Summary of Attorney General’s Opinions

CITIES: POWERS: LODGING TAXES: DISPOSITION OF PROCEEDS.

The City of Winona has no authority to use ninety-five percent of city lodging tax revenues to finance capital expenditures such as a cross-country ski trail. Minn. Stat. S 477A. 018, subd. 3 

January 30, 1985 

Mr. Richard F. Blahnik
City Attorney, City of Winona 
59a-44
Winona City Hall 
(Cr. Ref. 59a-22,
4th and Lafayette Streets 
476b-2)
Winona, Minnesota 559B7 

Dear Mr. Blahnik: 

In your letter to Attorney General Hubert B. Humphrey, IIII, you present substantially the following: 

FACTS 

The City of Winona’s Tourist Bureau would like to use the funds it receives from the hotel and motel lodging tax imposed under Minn. Stat. S 477A.018, subd. 1 (1983) to finance capital expenditures such as building a cross­country ski trail. 

You then ask substantially the following: 

QUESTION 

Does Minn, Stat. 5 477A.018, 5Ubd. 3 (1983) authorize the City of Winona tourist bureau to expend revenues it receives from the city lodging tax to finance capital expenditures such as building a cross-country ski trail? 

OPINION 

We answer your question ii the negative. Minn. Stat. I 477A.011, subd. 3, reads as follows: 

• Disposition of proceeds. Ninety-five percent of the gross of proceeds from any tax imposed under subdivision 1 shall be used by the statutory or home rule charter city to fund a local convention of tourism bureau for the purposes of marketing and promoting the city as a tourist or convention center…

The plain language of Minn. stat. S 477A.018, subd. 3, empowers cities such as Winona to establish local convention or tourism bureaus using ninety-five percent (95%) of the funds generated by city lodging taxes. The statute limits the further use of these tax revenues to “the purpose of marketing and promoting the city as a tourist or convention center… The question then becomes what expenditures will be considered to meet the specific purpose stated ln the statute. 

The legislative directive in Minn. Stat. S 477A.018, subd. 3, clearly contemplates expenditures for advertising or similar types of marketing or promotion of a city as a tourist or convention center. While it could be argued that building a cross-country ski trail or undertaking other capital expenditures are for the purpose of marketing and promotion because tourists would thereby be attracted to the city, we do not believe that this is what the legislature intended for the following reasons. 

It is an established principle that cities have only the powers granted to them by the legislature, e.g., Kronschnabel v. City of St. Paul, 272 Minn. 256, 137 N.W. 2d 200(1965). The language of Minn. Stat. S 477A.018, subd. 3, does not mention capital expenditures. Other statutes unambiguously give cities authority to use their general revenues for parks and recreation. See Min. Stat. S 471.15 et. Seg; Cf. Minn. Stat. S 85.44. the legislature had intended that revenues generated by city lodging taxes be sent in this way it would have so stated. 

Among the factors to be considered in construing a statute are the legislative history, the consequences of a particular interpretation, and the legislature’s intent that the entire statute be effective and certain. Minn. Stat. SS645.16(6) and 64S.17(2). 

Our examination of the legislative history of Minn. Stat. S 477A.018, subd. 3, indicates that the legislature did not intend to authorize the use of city lodging tax revenues for capital expenditures. An amendment to the House Bill, B.F. 680, which would have authorized construction of a civic or convention center and would have broadly stated that the tax revenues could be used to otherwise promote tourism was defeated in committee. The final bill had much more restrictive language concerning how the funds were to be spent. Also, some of the bills considered by the legislature on this subject matter provides that only fifty percent of the tax revenues be spent on promotion of tourism. The fact that the legislature had to decide how much of the tax revenues must be spent in accordance with the restriction in the statute, demonstrates that the legislature was aware that those tax revenues the expenditure of the legislature was aware that those tax revenues the expenditure of which was not governed by Minn. Stat. S 477A.018, subd. 3, could be used by cities for many other municipal purposes. Since the legislature enacted a bill which earmarked ninety-five percent of the tax revenues for tourism promotion, it made a choice that the vast majority of the money be spent strictly for that purpose. 

Regarding the other factors to be considered in ascertaining legislative intent, if the statute were to be interpreted as allowing the use of lodging tax revenues for capital expenditures, then the statute could be interpreted to include virtually any expenditure which arguably enhances the attractiveness of the city. IT would be difficulty to see where any distinction could be drawn between what use of funds would be authorized or not. To construe Minn. Stat. S 477A.018, subd. 3, as authorizing capital expenditures would effectively remove the limitation on spending, namely tourism promotion, which the legislature imposed, and would render a significant portion of the statute ineffective and useless. 

Minn. Stat. S 477A.018, subd. 3, is silent as to how the remaining five percent of city lodging tax revenues may be spent. Absent legislative restriction, we believe these monies can be spent for any authorized public purpose. 

Based on the foregoing, it is our opinion that the City of Winona is not authorized to use ninety-five percent of the revenues generated by its city lodging tax to build a cross-country ski trail. The city will have no independently considered how it wishes to utilize the remaining five percent of the tax revenues. 

Very truly yours, 

HUBERT. H. HUMPHREY, III Attorney General 

MICHELE M. OWEN Special Assistant 

Attorney General 

December 7, 1988

Alan R. Felix 
City Attorney 
City of Bemidji 
Bemidji, Minnesota 56601

Dear Mr. Felix: 

As the attorney for the City of Bemidji,· you have presented . several questions regarding the use of the-proceeds of the lodging tax authorized by Minn. Stat. § 477A.018, as ·amended by Minn. Laws 1988, ch. 414, § 1. 

The City of Bemidji has elected to contract with the local Chamber of Commerce, a private entity, as a method of funding a local convention or tourism bureau as authorized by Minn. Stat. § 477A.018, subd. 3 (1986). Under the terms of the contract the Chamber of Commerce (Chamber) must establish a separate council known as the Bemidji Visitors and Convention Bureau (Bureau). The contract also requires that all funds received by the Chamber from the City must be administered and expended by the Bureau for the purposes of marketing and promoting the City as a tourist and convention center. This is the same authorization which the statute grants to the City. Minn. Stat .. § 477A.018, subd. 3. 

The Jehovah Witnesses have indicated an interest in holding a convention in Bemidji. The organization has requested financial assistance from the Bureau to reduce the rent otherwise charged by one of the sites which the organization intends to use for functions and activities associated with its convention. 

Your first question is whether the lodging tax proceeds transferred from the City to the Chamber under the terms of the contract lose their character as “public” funds and become “private” in nature. Minn. Stat. § 477-.A.018, subd. 3 {1986} provides in pertinent part that: 

• Ninety-five percent of the gross proceeds from anv tax imposed under subdivision 1 shall be used by the statutory .or home rule charter city or town to fund a local convention or tourism bureau for the purpose of marketing and promoting the city or town as a tourist or convention center.

Although the City has chosen to provide by contract for “a local convention or tourism bureau ” nothing in the statute compels that choice. By its language, subdivision 3 allows the City to fund and operate its own convention or tourism bureau as part of City : government. The City has contracted with the Chamber to do exactly-what the City is authorized by the statute to do — “fund a local ·convention or tourism bureau for the purpose of marketing and promoting the city . . . as a tourist or convention center. “The fact that a private entity will make the actual expenditures neither expands the statutory authority for the expenditures nor does it remove restrictions which would apply to the city if it made the expenditures itself. The City cannot accomplish indirectly by contract what it cannot do directly. Op. Atty. Gen. 733, March 19, 1974. Based upon the foregoing, it is reasonable to conclude that the funds in question are subject to the same restrictions whether expended by the City directly or by the City indirectly through the Bureau. 

Such a result is reinforced by case law addressing the application of the Establishment Clause of the United States Constitution, an area specifically raised by your third question. In Wamble v. Bell, 598 F. Supp. 1356 (w.D. Mo. 1984), amp. Dism., 373 U.S. 933, 105 S.Ct. 3549 (1985), the federal district court addressed the Establishment Clause issues raised by the implementation of a federally funded education program. In that particular case, the federal government contracted with a private, independent contractor, the federal district court analyzed the private contractor’s activities using the Establishment Clause standards which have regularly been applied by the United States Supreme-Court to public agencies. Id. Inasmuch as the Bureau has been limited by contract to those expenditures which the City itself could make, it would “exalt form over substance” if this distinction would treat the proceeds as “private” rather than “public” in nature. See Wolman v. Walter, 433 U.S. 229, 250, 97 S.Ct. 2593, 2606 (1977) (despite a technical change in a program, it was found unconstitutional under the Establishment Clause because the program in substance was the same as that previously found unconstitutional). 

Your second question is whether use of the proceeds of the lodging tax to reduce site rental costs for conventions is authorized by section 477A.018, subdivision 3. In other words, does the use of the tax proceeds to reduce site rental costs for a convention constitute “marketing and promoting the city” within the meaning of the statute? 

At the outset, we note that there are some restrictions on the expenditure of the lodging tax proceeds. In Op. Atty. Gen. 59A-44, Jan. 30, 1985, this office ruled that the city lodging tax proceeds could not be used for capital expenditures for a city. The ruling was in response to a specific example. It was determined that the lodging tax could not be used to build a city¬-owned cross-county ski trail. 

Despite this restriction, it is nevertheless appropriate to construe the words “promoting” and “marketing” according to their common and approved usage since they were not defined by the Legislature for the purposes of section 477A.Ol8. Minn. Stat. 645.08(1) (1986). A dictionary definition of the word “promote” is: 

• To further the popularity, sales, etc. of by publicizing and advertising . . .

Webster’s New World Dictionary 1137 (Second Edition 1970). We do not believe, however, that the Legislature intended that the authorization to promote and market the City is limited to advertising. In determining legislative intent, it is appropriate to examine laws on the same or similar subjects. Minn. Stat. § 645.16(5) (1986). In that regard, the Legislature has previously authorized cities to expend funds for advertising. See, e.g., Minn. Stat. §§ 465.55 and 465.56 which were repealed by Minn. Laws 1987, ch. 291, § 244, but substantially reenacted as Minn. Stat. §§ 469.186-469.189 (Supp. 1987). Since the Legislature has previously authorized cities to expend funds to advertise, it would be unreasonable to restrict the use of the lodging tax proceeds to advertising. 

Assuming that the word “promoting” as used in section 477A.018, subdivision 3, is intended to mean more than advertising, other definitions of the word are relevant. “Promote” may also mean: 

• [T]o contribute to the growth, enlargement or prosperity of; to forward; encourage; advance; to further. It sometimes is used in the sense of aid, assistance, help, or advancement…

73 C.J.S. Promote 151 (1983). The word “market” “conveys the idea of selling, and it assumes the existence of trade and implies competition . . . . ” Lilac Variety, Inc. v. Dallas Texas Co., 383 So.2d 193, 196 (Tex. Civ. App. 1964). See also 55 C.J.S. Market 784 (1948). 

Section 477A.018, subdivision 3 states in part that the City may use the lodging tax proceeds to promote and market the city as a tourist or convention center. When the definitions of the two words are linked, it is reasonable to conclude that the City has the authority to decide to expend the proceeds of the tax in a manner reasonably designed to encourage the use of the City as a convention center. As applied to the specific situation you present, the Bureau an behalf of the City must determine that the site rental reduction is appropriate to “sell” the City and that it is in the City’s best interest to compete with other locations in that manner. In doing so, the Bureau on behalf of the City must examine all of the relevant facts in arriving at a decision, recognizing among other things, the limited budget available. Whether a specific decision is reasonable is a question of fact which we do not undertake to address. Op. Atty: Gen. 629-a, May 9, 1975. 

Subject to the foregoing, the language of Minn. Stat § 477A.018, subd. 3 permits the lodging tax proceeds to be used to reduce convention site rental ·costs to encourage and assist organizations to hold their convention in the City. 

Your third question is whether financial assistance from the lodging tax to the Jehovah’s Witnesses for their convention in the form of payment of rental fees for a building to house a meeting site of convention members would violate the Establishment Clause of the First Amendment to the United States Constitution. ‘ . ‘ 

In analyzing decisions which have applied the Establishment Clause, it is readily apparent that the specific facts of each case are critical to the result. Compare’Mueller v.· Allen, 463 U.S. 388, 103 S.Ct. 3062- (1983) (upholding tax deductions for, inter alia, expenses incurred by taxpayers in providing for the education of their children in public and parochial schools) with Committee for Public Education v. Nyquist, 413 U.S. 756, 93 S.Ct. 2955 (1973) (striking down certain tax benefits to taxpayers which were related to parochial school education). 

The City’s request for our assistance does not contain sufficient facts to enable us to provide it with an absolute answer to the third question. For example, the City has not indicated whether it has a policy of providing financial assistance to all groups, regardless of whether they are religiously affiliated, which would hold a convention in the City. Nor have we been provided with facts concerning either the purpose of the convention itself or the specific use to which the subsidized facilities are intended to be put during the convention. A complete knowledge of 9-ll of the facts is necessary to determine which ones are critical to an analysis under the First Amendment. As stated by the Supreme Court: 

• Rather than mechanically invalidating all governmental conduct or statutes that confer benefits or give special recognition to religion in general or to one faith – as an absolutist approach would dictate – the Court has scrutinized challenged legislation or official conduct to determine whether, in reality, it establishes a religious faith, or tends to do so.

Lynch v. Donnelly, 465 u.s. 668, 678, 104 s.ct. 1355, 1361-62· (1984). 

In the event that an examination of all of the facts indicates that it is appropriate to conduct an analysis under the Establishment Clause, the Supreme Court has established a three­ part test to. be used: 

• Under the Lemon [v. Kurtzman, 403 U.S. 602, 91 s.ct. 2105 (1971)] standard, which guides ‘[t]he general nature of our inquiry in this area’ (citation omitted), a court may invalidate a statute only if it is motivated wholly by an impermissible purpose (citation ommitted), if its primary effect is the advancement of religion (citation omitted), or if it requires excessive entanglement between church and state (citation omitted).

Bowen v. Kendrick, U.·S. , 108 S.Ct. 2562, 2570 (1988). Bowen, the most recent Supreme Court decision conducting an in depth analysis under the Establishment Clause, emphasizes the importance of the facts in the determination of whether proposed action violates the Establishment Clause. As restated by the Court: 

• ‘[R]eligious institutions need not be quarantined from public benefits that are neutrally available to all.’

Bowen v. Kendrick, 108 S.Ct. at 2574, citing Roemer v. Maryland Board of Public Works, 426 U.S. 736, 746, 96 s.ct. 2337, 2344 (1976). The Bowen decision references a number of prior decisions approving public benefits when they have been made equally available to both public and private school children (Board of Education v. Allen, 392 U.S. 236, 88 S.Ct. 1923 (1968); Everson v. Board of Education, 330 U.S. 1, 67 s.ct. 504 (1947)) or when grants have been made to all colleges and universities regardless of any affiliation with a religious body (Hunt v. McNair, 413 U.S. 734, 93 S.Ct. 2868 (1973); Tilton v. Richardson, 403 U.S. 672, 91 S.Ct. 2091 (1971)). Bowen v. Kendrick, supra at 2574. 

As the Supreme Court has noted, however, an analysis under the Establishment Clause does not always result in a favorable constitutional review of proposed programs. As stated by the Court in Bowen: 

• Of course, even when the challenged statute appears to be neutral on its face, we have always been careful to ensure that direct government aid to religiously affiliated institutions does not have the primary effect of advancing religion.

Bowen v. Kendrick, supra at 2574. Grand Rapids School District v. Ball, 473 U.S. 373, 105 S.Ct. 3216 (1985) is a case in which direct government aid, even though designated for a specific secular purpose, was found to advance the pervasively sectarian school’s “religious mission.” 

Although your specific inquiry focuses on the issue of the application of the Establishment Clause, the City’s analysis following a review of all of the facts should not ignore the application of other clauses of the First Amendment. For example, in Widmar v. Vincent, 454 U.S. 263, 102 S.Ct. 269 (1981), a public university denied access to its facilities to a religiously oriented student group. The university argued that allowing religious groups to share. the limited public forum established by the university would have the “primary effect” of advancing religion. Id. at 272, 102 S.Ct. at 275-76. The Supreme Court rejected the university’s argument stating: 

• The question is hot whether the creation of a religious forum would violate the Establishment Clause. The University has opened its facilities for use by student groups, and the question is whether it can now exclude groups because of the content of their speech.

Id. at 273, 102 S.Ct. at 276 (emphasis added). The Court went on to state that:

• We are not oblivious to the range of an open forum’s likely effects. It is possible – perhaps even foreseeable – that religious groups will benefit-from access to University facilities. But this Court has explained that a religious organization’s enjoyment of merely ‘incidental’ benefits does not violate the prohibition against the ‘primary advancement’ of religion.

Id. (citation omitted). The Court recognized two facts which were especially relevant in arriving at its conclusion that any religious benefit would be “incidental:”

• First, an open forum in a public university does not confer any imprimatur of state approval on religious sects or practices. As the Court of Appeals quite aptly stated, such a policy ‘would no more commit the University . . . to religious goals’ than it is ‘now committed to the goals of the Students for a Democratic Society, the Young Socialist Alliance,’ or any other?group eligible to use its facilities . . . .
• Second, the forum is available to a broad class of nonreligious as well as religious speakers . . .The provision of benefits to so broad a spectrum of groups is an important index of secular effect.

Id. at 274, 102 S.Ct. at 276-77 (citations omitted). 

Based upon the foregoing, the City must identify and examine all of the facts relating to its proposed financial assistance to the Jehovah Witnesses’ convention. While the focus of the City’s inquiry in its request is on the Establishment Clause, its analysis should not exclude consideration of constitutional rights relating to speech and association. 

February 24 1993

Representative Dave Battaglia 
517 State Office Building 
St. Paul, MN 55155 
Dear Representative, Battaglia:

You have sought our analysis of the scope of permitted expenditures of proceeds of local lodging taxes authorized pursuant to Minn. Stat. § 469.190, subd. 3 in the context of four particular examples, i.e.: 

1. To pay for high school band uniforms; 

2. To pay for fireworks to be used at a 4th of July celebration; 

3. To subsidize a county fair; 

4. To subsidize local “festivals” for local sports events, such as hockey, baseball or. fishing tournaments. 

We apologize for the long delay. in providing you with a response.

• Minn. Stat. § 469.190, subd. 3 provides:
• Subd. 3. Disposition of proceeds. Ninety-five percent of the gross proceeds from any tax imposed under subdivision 1 shall be used by the statutory or home rule charter city or town to fund a local convention or tourism bureau for the purpose of marketing and promoting the city or town as a tourist or convention center: This subdivision shall not apply to any statutory or home rule charter city or town that .has a lodging tax authorized by special law or enacted prior to 1972 at the time of enactment of this section.

Your question is directed to the 95 percent of the proceeds that must be used to fund a “convention or tourism bureau for the purpose of marketing and promoting the city or-town as a tourist or convention center.” (Emphasis added.) Thus, the authority of the use of the 95 percent portion of these revenues by the local bureau for the purposes ·specified would depend upon whether those uses could ever be seen as “marketing” or promoting the city “as a tourist or convention center.” 

In Op. Atty. Gen. 59a-44, January 30, 1985 (copy enclosed), we concluded that Minn.· Stat.§ 477A.018, subd. 3 (1983) did not authorize the City of Winona to spend portions of the 95 percent of the revenues generated by its city lodging tax to build a cross-country ski trail. This opinion was based· on a review of the legislative history which demonstrated that the legislature did not intend to authorize unrestricted use of lodging tax funds and more particularly did not intend that they be used for capital expenditures. We further reasoned that the restrictive language then in section 477 A.018 could not be interpreted so broadly as to include any and all expenditures which would arguably enhance the attractiveness of the city. I Thus while that opinion dealt with the use of funds for capital expenditures, I do not believe that was intended to imply that capital expenditures for city improvements are the only uses for which lodging tax expenditures might be unauthorized. For example, expenditures for maintaining and grooming the ski trails would present the same difficulty perceived in constructing the trails. 

On December 7, 1988, we again addressed the scope of authority to expend lodging tax proceeds in the context of a proposal to use funds to underwrite a rent reduction for facilities to be used by an organization in holding a convention. See letter dated December 7, 1988, to Alan R. Felix, ·Bemidji City Attorney (copy enclosed). In that letter we concluded that the “promoting” and “marketing” authorized was not necessarily limit to advertising alone but could include other activities which are reasonably designed to encourage the use of the city as a tourist or convention center. In that regard, we indicated that a city could determine that a · convention facility rental subsidy would be an appropriate way to attract a group to hold its convention in that city. · Thus we have been of the view that “marketing and promoting” the city for purposes of lodging tax expenditures includes activities directly related to providing information concerning tourist or convention assets of the city to persons outside the immediate area or in directly seeking to attract such persons to the city, but does not generally include creation ·of such assets or the support of community betterment in general. In light of the fact that the revenue in question is raised by taxation of hotels, motels and like tourist facilities, it is likely that the legislature intended that the restricted 95 percent be used in ways calculated to directly attract persons likely to patronize such facilities as opposed to uses which generally benefit the city as a whole. 

In the context of your inquiry, each of the proposed uses would have to be evaluated based on all relevant facts to determine whether the use would “market” or “promote” the city, and whether it would be in the City’s best interest to compete with other municipalities in that manner, given the-City’s budget constraints. City officials would be in the most advantageous position to conduct such an analysis. See Op. Atty. Gen. 629-a, May 9, 1975. We can informally discuss the expenditures you propose in light of the principles mentioned above. However, the ultimate determination whether any of such expenditures would actually market or promote _the city ·for tourism or convention business in a particular circumstance would likely be heavily dependent upon the facts of each given case. 

1. Minn. Stat. § 477A.018, subd. 3 was repealed, in 1989 Minn. Laws, ch. 277, art. 1, §35. However, Minn. Stat. § 469.190, subd. 3 (1992) contains the same operative language. 

1. Purchase of school band uniforms. It is frankly difficult to see how the purchase of band uniforms could be perceived. as marketing or promoting the city as a tourist. or convention center. While new uniforms could enhance the appearance of the band and the image it may convey when performing outside the community, it is not clear how t?e uniforms in themselves would convey any sort of message about any tourist or convention resources the city may have or result in the increase of tourism or convention business. 

2. Purchase of fireworks. Qualification of this expenditure would seem heavily dependent upon the circumstances of each case. If the fireworks were to make a significant · contribution to a city’s effort to attract tourists or convention business, especially if the display was advertised outside the city for that purpose, it could be determined to be related to promotion and marketing for those purposes. On the 0th.er hand, if the display were essentially a local event for residents of the city and surrounding area it may not qualify. 

3. The same might also be said for expenditures to subsidize a county fair or local sports event. The matter would, I believe, turn on whether the particular expenditure is reasonably related to a specific activity for attracting tourists or convention business. Certainly, advertising or similar efforts to make tourists or ·convention planners from outside the area aware of local events such as the fair or sporting events would appear to be legitimate marketing or promotion. If, on the other hand, the result of the expenditures is simply to assist the event in general. or in some way that would not reasonably be seen as calculated to attract additional people for tourism or convention business, they would not likely qualify. For example, subsidy for a statewide sporting event such as the Star of the North games to be held in the city would appear far more appropriate than underwriting an event essentially for local teams and their supporters: 

I am sorry that I cannot be more definite, but I hope these thoughts. are helpful to you. Again, we apologize for the delay. Please contact us if we can provide more assistance. 

October 15, 2002 

Mr. John H. Bray 
CLURE EATON LAW FIRM 
222 West Superior Street 
Skywalk Level, Suite 200 
Duluth, MN 55802-1907

RE: The Use of Lodging Tax Proceeds/City of Proctor 

Dear Mr. Bray: 

Thank you for your letter of August 19, 2002. On behalf of the City of Proctor you ask whether certain proposed expenditures of lodging tax proceeds are permitted by law. 

BACKGROUND

Minn. Stat. § 469.190, subd. I (2000) authorizes cities and towns to impose a tax of up to three percent upon receipts for lodging at hotels, motels, rooming houses, tourist courts, and resorts. Minn. Stat. § 469.190, subd. 3 (2000) provides in part: 

• Subd. 3. Disposition of Proceeds. Ninety-five percent of the gross proceeds from any tax imposed under subdivision I shall be used by the statutory or home rule charter city or town to fund a local convention or tourism bureau for the purpose of marketing and promoting the city or town as a tourist or convention center.

Thus, five percent of the lodging tax proceeds is unrestricted as to use. However, the remaining 95 percent of these revenues may be used only to fund of a tourism bureau, local bureau for sole purposes of “marketing”‘ or promoting the city “as a tourist or convention center.” For purposes of this opinion this allocation will be referred to as the “95 percent category.” 

There appear no court decisions addressing the permissible uses for those funds. However this Office has previously considered the scope of expenditure authority. 

In Op. Atty. Gen. 59a-44, January 30, 1985 (copy enclosed), this Office concluded that this language, then codified as Minn. Stat.§ 477A.018, subd. 3 (1983), did not authorize the City of Winona to spend portions of the “95 percent category” on construction of a cross-country ski trail. That opinion was based on a review of the legislative history which indicated that the legislature did not intend to authorize use of lodging tax funds for general city purposes, and more particularly did not intend that they be used for capital expenditures of general benefit to the City. That opinion further reasoned that the restrictive statutory language could not be interpreted so broadly as to include any and all expenditures that would arguably enhance the attractiveness of the city, because co do so would effectively negate the restrictions. 

On December 7, 1988, this Office issued an opinion in the context of a proposal to use the “95 percent category” funds to underwrite a rent reduction for facilities to be used by an organization in holding a convention. See opinion dated December 7, 1988, to Alan R. Felix, Bemidji City Attorney (copy enclosed). That opinion concluded that the “promoting” and “marketing” authorized by the statute was not necessarily limited to advertising alone but could include other activities that are reasonably designed to encourage the use of the city as a tourist or convention center. In that regard, a city could determine that a convention facility rental subsidy would be an appropriate way to attract a group to hold its convention in that city. 

Each of the proposed uses of proceeds set forth in your letter would need to be evaluated based on all relevant facts to determine whether the expenditure would “market” or “promote” the city “as a tourist or convention center.” The ultimate determination whether any of such expenditures could actually market or promote the city for tourism or convention business in a particular circumstance would be dependent upon the facts of each given case. City officials rather than this Office are in the best position to conduct such a factual analysis. See, e.g., Op. Atty. Gen. 629-a, May 9, 1975. However, I can informally discuss the expenditures you propose in light of the principles mentioned above. 

1. May lodging tax proceeds be used for the painting and maintenance of tourist attractions owned by the City, in this case, a steam locomotive engine (Proctor has historically been associated with trains) and a mounted fighter jet?

The use of proceeds for the painting and maintenance would seem analogous to the ski trail expenditure discussed in the 1985 opinion. While such a use could serve to enhance or preserve assets of the city, it is difficult to see how that action in itself would market or promote the city’s tourism or convention resources. Rather, expenditures for dissemination of information about such attractions to potential visitors would seem more in keeping with the statutes’ intent. 

1. May lodging tax proceeds be used for seasonal decorations and decorative lighting?

The same reasoning set forth in response to your first question would also apply to your questions about using the tax proceeds for decorative lighting or “seasonal decorations” that would generally beautify the city’s “main thoroughfare.” 

1. May lodging tax proceeds be used to develop ·and maintain welcome signs?

The authority to expend lodging tax proceeds. for welcome signs would be dependent upon the particulars of each sign. For example, a sign placed at the city limits merely saying, “Welcome to Proctor, population 2852, would not appear to have any particular marketing or promotional effect. On the other hand, a sign placed on a major highway notifying passersby of notable local attractions, or activities that would be of interest to tourists or convention planners would seem to be permitted. 

1. Are lodging tax proceeds predominantly meant to promote tourism to a city, or to encourage visitors to stay in local hotels?

It would seem that the above two goals are complementary, rather than mutually exclusive. Section 469.190, subd. ·3 (2000) speaks generally of using the proceeds to promote tourism and convention business. It does not limit its coverage to encouraging people to stay at local hotels, although the pennissible uses of the tax are ones calculated to attract to the city people who are likely to patronize such facilities. Thus, a promotional campaign funded with lodging tax dollars would not necessarily be required to mention local hotels at all. On the other hand, there is no question that the nature and availability of local lodging facilities is an important consideration for tourists and essential information for convention planners. Indeed, in some circumstances, hotels may themselves be tourist attractions or convention centers. Therefore, creation and distribution of materials that publicize the features of local hotels would seem to be a permissible expenditure. 

As noted above, the extent to which specific lodging tax expenditures will actually market or promote the tourism or convention features of the city is a factual determination to be made by the city on a case-by-case basis. I hope the foregoing discussion is helpful to that process. 

John H. Bray 
CLURE EA TON LAW FIRM 
222 West Superior Street 
Skyway Level, Suite 200 
Duluth, MN 55802-1907

RE: The Use of Lodging Tax Proceeds/City of Proctor 

Dear Mr. Bray: 

Thank you for your letter of April 4, 2003, concerning permissible expenditures of lodging tax proceeds. 

You state that your letter is an “amended request” for an opinion from this Office asking two questions in addition to other ones you posed in an August 19, 2002 letter, and which were addressed in my October 15, 2002 letter to you (copy enclosed): 

1. May lodging tax proceeds be used to purchase fireworks associated with an annual festival?
2. May lodging tax proceeds be used to assist in funding a local festival?