Senate committee reviews hotel-occupancy tax scenarios as MVA seeks additional funds

The Senate Fiscal Affairs Committee on Aug. 12 heard updated projections showing potential shortfalls for next year’s hotel-occupancy tax and considered how earmarks and alternative revenue scenarios would affect the Marianas Visitors Authority’s budget request.

Secretary of Finance Bennett told the committee the administration used MVA’s updated forecasts in its calculations and that “scenario 2 would be the most realistic projection” for hotel-occupancy tax revenue, adding that adopting that scenario would create a $533,000 shortfall relative to the administration’s current revenue projection. “We rely on MVA’s data for our projection,” Bennett said during the meeting.

The committee was discussing House Concurrent Resolution 24-2, which references the statutory earmarks from the gross hotel-occupancy tax. Committee members and finance staff reviewed three scenarios provided by MVA (presented to the committee as scenarios 1–3) and the effect each would have on gross collections and the MVA trust fund. Under the administration’s reading of MVA’s scenario 1, gross hotel-occupancy tax collections would be about $7.9 million and MVA’s 80% share would be about $6.3 million, leaving MVA short of the $10 million operating request it presented. Finance staff said, after required earmarks to municipalities and the Department of Finance, the net MVA funding could be about $4.5 million under that scenario.

Finance staff gave the committee monthly collection figures: as of July, the MVA share of collections was $2.9 million; municipalities’ cumulative share was listed as $58,874; and the Department of Finance share was $73,593. Finance also reported total collections to date of $3.7 million and a fiscal-year forecast of roughly $5.5 million in gross collections, and cautioned that the forecast faces volatility because of factors such as suspended flights and an earlier aviation crash.

Committee members pressed staff on how statutory earmarks operate in practice. Finance described their current methodology as remitting monthly transfers based on actual collections, and then addressing any year-end shortfall between the monthly transfers and the statutory $300,000 (or 2%, whichever is greater) municipal minimum from the MVA trust fund. Senator Donald asked whether current transfers use the fixed $300,000 floor or the 2% calculation; Bennett replied the administration uses the 2% of actual collections for monthly transfers and reconciles year-end to meet the “whichever is greater” requirement.

Several senators said they wanted to preserve MVA’s ability to stabilize air service and hotel demand. MVA’s budget request seeks additional funding beyond the hotel-occupancy tax allocation; finance staff noted that MVA asked for supplemental funds to reach a $10 million budget target because the hotel-occupancy-tax allocation alone would not meet that figure under the scenarios presented.

Committee members asked for and received additional data and reconciliations. Senator Cavill raised apparent discrepancies in the executive-branch third-quarter financial report and asked finance staff to provide the supporting spreadsheet so the committee could reconcile totals.

The committee did not take a formal vote on changes to earmarks or on funding MVA; instead members requested more documentation and said they would continue the discussion when the concurrent resolution is taken up in session. Finance staff said the administration favors scenario 2 as a status-quo projection but highlighted that all scenarios show vulnerability in the hotel-occupancy-tax category.

The committee recessed subject to the call and scheduled follow-up work and a session to consider the concurrent resolution the following day.