Continuing a positive trend, Minnesota’s hospitality and leisure industry added 16,690 from May to June, according to new data from the Department of Employment and Economic Development. As Minnesotans continue to re-enter the workforce and/or move industries, thousands are choosing hospitality which is a positive sign. Overall, Minnesota is still down 33,644 private sector workers compared to pre-pandemic levels, and hospitality continues to make up an out-sized portion of this deficit (68%). This points to the uneven nature of the recovery, as cited in recent news reports and evidenced by our quarterly Economic Snapshots based on surveys with the Federal Reserve Bank of Minneapolis and Explore Minnesota Tourism.
Our advocacy to help create a level playing field in the market continues to have success, as more and more counties have developed local regulations in the last two years. While there are currently over 8,000 vacation rental units in the state, government regulations have been challenged to keep up with the changing marketplace. Hospitality Minnesota, through its Short-Term Vacation Rental Work Group, has developed a Model Policy Checklist to aid counties and other local governments in developing fair regulations.
Beltrami, Blue Earth and Carlton Counties add Ordinances in 2022
Beltrami, Blue Earth, and Carlton counties are the most recent local governments to tackle the challenges around fair regulation of short-term vacation rentals by passing ordinances. The policies adopted by these counties include many of our recommendations, and we will continue to communicate with local governments as they adapt to market conditions and challenges posed by the changing technology and practices in overnight accommodation.
Lake County and Some Stearns County Townships hit “Pause” on Vacation Rentals
In May, Lake County passed a one-year moratorium on any new short-term vacation rentals as the county grapples with concerns around housing shortages, property stewardship, and fair regulations. Several townships in Stearns County have taken similar actions to pause new rentals until the local governments can figure out the correct regulatory balance.
Stearns County and Cook County Consider Updates to their Ordinances
As local townships hit pause, County Commissioners and staff in Stearns County are strongly considering updates to their regulations county-wide. Stearns was one of the first counties in the state in 2012 to address vacation rental regulation by requiring permits. Hospitality Minnesota has been in communication with county officials and hospitality thought leaders and we have shared both the Issue Brief and Model STVR Policy Checklist with the county and offered to serve as a resource. Similarly, Cook County has created a committee to review the ordinance it passed in 2019, which Hospitality Minnesota worked on. Much of the ordinance includes our suggestions. As in Stearns, we are in conversation with county officials and local hospitality leaders and have provided our resource materials and offers to aid in any way helpful.
Want to get involved?
Are you interested in advocating for your county or local government to create a fair and level playing field through a vacation rental ordinance, or to improve the current regulations? We have tools and networking resources to help.
Legislative Deadline Passes With Work Unfinished, Special Session Unclear
The Legislature could not come to agreement on a variety of spending bills prior to last night’s midnight deadline and will adjourn today. There are ongoing discussions regarding the potential of a short special session if agreement can be reached quickly. Unfortunately, several of our key objectives were caught in the crossfire because larger bills they were attached to did not get passed. The following measures would require a special session in order to pass omnibus bills related to taxes, jobs and environment:
What Did Pass?
Several of our legislative priorities were passed into law this session:
Stay tuned for additional updates on a potential special session.
Some Victories, More Work to be Done as Session Nears Conclusion
With only 10 days left in the legislative session and a historic budget surplus, legislators remain far apart on numerous policy and finance decisions. Here’s a status breakdown of legislation in-play or concluded affecting our industry; use the the link below to review our legislative priorities for this session.
Unemployment Insurance Fix The biggest bipartisan accomplishment to date is passage of legislation paying back the federal government and the UI Trust fund without spiking payroll taxes on hospitality (and other business) operators. This was a top legislative priority of ours this session. We appreciate the work of Senator Pratt, Representatives Noor and Pelowski, and Governor Walz to get this done and the engagement of all of our members that participated in our calls to action on this.
“Frontline” Worker Pay As part of the UI Trust Fund negotiations, legislators agreed to expand the “frontline” worker pay agreement from last session. The benefits include foodservice and hotel workers (though there are exclusions, including for workers who received 20 or more weeks of unemployment benefits). Employers are required to notify workers of their potential benefits.
The Senate and House positions remain widely divergent on tax policy and there is very real concern about the ability to find compromise in the coming days, potentially jeopardizing policy that could help our industry. Here’s a breakdown of where the two bodies are at on our key issues.
Take Action NOW
Use the messaging in our Issue Briefs linked below to contact the senate tax chair and house conferees for the omnibus tax bill conference committee today and ask them to support our industry by:
Open Wholesale on Liquor This issue impacts any hospitality business that purchases liquor, from small ma-and-pa resorts, to restaurants, bars, and hotels. Last month, the U.S. Federal District Court struck down Minnesota’s “Coleman Act” as unconstitutional. Unless the legislature acts to ensure open wholesale, large-scale out-of-state producers will be able to use exclusive contracts, driving up cost for our members and other retail purchasers. This is a top issue for our industry, and we are working with a coalition to ensure open wholesale for all.
While the Senate passed SF3008 the fix to the Coleman Act unanimously, the House added a variety of additional alcohol policy items to its bill before passing it 85-48. The House version of the bill, summarized by House Research and linked below, expands freedom for craft brewers/distillers to sell their products (in volume and/or container), allows 17-year-olds limited ability to serve alcohol, allows counties to issue liquor licenses to resorts and others and other provisions.
Take Action NOW
Contact the conferees and tell them to pass the Coleman Act fix and help our hospitality businesses!
Workforce and Jobs Proposals As we previously reported, we were disappointed that neither the House nor Senate omnibus jobs bills included our online hospitality training program. This bipartisan legislation would appropriate $275,000 to create an online hospitality training program through the University of Minnesota Tourism Center (in partnership with Explore Minnesota Tourism), modeled after the highly successful program in South Dakota. We have sent a letter asking that the conference committee reconsider including HF3550/SF3771.
Take Action NOW
Contact the conferees today and ask them to invest in much-needed hospitality workforce training by including HF3550/SF3771 in the omnibus jobs bill.
The House workforce/jobs bill also includes a scaled-downed version or Rep. Sandstede’s bill to provide direct grant relief to small businesses impacted by COVID. The current proposal would provide $35M in grants (down from $100M) but is not included in the Senate proposal.
New Hotel/Overnight Accomodation Regulations The House State Government Omnibus bill includes a provision allowing local governments to add new and unnecessary regulatory burden on hotels and overnight accommodations on top of existing state and county licensure. We sent a letter opposing this legislation and are in communication with the senate chair, Mary Kiffmeyer, who has also expressed that she shares our concerns. We continue to work to protect hotels and other overnight accommodations from over-regulation.
Explore Minnesota Tourism Funding Hospitality Minnesota supports an additional $10M in funding for Explore Minnesota Tourism in the House Omnibus Environment bill for tourism industry recovery grants. While the Tourism Growth Coalition (of which we are part) proposed $6M, the House has increased the ask substantially, which we support. The Senate bill does not currently include this provision and instead would direct $1.45M to Minnesota Sports and Events to attract large scale sports and events to the state.
Broadband Expansion The House Agriculture omnibus bill includes a proposal for $25M in new funding for expanding broadband. We have had good success in recent years working with a coalition to expand access to broadband to all four corners of the state and continue to support additional investment that will aid hospitality businesses and guests.
Invasive Species In addition to the $45M investments made last year to prevent and mitigate invasive species, the House Omnibus Environment bill proposes an additional $2.3M ($1.8M to local governments and lake associations to deal with aquatic species and $500,000 for cooperative weed management). Hospitality Minnesota supports an aggressive and comprehensive approach to dealing with invasive species.
Boating Licensure We are monitoring a provision in the House Omnibus Environment bill (and heard in senate committee) to create a license requirement for boat operators in Minnesota. We have relayed some concerns about requirements for resorts and rental operators to enforce the law, in particular a provision that could require them to administer a test to renters even if the renter has already obtained a license or is exempt. The mark-up linked below includes exemptions and requirements of note.
Paid Leave Proposals Hospitality Minnesota supports the ability of operators to offer competitive leave benefits on a voluntary basis within their financial means. The House and Senate have competing proposals on paid leave, with the House passing government mandated benefits funded by employers (and potentially partially funded by employees for family leave). The Senate proposal would incentive purchase of insurance or payment of benefits through tax credits up to $3,000 per worker, rather than mandating a specific benefit package. With only 10 days left in session and the parties so far apart, a deal appears unlikely on this issue this session.
With only 10 days left in the legislative session and wide gaps between the parties’ policy and finance philosophies and positions, the situation is very fluid. Stay-tuned for additional updates and potential opportunities for grassroots engagement in the endgame.
In the meantime, you can contribute to our understanding of the conditions that drive our policy and advocacy work by completing the Q2 Business Conditions Survey.
Want to get more involved? Join the HM Advocacy Group available to all members by contacting Ben Wogsland.
The Big Picture With only seven weeks to go until adjournment, our divided legislature continues to be far apart on how to best use the historic $9 billion surplus to hasten the economic recovery and to address our state’s needs. There is increased speculation that the parties may not reach agreement and may leave much of the surplus until next year. Given that 2022 is not a traditional budget year, the legislature technically does not have to pass finance bills or spend the surplus. Our continued advocacy work this session is centered around two principles:
Unemployment Insurance Trust Fund Despite early statements of support from both Senate republicans and the governor to address the $2.7 billion needed to repay the federal government and refill the Unemployment Insurance Trust Fund, resolution has been elusive. While the Senate has already passed the bill by a wide bipartisan margin, House democrats continue to hold out for agreement on frontline worker pay beyond the $250 million agreed to last session. We continue to work with a coalition of business organizations to push for resolution of the UI Trust Fund ASAP and block significant payroll tax increases.
Restaurant Revitalization Fund Tax Free Our work at the Minnesota Legislature is paying off as yesterday our bill making Restaurant Revitalization Funds tax free was included in the release of both the House and Senate Omnibus Tax bills. We have testified in multiple committees and engaged you as members in direct action to get to this point. Thank you for going to bat! The bills also includes conformity on the EIDL loan advances and the Shuttered Venue Operators Grant that was part of our advocacy efforts.
Left to right: Rep. Paul Marquart (Dilworth), Chair, House Tax Committee; Sen. Carla Nelson (Rochester), Chair, Senate Tax Committee;
and Lead Authors Rep. Dave Baker (Willmar) and Sen. Karla Bingham (Cottage Grove)
Contact the committee chairs, Rep. Noor and Sen. Pratt and ask them to include significantly expanded grant relief for hospitality businesses in need. You can remind them that Wisconsin has passed over $900 million in small business direct grant relief (compared to Minnesota’s $345 million), including $93 million for hotels. Minnesota can do better by businesses hit hard by the pandemic.
Open Wholesale on Liquor This session we have been working with a coalition to ensure open wholesale on liquor. As we reported last week, the courts have ruled the “Coleman Act” unconstitutional due to its “discriminatory treatment” of out-of-state producers. This means that if the legislature does not act to create true open wholesale for all parties, giant out of state distributors will be permitted to use exclusive contracts, likely driving up cost for purchasers of spirits such as our members, and potentially creating further supply chain issues. Thankfully, the judge in the case delayed the effect of the ruling for 60 days, giving the Legislature time to act. While the senate bill has been passed to the floor, the house version awaits action in the Ways and Means committee.
Property Tax Relief Hospitality Minnesota supports the elimination of the state property tax levy. While last session we won an incremental victory by raising the property value exemption, there may be an opportunity to further this work this session. Sen. Nelson (Rochester) has a bill to repeal the tax and is the senate tax chair. While the business community has been focused on UI so far this session, there may be additional opportunities to advance business property tax reform later this session. We have met with both tax chairs on our position and will continue to monitor the situation for opportunities.
Sales Tax Exemption on Restaurant Equipment Building on momentum from last session, we have pressed hard for inclusion of this long-term priority this year. The House Omnibus Tax bill revealed yesterday does include our bill, authored by Rep. Baker (Willmar). The current Senate Omnibus Tax bill does not include our bill, however, meaning there is more work ahead.
Explore Minnesota Tourism Funding Hospitality Minnesota is part of a coalition seeking additional funding of $6 million to EMT for economic recovery grants. The recently released Senate Omnibus Environment committee does not include this provision, but instead directs $1.45 million to EMT to promote large scale sporting and other events. The House Omnibus Environment bill includes our ask, but also raises the investment to $10 million. We will be monitoring this closely as it moves to conference committee.
New Hotel Regulations As we have reported previously, legislation creating an additional and unnecessary bureaucratic licensure structure at the city/town level over hotels (and potentially resorts) was passed to the House Floor. We have been in contact with the Senate committee with jurisdiction over the bill and submitted a letter to key players and the author. The Senate committee has not heard the bill to date. We are closely monitoring the State Government Omnibus bills to see if it is added as an amendment in the coming weeks and will act accordingly.
Border/BWCA Closure Assistance Legislation supported by Hospitality Minnesota to provide $7.5 million in grants to small businesses impacted by the closures of the Canadian border and the BWCA has advanced and has now received a hearing in a Senate committee and is included in the House Omnibus Jobs bill release yesterday. We testified in support of the measure late yesterday and will continue to advocate for its passage. The bills are authored by Sen. Bakk (Cook) and Rep. Ecklund (International Falls).
Protecting the Lodging Tax Unfortunately, provisions to redirect the lodging tax for capital projects in Woodbury and to permanently allow redirection in Plymouth have advanced in the House Omnibus tax bill. We have opposed these measures at every step and will provide additional testimony in the House Tax committee tomorrow. These provisions are not included in the current Senate Omnibus Tax bill.
Resort Spa De-Regulation A bill to de-regulate spas/hot tubs at resorts (as was allowed for Houseboats several years back) has advanced to the Senate floor and has been included in the Health and Human Services Omnibus bill. Sen. Bakk proposes the bill would put resorts with stand-alone single unit spa pools in a room or cabin on an even playing field with cabin rentals and/or vacation rentals. In a Senate hearing, HM member Mindy Fredrikson testified that as a resort owner, the current regulations triple the cost of adding a hot tub to a unit (over $60,000 per), putting resorts on an uneven playing field with short-term vacation rentals that are under-regulated or unregulated in this area under current practice.
Employer Mandates While debates around minimum wage and predictive scheduling have been quiet this session, competing proposals on paid family leave have taken shape with democrats favoring a state-run program funded by a new payroll tax (0.6% split between employer and employee) and mandated on all employers. Similar programs have run into varying problems in Oregon, Washington, and New Jersey. Alternatively, republicans have released a plan that would create tax credits for small businesses seeking to add coverage on the private marketplace. Hospitality Minnesota supports employers adding competitive benefits packages to their employee offerings, but they must be able to do so on a voluntary basis within their financial ability.
On the call, EVP Ben Wogsland advocated for the Fire Marshall to:
Federal RRF Replenishment In what may be the final effort to get the Restaurant Revitalization Fund Replenished at the federal level, we expect the U.S. House of Representatives to bring the bill up for a vote as a stand-alone as early as this Thursday. We believe the votes are there to pass the House, but a wide bipartisan total would dramatically improve the chances of Senate passage, which up till now has appeared unlikely (despite both MN senators supporting us).
New Federal Visa Proposal The National Restaurant Association is supporting a new federal visa proposal that would allow up to 85,000 visa workers to enter the U.S. on 3-year terms on new “H-2C” visa to help fill the workforce shortage in foodservice businesses.
These are some of the key issues we are tracking and working on at the Capitol and federally. Don’t see something you care about, or want more information? We are also happy to help you set up meetings with your legislators and provide you with talking points to move our industry agenda forward. Contact email@example.com
Want to get more involved?
This afternoon, we provided testimony before the House Tax Committee on stand-alone legislation authored by Rep. Baker (Willmar) to conform MN to the federal standard and make RRF tax free. This is the third hearing on this issue between the House and Senate. We urged the committee to act swiftly to pass this measure as a stand-alone (like Wisconsin did last week), rather than waiting for an Omnibus Tax bill negotiation that likely won’t be completed till session’s end, missing the next tax filing deadline. We will continue to keep the pressure on and encourage members to contact their legislators and demand they pass RRF tax conformity now.
Yesterday, the House Higher Education Committee heard our bill to create a free online hospitality training program. We have worked hard to build a strong coalition of supporters to address the workforce shortage, and our strategy of partnering with the U of M Tourism Center and Explore Minnesota Tourism seems to be resonating with policymakers, as the bill was passed 17-0 and sent to the Workforce Committee. With this action, the bill has now made deadline. Testifying were (l to r): Jason Subbert (TPI Hospitality), Xinyi Qian (U of M Tourism Center), and Ben Wogsland (Hospitality Minnesota).
On Tuesday’s Hospitality Roundtable call, Ben Wogsland briefed Steve Grove, commissioner at DEED, and Lauren Bennett-McGinty, director at Explore Minnesota Tourism, and others on the current Economic Snapshot. Thank you to members Terri Huml (Gianni’s) and Pete Mihajlov (Parasole), who shared their insights on the state of the industry.
Ben also highlighted our workforce efforts, including the NE Minnesota Gathering held in Duluth on Tuesday, which welcomed hospitality leaders from across the region for lunch and a conversation on the workforce issues facing hospitality business in the region.
On seeing ProStart teams in action recently, state leaders on the call had this to say:
Two years ago today, foodservice and other hospitality businesses were shut down as the state grappled with uncertainties around the developing COVID-19 pandemic. No industry has been hit harder by the following economic conditions, including shutdowns and limitations that reduced revenue by an equivalent of up to 249 days. Experts project that Minnesota’s hospitality and tourism industry lost over $15 billion in revenue. At the same time, operators’ bills for rent, mortgage, insurance, utilities, taxes, and other costs continued unabated, leaving a many in debt as they work to emerge from the crisis. Today, over half of restaurants and hotels project that revenue won’t return to “normal” until 2023 or later. The situation is made worse by the fact that the industry now has 32,000 less workers than pre-pandemic levels. This report and the data within helps drive our legislative engagement and communications strategy as an industry and is important information for our members and allies to understand and be conversant in.
Follow as we advocate for the hospitality industry at the local, state and federal levels. This work has been a hallmark of the Association for decades, and will continue to be a core benefit of membership.