Thursday could be a day for the history books as the Williamsburg City Council decides whether it will fundamentally alter the city’s relationship with the Colonial Williamsburg Foundation.
Colonial Williamsburg and its namesake city have been inextricably linked for nearly a century, but a proposed tax may place that symbiotic relationship under threat.
For the first time, City Council is looking to create a new tax on admission tickets to Colonial Williamsburg and other attractions in city limits.
City officials have said the money will go toward making Williamsburg “more of a destination.” Colonial Williamsburg claims the tax could have devastating effects on the organization.
In 1924, when John D. Rockefeller toured the historic area of Williamsburg with Reverend Dr. W.A.R. Goodwin, Rockefeller saw the potential to reconstruct and preserve a slice of American history.
In the prevailing 91 years since the start of reconstruction, the City of Williamsburg and the Colonial Williamsburg Foundation have often worked together.
On Thursday, City Councilors will vote on a proposed tax increase to meals and lodging, as well as the creation of an all new tax aimed at admission tickets to places like Colonial Williamsburg.
The new tax will fund the creation of a “Tourism Development Fund,” a fund to support city efforts to make Williamsburg a “tourism destination” Of the six proposed tax options, only one of the plans — the first one submitted — does not include an admissions tax.
Historic moment
A vote in favor of the tax would be historic, as the city has never imposed a tax on admission tickets to Colonial Williamsburg, according to City Finance Director Phil Serra. If the city were to adopt such a measure, it could add as much as $2.2 million annually to city coffers, according to city estimates.
With a proposed tax increase of seven percent, an adult single day ticket to Colonial Williamsburg could increase by as much as $2.87 per day. Ticket prices would rise from $40.99 to $43.86.
In 2015, the Foundation brought in about $19 million in admissions, according to tax documents. If the city had charged the highest proposed tax rate that year it would have made $1.34 million dollars — nearly $900,000 less than what the city estimates it could make from proposed tax hike.
Colonial Williamsburg Foundation President Mitchell Reiss says the tax would deal a devastating blow to an organization already struggling to increase visitation.
Just over half of the Foundation’s program service revenue, money Colonial Williamsburg makes from tourists, comes from admission tickets.
In an analysis of the past 11 years of Foundation tax returns, WYDaily found the organization has suffered significant financial shortfalls, leading Colonial Williamsburg to transfer funds from its endowment to cover operations and debt repayments.
In 2015, the most recent tax year available, Colonial Williamsburg transferred $83 million from its endowment to cover its expenses. The Foundation paid off about $10 million of its debts annually between 2012 and 2015, according to tax returns. In the same period, its sales of retail products have stagnated.
Meanwhile, running the taverns and colonial houses has cost the foundation about $2 million more than they annually brought in.
“If any City Council member is saying that the admissions tax won’t hurt Colonial Williamsburg they’re being politically irresponsible,” Reiss said. “If any City Council member believes that the admissions tax won’t hurt Colonial Williamsburg they’re being financially illiterate.”
‘Meaningful amount of money’
City Councilor Doug Pons said the need to fund “product investment” in Williamsburg has been talked about for years and added the Tourism Development Fund has been a topic of council discussion for months.
“The final product might be different than it is in its current form,” Pons said, before indicating he prefers an option that calls for a seven percent tax on meals, lodging, and admissions. “The option has to generate a meaningful amount of money.”
Yet Reiss has made it clear he is opposed to “any new tax increases” on tourists. He said if the tax increases are approved by the council it could result in fewer visitors, fewer people employed by the Foundation, and lower tax revenues for the city.
In a letter to the City Manager, Reiss wrote “Significantly higher taxes on meals and hotel rooms, coupled with a new admissions tax on attractions like Colonial Williamsburg, will cause significant harm to those working the hardest, and likely contributing the most, to attract more visitors to our community.”
Every admission ticket matters to the organization, said Virginia State Senator Tommy Norment, Jr., who serves on the Colonial Williamsburg Foundation’s Board of Trustees’ financial committee.
“As a lifetime resident of the community, I do not believe that most of our citizens understand the financial challenges of the Colonial Williamsburg Foundation,” Norment said.
According Norment, the foundation’s debts are almost half of what the endowment is worth — more than $300 million compared to the $650 million endowment. He said Colonial Williamsburg cannot keep drawing on its endowment to pay the bills and called the practice “unsustainable.”
Varying visions of the future
The City of Williamsburg and Colonial Williamsburg Foundation have both said they want to continue to promote tourism to the Revolutionary City, but in the words of Reiss “where we disagree is over how we reach this goal.”
Councilman Pons has previously said he does not expect another figure such as John D. Rockefeller to come along and invest in the city.
“We often hear we need to invest in new infrastructure, and there just isn’t money available,” Pons said. “It’s time, I believe, that some investment is made. No billionaire is going to show up and make the investment that we need to.”
Pons and fellow Councilor Barbara Ramsey invoked their right to push the issue of the Tourism Development Fund to the floor of June 5 City Council work session, a meeting that lasted over five hours.
Ramsey said now is the time to raise the taxes to pay for a program that would “move Williamsburg forward.”
“If we don’t invest now to broaden our appeal and make us the best that we can be, it will be harder for us to compete with [other] destinations,” Ramsey said
That’s not a view held by Councilor Benny Zhang, who has instead suggested that the city study the issue before passing a tax increase that the city doesn’t yet know the full implications of, he said.
“It’s hard to ascertain how we would benefit from this tax increase,” Zhang said. “I think it’s important that we know what we’re getting ourselves into. Anything short of that would be reckless.”
Thursday’s meeting will begin at 2 p.m. at the Stryker Center, 412 N Boundary St.
