djernaes and Clarke said they talked with other cities about their tourism and chamber budgets, it’s a different ballgame because we aren’t them. Solvang is unique. I get cutting back on discretionary funding, but those two agencies make up our city,” Waite said after the meeting.
Some other challenges staff identified in the coming year include county sheriff cost increases, CalPERS pension, and costs to improve and repair aging infrastructure, including the wastewater treatment plant.
Other planned projects include updating storm drains, sewers, and manhole repairs. The council will also consider land acquisition and professional services costs associated with upgrades to the wastewater treatment plant, anticipated to cost $1.5 million.
To see a video of the entire meeting, visit www.youtube.com/watch?v=r5dFI1glNl4.