Orange County’s tourist tax collections break records. Here’s what the money is used for and why

In April, at a meeting of the Orange County Charter Review Commission, a Winter Garden resident named Ed Williams told the group why he thought Orange County’s latest attempt to put a sales tax for transportation improvements on the November ballot failed.

“When you open up the tourist tax money for transportation improvements, we’ll support a tax of a penny,” Williams said. “We’ll support other funding concepts, but until you open that up… people are so fed up that that money is not available to help solve the problems created by the tourists.”

Williams was referring to the Tourist Development Tax, the tax Florida counties can put on hotel rooms and other lodgings.

In Orange County, the tax is 6%, bringing in $359 million in fiscal year 2023 alone.

Williams’ call to use some of that tourism windfall for roads or other infrastructure or county needs is not new. It’s an argument that has sprung up in the last two decades from time to time from county commission chambers to the Florida Legislature.

But with few exceptions, county TDT money in Florida can only be used for things that benefit the very industry the money comes from.

And efforts to change that are often met with heavy resistance from the tourism industry – and sometimes from lawmakers themselves.

What is the Tourist Development Tax?

The Florida Legislature created the Tourist Development Tax in the 1970s. It allowed counties to levy a 1% or 2% tax on “transient rentals,” i.e. hotels, motels, vacation rentals, etc. Counties that levied the tax had to create a tourist development council. In Orange County, that’s Visit Orlando.

“It was produced by hoteliers, who said we want to self-impose a tax upon ourselves that the money that we raised would then be reinvested in driving further tourists to the destination,” said Robert Agrusa, president and CEO of the Central Florida Hotel and Lodging Association.

Over the next two decades, state lawmakers allowed for the TDT to grow. Depending on eligibility, counties can plus up to a 6% tax or six cents on the dollar, provided each percent is used for specific purposes.

[RELATED: Read the Florida Statutes on the Tourist Development Tax]

What can the TDT be used for?

Essentially, the tourist tax revenue is used for things that improve tourism to the county, according to Orange County Comptroller Phil Diamond, whose office collects and tracks the TDT.

Tourism promotionBuilding and maintaining tourism-related facilities like convention centers, sports stadiums and arenasBuilding and maintaining auditoriumsBuilding and maintaining aquariums or museums that are publicly owned and run by not-for-profit organizationsPromoting zoological parksFunding convention bureaus, tourist bureaus and tourist information centersFinancing beach park facilities or beach improvements, including restoration and erosion control, as well as cleanup or restoration of inland lakes or riversPay for any debts or bonds used to finance the convention center, or professional sports facilities

“In a way it’s kind of like the gas tax,” Diamond said. “Whenever I fill up with gas, the gas tax is typically just used for stuff involving transportation, whether it’s paving roads or paying for the bus system.”

“A factoid you might find interesting is that we collect more tourist development taxes in Orange County than any other county in the state of Florida. So it’s a big deal,” Diamond said.

Now, there is a provision that allows for using tourist taxes for public facilities such as transportation, sewers, drainage, and pedestrian facilities. To do that, counties have to meet several criteria, including first spending at least 40% of all TDT revenues on promoting and advertising tourism.

Orange County currently spends only about 30% of TDT revenues on tourism promotion and advertising.

Still, that is quite a bit of money.

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How does Orange County spend its money?

Here is how the county is budgeting its TDT revenues for fiscal year 2023-2024, according to Comptroller Phil Diamond’s office. It set a budget of $309.7 million:

$79.2 Million: Debt service$21.4 million Convention Center operations$67.8 million Convention Center building and maintenance$99 million on Visit Orlando$27.5 million Contract TDT payment for Kia Center, Dr. Phillips Performing Arts Center and Camping World Stadium$8 million Arts programs$3.1 million Orange County History Center$3 million in Grants$700,000 TDT Collection Services Fees

The debt service includes the annual payment on building the Orange County Convention Center and its subsequent expansion in 2003. The comptroller’s office says about $2 billion in principal and interest payments have been paid into the construction and expansion. There is another $345 million in debt outstanding on the convention center.

“Also the convention center, typically but not always, sometimes a profit, but sometimes it turns a loss during the year,” Diamond said, “Because it brings in shows, it brings in conventions and sometimes they make money, sometimes they don’t. So, if there are losses those also get charged to that.”

The debt service also includes $291.7 million in debt outstanding for the Dr. Phillips Performing Arts Center and renovation of Camping World Stadium.

Why does the county spend so much on Visit Orlando?

Visit Orlando is the county’s public-private tourism marketing bureau. Some 30% of TDT revenues go to that agency. That number fluctuates.

The $99 million Visit Orlando is getting exceeds the budget for Visit Florida, the state’s tourism marketing agency, which is at $80 million.

Agrusa says Visit Orlando doesn’t just market the theme parks. It extends the spotlight on smaller attractions and businesses to potential visitors from around the world.

“I’ll give you just a basic statistic here — 33-to-1 ratio,” Agrusa said. “That is how much return comes back into our community for every dollar that is spent on marketing.”

But Jane Healy, who co-chaired the 2023 Orange County Tourism Development Tax Task Force, questions why Visit Orlando needs so much money when Orange County is already the No. 1 tourism destination in the world. She points out that the public doesn’t know exactly how Visit Orlando spends the money.

“It’s all private. It’s outrageous,” Healy said. “And then the person in charge gets (nearly) $600,000 year, and it keeps the industry happy.”

“Now it’s up to the commission how much money they get,” Healy added. “So that’s in their hands. they can cut back to like $80 million, and that would open up money for other things, but not for not permitted uses.”

Earlier this year the county commission agreed to reallocate $15 million from Visit Florida, putting $10 million toward the Sports Incentive Committee which brings athletic events to the area, and $5 million toward the committee that handles arts and cultural projects.

In addition to reallocating the budget, commissioners will now have a seat on Visit Orlando’s board of directors, and there will be an audit of the agency.

Have there been attempts to change the rules at the state level?

Some over the years, but they are often met with resistance, and often they fail.

Some minor exceptions have been allowed. For instance, some coastal counties can now use up to 10% of the revenue to reimburse expenses for public safety services like police or emergency medical services.

Efforts to use TDT revenues to fund affordable housing failed in 2008 (HB 699).

In 2018, several bills in the Florida Legislature sought to allow TDT revenues to develop or operate public facilities if needed to increase tourist-related business activities.

The one that eventually got signed into law included these requirements:

At least $10 million in TDT revenues must have been received by the county in the prior fiscal yearThe use must be approved by a vote of at least two-thirds of the county governing board membershipNo more than 70% of the cost of the new facilities may be paid for with TDT revenuesAt least 40% of TDT revenues collected by the county are spent to promote and advertise tourismAn independent analysis, performed at the expense of the county tourist development council, must demonstrate the positive impact of the infrastructure project on tourist-related business in the county.

The other bills did not have the rule requiring 40% of revenues already being spent to promote and advertise tourism.

Efforts to use the TDT revenues to fund incentives for film and television productions have also failed in the legislature year after year.

In 2021, some state lawmakers suggested allowing counties to use TDT revenues to pay for projects to combat flooding. It faced heavy opposition from the Florida Hotel and Lodging Association and died in committee.

Does Orange County want to change how the TDT is spent?

Past actions show reticence on county leaders’ part to champion changes that would allow the TDT revenue to be used for non-tourism-related projects.

Diamond won’t comment on how the tax revenues should be used, but he does worry about using the tax for critical infrastructure. He likened it to having a mortgage and then losing a job and not having the money to pay it.

“One thing that has really stuck with me is how much the collections of the tourist tax can change from month to month,” Diamond said. “You know back in 2019, the county was setting records for how much was coming in. And then in March of 2020, we lost half of it, like in the blink of an eye, and then in April, we lost almost all of it. We lost 97% of it when the theme park shut down.”

That’s also why Diamond keeps a very healthy reserve of TDT funds, so the county can afford to pay its debt if there’s a sudden economic downturn. The reserve is at least $300 million, Diamond said.

However, sometimes there is extra money to play with.

Last year, Orange County convened a 30-member task force to decide how to spend a surplus of tourist tax dollars — up to $900 million.

[WATCH PREVIOUS COVERAGE]

Amid months of meetings, some in the community pushed to use the money for things like roads and affordable housing. County criteria didn’t allow for those uses though, said Healy.

“The ranking was all about economic impact,” Healy said. “And you know, those arts groups, it’s really hard to compete.”

The county, taking the task force’s recommendations in mind, approved $560 million to expand the convention center, $69.4 million over 5 years for increased funding towards arts and cultural events, and $90 million for a new sports tower at UCF, the first time the university got TDT money.

But the task force, and eventually the county commission, did agree to one thing Healy pushed for: lobbying the state for a Tourist Impact Tax.

“If you’re an area of critical concern, you can have a hotel tax separate from Tourist Development Taxes, a lone-standing penny, and spend it on for affordable housing and conservation land,” Healy said.

Basically, the tax would levy an additional 1% on transient rentals. The county would then be able to use part of it to buy land for affordable housing. Developers wouldn’t have to pay taxes on the land.

Healy figured with occupancy rates in the county high and the hotels adding and increasing resort and parking fees all the time, would another penny hurt?

“In Orange County, that’s a ton of money,” Healy said. “A penny on a hotel tax for a year is about $70 million. So that’s a ton of money by anybody’s standard just to buy land. That’s a lot of money. So I thought this was a no-brainer for the task force. You know, of course, everybody’s gonna agree with it, just a penny on the hotel taxes, it’s not going to hurt anybody’s demand. You know, there’s still going to be plenty of demand here.”

The tax is already on Florida’s books, but right now only a few parts of the state meet the criteria, and the only county utilizing the tax is Monroe. The state legislature would have to change the rules to allow Orange County to use it.

The commission did agree unanimously to make the idea a legislative priority. The issue was raised in Tallahassee during the last session but it failed to pass the Florida House Ways and Means Committee.

Healy says the proposal has its critics, notably the Orlando Economic Partnership, whose representatives opposed the issue in the task force meeting.

The Central Florida Hotel and Lodging Association, however, says it takes no position on it.

“We are not in opposition to any type of Tourist Impact Tax,” Agrusa said. “And I would urge those who are interested in passing something like that to talk to our state legislators, senators, so no one is in opposition to it. But I think that this is a new concept that I think needs to be discussed and be vetted with our various legislators.”

The only question is, will the county make another push for change in the state legislature next year?

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