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TO: Mayor John Laesch
FROM: Chris Minick, Chief Financial Officer/.City Treasurer
DATE: June 30, 2025
SUBJECT:
Seeking a Motion to approve an Ordinance amending Article 44 Section 191 of the Municipal Code, "Hotel Occupancy Tax"
NOTE: Changes have been made since COW meeting. They are attached as "Hotel Tax Changes Since COW." Clean and Redline versions are in the attachments section.
PURPOSE:
Seeking a Motion to Amend the Hotel Occupancy Tax portion of the Municipal Code. The changes sought are to increase the rate of the tax from 3% to 6% and to impose a flat $10 charge for the privilege of occupying a hotel room in the event that no cash charge is levied for the privilege. .
BACKGROUND:
The City currently levies a tax for the privilege of renting a hotel room in the City limits. The rate of tax imposed is 3% of the amount of the room rental charge. Hotel operators collect the tax from their patrons and remit the proceeds to the City on a monthly basis. The City supports the operations of Aurora Area Convention and Visitor's Bureau via an operating and services agreement. The City makes a financial contribution of support from the proceeds of the Hotel Occupancy Tax in accordance with the terms of that operating agreement. The level of support is in the amount of $225,000 annually.
DISCUSSION:
Hotel Occupancy Taxes are common in Illinois municipalities. The City began levying the tax in the late 1980's and the rate has not been adjusted in some time. The rate is now at the lower end of the spectrum compared to area municipalities. Rates of 5% and 6% are common in the area; staff has attached an analysis of the rates charged in regional communities. Staff is proposing an increase in the rate to generate additional revenue for the City. Proceeds would inure to the benefit of the General Fund.
Currently, the Hotel Tax generates approximately $550,000 on average each year. Increasing the rate to 6% would double the amount of the revenue collected based on existing hotel room inventory, resulting in approximately $1.1 million annually. In the coming months, the new casino will open and bring approximately 220 additional hotel rooms into the community, generating additional Hotel Tax revenue for the City.
It is important to note that these Hotel Taxes are not paid by residents but by visitors to the City. The increasing number of hotel rooms combined with the attractions that the City has such as the Paramount Theatre, the Outlet Mall, and the new Hollywood Casino soon to open will create an opportunity to generate significant new revenue for the City. This is an opportune time to address the Hotel Occupancy Tax rate.
In addition to increasing the rate, the proposed ordinance would also levy a flat $10 charge in the event that a hotel room would be granted to a patron free of charge or "comped." We recognize that the new casino may offer incentives to various customers as rewards for loyalty and level of play. The City wishes to assure that Hotel Tax revenue collections do not suffer in this event. Assuming a 6% Hotel Tax Rate, the $10 flat charge would equate to a room with a rental charge of approximately $167.
IMPACT STATEMENT:
Increasing the Hotel Occupancy Tax rate from 3% to 6% presents a very beneficial situation for the City to be able to generate additional tax revenue with essentially no impact to residents. The tax will be paid almost entirely by non-residents and visitors to the City who wish to take advantage of the many amenities and attractions that the City and the area have to offer. Additionally, the change in the rate will allow for the City's tax rate to keep pace with the Hotel Tax rates in area communities.
Should the City not address the rate at this time, revenue which can finance City services will be lost and the City's Hotel Occupancy Tax rate will lag the area market.
RECOMMENDATIONS:
Seeking a Motion to approve an Ordinance amending Article 44 Section 191 of the Municipal Code, "Hotel Occupancy Tax "
cc: Finance Committee
CITY OF AURORA, ILLINOIS
ORDINANCE NO. _________
DATE OF PASSAGE ________________
title
An Ordinance amending Article 44 Section 191 of the Municipal Code, "Hotel Occupancy Tax."
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WHEREAS, the City of Aurora has a population of more than 25,000 persons and is, therefore, a home rule unit under subsection (a) of Section 6 of Article VII of the Illinois Constitution of 1970; and
WHEREAS, subject to said Section, a home rule unit may exercise any power and perform any function pertaining to its government and affairs for the protection of the public health, safety, morals, and welfare; and
WHEREAS, the City Council previously enacted Article 44 Section 191 of the Code of Ordinances in order to codify provisions relating to the City's Hotel Occupancy Tax; and
WHEREAS, the City Council finds it appropriate to amend Article 44 Section 191 to revise the provisions of the Hotel Occupancy Tax; and
NOW, THEREFORE, BE IT ORDAINED by the City Council of the City of Aurora, Illinois, as follows: That Article 44 Section 191 of the Code of Ordinances shall be and hereby is amended specifically as provided in Exhibit A to this Ordiannce.