Tourism Improvement Districts: More Funding for Sports Tourism

BY JACKIE REAU, GAME DAY

At a time where communities, sports corporations and venues are looking for new sources of revenue for their projects, one method growing in popularity is the formation of Tourism Improvement Districts (TID) dedicated to sports tourism funding.

In a recent Sports ETA presentation, Roxanne Steinhoff, lead consultant for sports tourism for Civitas, explained the genesis of TIDs, beginning with how sports tourism traditionally gets its funding. For most, it means private sources such as memberships and partnerships, grants, event revenue, contract services and sponsorships, along with public sources like federal and state grants, tax allocations (both tethered and untethered), property tax increment financing, sales tax increment financing and assessments, which include TIDs.

So what is a TID assessment and how is it different from a tax?

“Taxes of course are, by nature, public funding sources,” according to Steinhoff, “so they’re imposed by governments, mandated by government, they have no defined term, typically there’s no requirement that they have to benefit those businesses that are paying the tax, and then of course the biggest problem we always have, funds can be diverted by government.

“An assessment, on the other hand, is a bit different. An assessment at its core is a business model, it is a public-private model. The assessed businesses vote to self-assess, the government collects the funding, then those businesses govern how that assessment is spent. There is a specific term and plan, usually with TIDs it depends on how long you want them to run for, but they have terms that must be renewed, there is legal accountability to the district plan.

“What that means is if the assessment is not benefiting those businesses that are paying it, then the assessment can no longer be levied. It has to benefit the tourism business and the most important thing, funds cannot be diverted for general government programs. Assessments may only be used for tourism purposes.”

A Tourism Improvement District model could include hotels in the district paying an assessment, that assessment is collected by the local government, then those funds are managed by the destination management organization (DMO). “There are some sports commissions that do have a TID, but usually the way this is set up is the DMO manages those funds,” said Steinhoff.

“What’s great about the TID model,” she continued, “is that not only does it get us dedicated funding, but it also helps us to build partnerships within our business community, something as sports commissions we’re already good at but this adds another layer.

“When a TID is formed, it creates a non-profit board, which the assessed businesses will sit on that board. That in turn creates a forum where the businesses at a minimum get to direct how those funds are spent, and allows them to have a significant voice while the DMO or sports commission gets a reliable, dedicated source of funding.”

“Not only are we seeing an increase in destinations implementing TIDs to support tourism promotion in general, but we’ve seen a substantial increase in interest for using TIDs to fund sports event and facilities,” said Roxanne Steinhoff, Legal Analyst & Sports Consultant for Civitas. “In a survey we conducted in partnership with Travel Analytics Group in late 2021 and early 2022, 50% of the respondent destinations considered improving their capital tourism assets a top priority, and 33% were prioritizing an increase in hosting sports events. The interest in sports events and facilities is only continuing to grow, and we expect to see more existing and new TIDs serve as key funding tools for sports-focused destinations.”

Tourism Improvement District (TID) Business Model

A Non-Profit Board is Created

• made up of the assesed businessses

The TID impact is that it also helps the sports entities build community. “We all know that sports already is a bridge between our community and tourism, and a TID just elevates that,” said Steinhoff. “TID funds, depending on your plan, can be used for bid fees, host costs, event marketing and/ or grants to rights holders. What that means is if you have a model where your rights holders come in and maybe your DMO is smaller, you don’t have as much of a big sports team, you can give them a grant to host their event.

A

Forum is Created

•businesses direct how the funds are spent

•Gives the businesses a voice

• DMO and/or sports commission get reliable, dedicated source of funds

“Funds can also be used to finance capital improvements such as sports facilities and event centers, not only is that good for tourism, it’s good for communities. And then funds can also be allocated to grant programs to support special initiatives or community-based events. There are a few existing markets that actually use part of their TIDs to have community members come to them and ask for grant money to host local events, which is a pretty cool benefit.”

At the time of this presentation, there were 192 TIDs in place across 18 U.S. states. At least that many states have either introduced legislation or are considering legislation to allow formation of TIDs. The amounts raised range from $10,000 on the low side to $120,000,000 at the highest. Currently, as of February 1, 2023, there are 201 TIDs in place across 20 U.S. states.

Benefits

• dedicated funding

•build partnerships within our business community

201 place across 20

•bid fees,

•host costs

•event marketing

• grants to rights holders

•finance capital improvements such as sports facilities and event centers

•grant programs to support special initiatives or community-based events

Most TIDs, according to the Civitas, promote sports tourism either through direct grants to the DMOs, direct grants to rights holders to host events, or combination of both.

To start your research on setting up a TID: Know your state’s statute governing TIDs to know how your organization or sports commission could benefit from the funds generated by your own Tourism Improvement District.

You can watch the presentation, and panel discussion afterwards, here