Tourism fund overview: bed tax distribution, Experience Scottsdale contract and new city destination marketing plans

Scott [last name not specified], finance staff, and Rachel Smetana, tourism and events director, presented the proposed FY 2025‑26 Tourism Development Fund budget and described how bed tax revenue is allocated and spent.

The Tourism Development Fund is governed by a voter‑approved change (Prop 200) that raised the transient occupancy (bed) tax to 5 percent and dedicates half of the increase to destination marketing; the other half may be used for tourism events, research, capital projects and related uses. Staff said the fund is projected to receive about $38.8 million in the current forecast, up from original adopted estimates due to stronger bed‑tax receipts.

Staff described the allocation structure: 50 percent of the bed tax goes to destination marketing, of which 45 percentage points (of the total bed‑tax pie) are typically directed to Experience Scottsdale under the city’s long‑term contract, and 5 percentage points are retained by the city for direct destination marketing work. Scott noted that destination marketing historically produces measurable room‑night and tax revenue impact; staff and Experience Scottsdale provide quarterly reporting and annual business plans that are reviewed as part of the contract oversight.

Rachel Smetana said the city’s 5 percent destination marketing allocation (the city’s portion) is being rethought for greater local impact. She said the city will conduct public outreach, focus groups and coordinate with WestWorld strategic planning before finalizing how the 5 percent will be spent. "There’s a lot of oversight," she said, noting Experience Scottsdale provides an annual business plan and performance standards and that the city receives quarterly reports.

Other fund components discussed included: an automatic 12 percent transfer to the general fund to offset increased public‑safety and maintenance costs associated with tourism (staff projected roughly $4 million under that transfer), event funding programs and debt service for tourism‑related capital projects. Staff also noted a multi‑year commitment to the Museum of the West (a $250,000 operating commitment plus matching funds and a proposed $600,000 capital refresh spread across two years). Rachel emphasized that the tourism fund now has fewer obligations to pay for park rangers and some maintenance because Prop 4.90 had reallocated some related duties.

Commissioners asked about the Experience Scottsdale contract, local oversight of events and whether Scottsdale receives a fair return on the contract. Staff said Experience Scottsdale’s work focuses on bookings, meetings and conventions as well as broader destination marketing and that the nonprofit receives roughly 70 percent of its operating revenue from Scottsdale bed‑tax funds (staff provided an Experience Scottsdale financial participation agreement and performance metrics in the packet). Staff and commissioners agreed to follow up with more detailed performance and program information in future commission briefings.

Staff recommended continued oversight and said they will return with refined plans for the city’s 5 percent destination marketing allocation after public outreach and internal planning.