Barricades mark one of many roadwork projects undertaken in recent months in the central Oregon city of Bend. (City of Bend website photo)

BEND – The city of Bend must reallocate roughly $1.6 million to go toward tourism-related purposes after the Oregon Court of Appeals sided with the Oregon Restaurant and Lodging Association in a lawsuit regarding the spending of lodging taxes.

The decision represents a loss, but also provides Bend with an opportunity to invest more in tourism-related facilities, according to the city.

In 2017, the City Council passed an ordinance that lowered the total percentage of transient room tax revenue earmarked for tourism promotion, from 35.4% to 31.2%. The rest was directed to the city’s general fund, which pays for police, fire and roads.

This revenue comes from a fee charged to guests at hotels, motels and short-term rentals.

The Oregon Restaurant and Lodging Association and two local hotel owners challenged the ordinance in court, arguing that Bend broke a state law by using about $350,000 of its lodging tax money to fix roads instead of for tourism promotion. In 2018, Deschutes County Circuit Court Judge Beth Bagley agreed.

The city appealed, and argued that it met the law because the overall percentage allocated to tourism was still more than 30%. The court of appeals disagreed, calling the law that says cities can’t decrease the percentage amount that goes toward tourism promotion “unambiguous,” according to the decision.

Jason Brandt, president & CEO of the Oregon Restaurant & Lodging Association, could not be reached for comment Thursday, but in a written statement celebrated the decision.

“The affirmation by the Oregon Court of Appeals this month upholding the Deschutes County Circuit Court decision means strong protections remain in place for how local lodging tax dollars can be spent across Oregon,” Brandt wrote.

So now, the city has to go back to allocating the full 35.4%  to tourism promotion and facilities, said Ian Leitheiser, an attorney with the city. The city will also have to pay what it hasn’t paid since 2017, roughly $400,000 a year, or about $1.6 million, he said. The city had already saved this money in the event the city lost, so no other part of the budget will be affected.

“We’re disappointed we couldn’t create that flexibility through the 2017 code change,” Leitheiser said in an email. “However, we’ve taken steps since 2017, both to be prepared for this potential outcome and to find other ways to create flexibility in how we can spend that revenue.”

Since 2017, the city changed its code to allow lodging tax dollars to also be used for tourism facilities, as well as tourism promotion, said Mayor Sally Russell.

Four years ago, Bend’s own code only allowed for this money to be used for tourism promotion. In general, a tourism-related facility is anything with a substantial purpose to support tourism activities, like convention centers or visitor centers, according to state law.

Visit Bend, the organization the city uses to promote tourism, recently created the Bend Sustainability Fund, where groups can apply for some of these tourism dollars to create or maintain recreational infrastructure.

Russell said the council has not made any official decisions on how to spend the money, but said there is interest in funding improvements to downtown, including the creation of public restrooms.

“I’m excited about the possibilities,” Russell said. “When we have a lot of tourists in our community, there are some facilities that do need maintenance and do need improvement, and we’ve now found a path forward to use them for these needs.”

NOTE: This story from the Bend Bulletin is published with the permission as part of a collaborative of news organizations in Oregon sharing news content. The Enterprise is part of the arrangement.

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