Sustainable Funding Options
Tourism Districts
Tourism improvement districts go by many names – tourism business improvement district, tourism marketing district, even hotel marketing district. But no matter what it’s called, a tourism improvement district is a revolutionary way to fund destination marketing programs. The tourism improvement district model has evolved from hotel districts to restaurant districts to winery and brewery districts in recent years.
Property Districts
Approximately 211 tourism improvement districts raise over $500 million for destination marketing each year. These districts usually include all hotels in a city or county (or, in some cases, multiple cities and the county). They place a charge on all hotels, typically a percentage of room night sales or a fixed dollar amount per night. Rates are usually 1-2 percent or dollars per night but can be as high as 4-5 percent or dollars per night.
The charge is usually passed on to the customer, and funds raised are typically collected by the local government in the same manner as bed taxes. However, unlike bed taxes, they cannot be spent on general programs by the local government. Funds raised through the assessment must be spent for the benefit of the businesses paying the assessment. A TID’s operations are determined by the businesses funding the TID.
The services funded by a tourism improvement district typically include marketing, sales, promotions, website and Internet presence, and group sales. Sometimes, they even have capital improvements or other projects designed to make the destination more appealing to potential visitors.
The term of a tourism improvement district varies. It can be an annual levy, a 5-10 year term, or even longer in some places. A 2016 survey of tourism districts revealed that most districts took between 6-12 months to form.
The critical difference between a sports marketing district and a traditional tourism improvement district is that sports districts focus on sports marketing rather than destination marketing. Programs revolve around attracting overnight groups to local sports attractions – golf courses, regional aquatic centers, youth soccer facilities, and the like. Hotels in cities that are not traditional tourist destinations can significantly benefit from the targeted marketing provided by a sports district, which utilizes existing sports facilities to drive room night sales.
To learn more about how sports marketing districts function, read the section above on tourism improvement districts.
Authorized in nearly every state, property districts place an assessment on property owners within a distinct downtown or commercial area. The assessment is collected by the local government – but unlike property taxes, the assessment money cannot be used by the local government for general purposes; instead, it must be used for specific services and improvements desired by the property owners. The funds are directed to a nonprofit corporation managed by property owners, who use the funds to implement services. Typical services include clean and safe programs (security, maintenance, landscaping), marketing, and business attraction. They can also install physical improvements, such as bus benches, garbage cans, signage, and trees. Some even undertake large-scale capital improvements, such as undergrounding power lines or building recreational facilities.
Typically, creating a property and business improvement district takes about a year. The district is created for a specific term, with approval from property owners. After that term, it must be renewed (again with approval from property owners) to continue providing services and improvements.
Typically, it takes about a year to create a community benefit district. The district is created for a specific term, with approval from property owners. After that term, it must be renewed (again with approval from property owners) to continue providing services and improvements.
Although community facilities districts impose a special tax rather than an assessment, their funds still must be used for a designated purpose. The most common uses of community facilities district money are the construction of schools, police and fire services, and cultural facilities like libraries and museums. They are also often used to provide landscaping and lighting improvements to commercial areas and residential neighborhoods. The funds are managed by the local government rather than a nonprofit.
Unlike most other special districts, community facilities districts are often created in residential neighborhoods rather than commercial districts. They must be approved by the electors or property owners within the district boundaries. A community facilities district is a long-term investment; they are usually created for 30 years.
Some property improvement districts are formed with a limited purpose. Landscape and lighting districts are one such type of district. Landscape and lighting districts place an assessment on property owners in a commercial or residential area. The assessment is collected by the local government – but unlike property taxes, the assessment money cannot be used by the local government for general purposes; instead, it must be used for specific services and improvements desired by the property owners.
Typical services include installing and regular maintenance of landscaping features such as trees and flower baskets and installing decorative lighting. These districts are often residential neighborhoods, providing upgraded streetlights and neighborhood entry landscaping. Funds are managed by the local government or a nonprofit corporation.
Multi-family improvement districts have been most successfully used in disadvantaged neighborhoods to increase safety and cleanliness for the benefit of all residents and businesses. The funds are managed by a private nonprofit corporation and cannot be diverted for other purposes.
Multi-family improvement districts are formed initially for five years and can be renewed for up to ten years. The formation process takes about a year.
Business Districts
Although the funds are collected by the local government, they are typically provided to a nonprofit corporation. The corporation is managed by representatives of businesses paying into the district, helping ensure their needs are met.
Services provided by a business improvement district typically include marketing, wayfinding, brochures, websites, decorations, lighting, and special events.
The term of a business improvement district varies. It can be an annual levy, a 5-10 year term, or even perpetuity in some states. Business improvement districts tend to be quicker to form than property-based districts, taking between 6-10 months.
Wine heritage districts are becoming increasingly popular. In many wine destinations, there is, a tourism improvement district hard at work promoting room night stays – but nothing promoting the local wineries. A wine district helps close that gap and drive increased sales to tasting rooms.
In a wine heritage district, a fee is placed on tasting rooms. The funds raised are provided to a nonprofit corporation and used on marketing and promotions designed to increase patronage at tasting rooms. The programs funded vary, including traditional marketing, special events, training programs, transportation improvements, and wayfinding.
The term of a wine heritage district varies. It can be an annual levy, a 5-10 year term, or even longer in some places.
A brewery promotion district can fund various services, including traditional marketing, special events, training programs, transportation improvements and wayfinding signage.
The term of a brewery promotion district varies. It can be an annual levy, a 5-10 year term, or even longer in some places.
Restaurant Improvement Districts
The fee is usually passed on to the customer, and funds raised are typically collected by the local government. The money is then directed to a nonprofit organization, which uses it on programs designed to benefit the restaurants.
The services funded by a restaurant improvement district typically include marketing, special events, and promotions. They can also have signage pointing to the area, parking improvements, cleanliness services including sidewalk cleaning, and even security.
The term of a restaurant improvement district varies. It can be an annual levy, a 5-10 year term, or even longer in some places.
