Economy and Tourism & Hospitality and Economic Development

State tourism effort set for new format: Lawmakers create separate department; supporters think changes could lead to less bureaucracy, more funds

April 4, 2005

After years of languishing in the Department of Commerce, lawmakers passed legislation late last month creating a separate Department of Tourism and Community Development that will report to Lt. Gov. Becky Skillman starting July 1.

The commerce department already has been dissolved, effective Feb. 1, and the state's economic development programs have been handed to the new Indiana Economic Development Corp. Tourism supporters are hopeful that by removing a layer of bureaucracy, the department can capture more funding.

"It was underneath Commerce and would have to compete directly with other Commerce issues," said Matt Carter, vice president of strategic development at the Indianapolis Convention and Visitors Association. "This is an appropriate alternative and a step in the right direction. It gives [tourism] its own autonomy."

The decision to establish a tourism department is just one piece of an ongoing plan to make the state more competitive in attracting visitors. While 58 million people drop roughly $7 billion annually patronizing the Hoosier state, the amount Indiana spends on tourism initiatives still lags behind its Midwestern counterparts.

Indiana's $4.5 million tourism budget ranks 37th nationwide and is merely a drop in the bucket compared with Illinois, which spends $49 million, or Missouri, which appropriates $15 million, according to the New York-based Travel Industry Association of America.

"We're a very lean and mean organization," new tourism executive director Amy Vaughan said. "We have a ways to go to compete with our neighbors. We're hopeful that over time, our budget will grow."

While Indiana has some catching up to do in terms of public funding, its efforts to attract private dollars are more than adequate. The state does not have the budget to advertise in print outlets. But the tourism office has been successful in generating private revenue-$1.8 million last year-from selling advertisements in the Indiana Travel Guide and other publications. The amount generated from private contributors ranks third behind Florida and California, Vaughan said.

Now that an autonomous tourism department has been created, the next step in the plan to bolster Indiana's image involves a new funding model that should bring more money into the budget.

The concept, which the Legislature would have to approve, would allow the state to reinvest back into tourism initiatives the amount of sales tax collected from the industry that is above what the state expected to receive. The state realizes $34 in sales tax revenue per each dollar spent on promoting tourism, Vaughan said.

If hotel sales for a year are higher than expected, for instance, the tax amount above what was budgeted will be reinvested into the tourism budget. Missouri adopted the funding model about a decade ago and since has managed to double its tourism budget, Carter said.

The funding mechanism would act as an incentive for the tourism industry to build a larger budget and would relieve officials from having to make their case every year to the Legislature, he said.

The tourism industry employs 97,000 people in the state, and Skillman made sure professionals attending the 2005 Hoosier Hospitality Conference March 23-24 understood what the state is attempting to accomplish with the changes.

She testified on behalf of the bill in February and was impressed with the support it received. The issue rolled through the Senate on a 48-0 vote.

"Visitor spending directly affects our Indiana economy," she told conference attendees, "and we want to do more than support this vital segment of our economy. We want to help it expand over time. The governor and I believe tourism plays an important role in building our sense of pride as Hoosiers."

The bill puts safeguards in place to better secure appropriate and consistent funding to promote the state's tourism destinations, and streamlines the process for awarding grants.

Sen. Vi Simpson, D-Bloomington, authored the bill that was sponsored in the House by Rep. Jeffrey Espich, R-Uniondale. Espich said the effort to establish a tourism department is similar to the push to create a Department of Agriculture, which would also fall under Skillman's watch.

In supporting the tourism endeavor, Espich simply said he hopes more attention will be paid to attracting more visitors.

"One of the neat things, I thought, was that if there were any big tourist initiatives, like a big theme park, the Department of Tourism would now be engaged in the solicitation and development of such proposals," Espich said.

The tourism department has a staff of eight. State tourism officials who traditionally have worked with a small staff and budget have done the best they could, under the circumstances, Carter said.

"Their hands were tied because we were unsuccessful in creating an adequate amount of funding," he said. "This is an appropriate way to bring funding to this industry to a level where it ought to be."
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