Fairbanks council members seek to suspend room tax formula as budget trims tourism share

Fairbanks City Council members Valerie Therrien and Crystal Tidwell are sponsoring an ordinance that would suspend the city's hotel room tax formula for 2027 so the money follows whatever budget the council adopts. Neither the ordinance nor the budget has been adopted.

Mayor Mindy O'Neall's proposed budget lists up to $2 million for Explore Fairbanks, the city's tourism marketing organization. The formula in city code would give it $2,725,000 at the $5.5 million in room tax revenue the budget assumes, a gap of about $725,000. Chief Financial Officer Margarita Bell gave that figure at a Nov. 4 budget session, though neither the budget nor its fiscal note states it. Bell said Explore Fairbanks is projected to get $2.795 million this year.

The council takes up the ordinance Monday, Nov. 9, after Explore Fairbanks presents its annual report at a work session. If it advances, a public hearing follows Nov. 23.

The ordinance would suspend the formula "for the limited purpose" of following the 2027 budget. It names no recipient or amount; those appear in a fiscal note that matches O'Neall's budget.

Under current code, the city keeps 23 percent for collection, administration and tourism impact and 7 percent for security and other services. It then pays $600,000 in fixed amounts: $150,000 to the Fairbanks Economic Development Corporation, $50,000 for Golden Heart Plaza and Barnette Landing maintenance and $400,000 for discretionary grants. Explore Fairbanks gets up to $2.2 million, and the rest is split equally between the city and Explore Fairbanks.

The fiscal note instead sends the remainder to two city lines, $1,790,000 for administration and tourism impacts and $910,000 for economic development. That $2.7 million is about $525,000 more than the formula would yield for the city. Discretionary grants would rise to $500,000 and plaza and landing maintenance to $150,000.

The ordinance calls the change "a slight reallocation," citing community survey input that identifies safety as "a primary concern that hampers activities downtown and tourism." O'Neall said Nov. 4 that the changes considered community surveys and surveys Explore Fairbanks did at the airport. She said the added plaza money is for programming, the grant increase is to help nonprofits with rising costs and the economic development increase is for security first, with foot patrol if the city is able.

The economic development line, up from $67,698 in actual 2025 spending and $617,440 in the 2026 amended budget, covers tourism promotion, special event security, property tax rebates, waived permit fees and a storefront program. The budget ties no dollar figure to police patrols, though it sets a 2027 goal of 850 downtown patrol hours, against 182 so far this year.

Council member Jerry Cleworth said at budget sessions this month that the budget's room tax amounts do not follow city code, and he asked for a legal review. "We're all sworn to uphold code when we take our oath of office here. And this, to me, kind of violates that," he said. City Attorney Thomas Chard said Nov. 4 that adopting the budget's figures as written would require a matching change to city code, and he promised a fuller analysis before the council's Friday session.

The council adopted the current formula 4-2 in May 2023. Tidwell co-introduced it, and Cleworth voted for it.

If the council does not adopt a 2027 budget by Dec. 15, the mayor's budget, as submitted or amended, takes effect.