At the September 3, 2026 meeting of the Friday Harbor Town Council, Mayor Evan Perrollaz added an item to the agenda. He wanted to talk about a Christmas tree. Not just any Christmas tree, but a commercial artificial tree somewhere around 30 to 40 feet tall, prelit, modular, reusable, and large enough to become a centerpiece of Friday Harbor’s holiday season. The price tag, up to $45,000.
Some have referred to me as grumpy, but I’m not attempting to be the Grinch Who Stole Christmas. I’m not opposed to a Christmas tree, and this article isn’t about whether or not Friday Harbor deserves a really nice one. I’m also not suggesting that the mayor or Town Council is doing anything wrong or nefarious with public money.
What caught my attention was how easily the Town approved spending up to $45,000 for a Christmas tree. The Christmas tree was added to the agenda, there was some discussion about it, one councilmember questioned whether lodging tax money could legally be used for the purchase, and the Town Administrator explained that she had researched it and was comfortable that the tree qualified because it would support Winterfest and help attract winter visitors. Shortly thereafter, the Council unanimously approved up to $45,000 for the tree.
I thought, okay, lodging tax money? This must be one of those buckets of money that is pretty full and difficult to spend anywhere else. I’ve written before about how the Town has all these different buckets of money. Some have plenty of money in them, some don’t, and because of the laws and restrictions attached to them, the Town can’t necessarily take money out of a full bucket and put it into an empty one. To be honest with you, I hadn’t paid much attention to the lodging tax bucket before this. So I started digging into it to see how much money was actually in there, where it comes from, and what the Town can and can’t do with it.
At the Council meeting you will hear this referred to as LTAC money, and that is a term used around Town quite a bit. LTAC actually stands for Lodging Tax Advisory Committee. The money itself is lodging tax money, collected from people staying in hotels, motels, inns, bed and breakfasts, vacation rentals, and other short term lodging. The taxes are paid as part of a lodging stay, collected through the state tax system, and distributed back to the Town. For the sake of keeping this simple, I’m just going to call it lodging tax money.
Friday Harbor has two of these lodging taxes, each currently 2 percent. The Town began collecting the first in 1993 and added the second in 2001, which was increased to its current 2 percent rate in 2003. Together they generate a substantial amount of money for a town of roughly 2,700 people. Collections were approximately $590,000 in 2021, $622,000 in 2022, $590,000 in 2023, and $555,000 in 2024. The Town budgeted another $600,000 in lodging tax revenue for 2026. The Town entered 2026 with approximately $900,000 budgeted in one lodging tax fund and another $600,000 in the other. That’s roughly $1.5 million in these two restricted funds at the beginning of the year, with another $600,000 expected to come in. Even after all of the Town’s budgeted 2026 lodging tax spending, the two funds are projected to finish the year with roughly $1.47 million still remaining.
The reason this money is restricted takes us all the way back to Olympia and the Kingdome. Washington’s lodging tax law dates to 1967, when King County was authorized to impose a tax on lodging to help finance what eventually became the Kingdome. Over the years the Legislature expanded both the places that could collect the tax and the things the money could be used for. Convention centers and performing arts facilities were added along the way, and eventually the law evolved into the much broader system of tourism promotion and tourism related spending we have today.
The basic idea of the law is still pretty simple. Lodging tax money is tourism money. It can be used for things such as tourism marketing, operating and marketing festivals and special events designed to attract visitors, and supporting certain tourism related facilities. Friday Harbor follows those rules, and our own program even gives preference to proposals intended to bring visitors here during the shoulder and winter seasons. The Town’s 2026 budget included $100,000 in lodging tax money to renovate public restrooms, an example of how the money can sometimes be used for physical facilities as well as marketing and events. What the law generally does not allow is simply taking that same money and putting it toward ordinary municipal infrastructure such as streets, water lines, or sewer projects merely because tourists use them too.
That explains how a Christmas tree can become an eligible expenditure. The tree supports Winterfest, Winterfest is intended in part to attract visitors, and attracting visitors is one of the things lodging tax money can legally support. It also explains some of the other ways this money is spent. The Town’s 2026 budget includes $210,000 for the San Juan Islands Visitors Bureau. The Chamber of Commerce receives separate lodging tax funding for visitor center operations, Fourth of July fireworks, the parade, and other tourism activities. The Town has also announced $120,000 in lodging tax grant funding for 2027 events and activities.
Whether the money goes to Winterfest, the Fourth of July parade, or maybe to some other new organization that dreams up an event such as a Pride celebration, an arts and music festival, or a historical reenactment event, the organizations applying for the money aren’t creating the rules. They are being offered money specifically to create things that attract visitors, and naturally they’re going to come up with things that attract visitors. The irony is that attracting people to Friday Harbor has never really been our problem.
When I was a kid, I remember major economic engines turning here, such as commercial fishing and agriculture. I also remember more than a few trucks with bumper stickers that said, “If it’s tourist season, why can’t we shoot one?” Obviously it was a joke, but those bumper stickers tell you something. The islands were well known and we certainly weren’t suffering from a shortage of visitors then, and we’re definitely not suffering from a shortage of visitors now.
As those other economic engines ground to a halt, we increasingly became a full blown tourism economy. Today people know where the San Juan Islands are. They come here from all over the world. Travel publications write about us. Hotels advertise themselves. Whale watching companies advertise themselves. Restaurants advertise themselves. Vacation rental companies advertise themselves. Real estate companies advertise too. The state ferry system occasionally seems to advertise us simply by making people wait long enough to wonder what could possibly be worth all this trouble.
All those people arrive in a town with roads, sidewalks, water lines, sewer lines, stormwater systems, parks, garbage service, parking, public safety, and all the other unglamorous things necessary to keep a town functioning. Visitors use those things just like the rest of us do, and in a community whose population changes dramatically with the tourism season, we have to build and maintain infrastructure capable of serving considerably more people than the roughly 2,700 who actually live in the Town of Friday Harbor.
The visitors using that infrastructure generate hundreds of thousands of dollars each year in lodging tax revenue, but the state greatly restricts the Town’s ability to use that revenue for the infrastructure supporting those visitors. Instead, the law largely directs the money back toward tourism. More visitors produce more lodging tax revenue, and more lodging tax revenue gives us more money to promote tourism and create things that attract more visitors. Meanwhile, much of the cost of maintaining the town underneath all of that continues to fall on the residents.
That brings me back to the $45,000 Christmas tree. The Council wasn’t really choosing between spending $45,000 on a Christmas tree or spending $45,000 fixing a street. Those aren’t equal choices under the law. The street might need the money more, but that doesn’t make it an allowable use of this particular money. The Christmas tree can qualify because it supports an event intended to attract visitors. The road those visitors use to get to the event generally doesn’t qualify simply because it needs fixing.
During the 2026 legislative session, House Bill 2270 proposed allowing cities and towns with fewer than 5,000 people to use up to 15 percent of their lodging tax revenue for things including infrastructure, secondary roads, recreational facilities, and tourist season law enforcement. The bill didn’t make it through the Legislature, but the fact that it was introduced tells me this conversation has already started.
Fifteen percent might be a start, but for a place like Friday Harbor I think considerably more flexibility deserves consideration. Allowing a tourism dependent community to put perhaps half of its lodging tax revenue into a general infrastructure fund could begin connecting the money generated by tourism with some of the costs necessary to support tourism. That could mean roads, water and sewer projects, or even helping retire infrastructure debt. The other half could continue doing exactly what lodging tax money does now, supporting events, facilities, marketing, and the other things that contribute to the tourism economy.
Our mayor and Council have been working with other governments on the ferry problem, and the Town and County seem to be finding more opportunities to work together. The County has an interest in this too. San Juan County collects its own lodging tax revenue, and its 2026 budget shows roughly $3.8 million in cash in that fund and anticipates nearly $2 million more in lodging tax revenue during the year. Much of that money goes toward things such as destination marketing, local chambers of commerce, museums, theaters, and tourism related projects, again because those are the kinds of expenditures the law allows. Like the Town, the County is limited by state law in how that money can be used. Friday Harbor certainly isn’t the only tourism dependent community in Washington facing this problem.
A coalition of those communities, working with their counties and state legislators, would have a much stronger argument in Olympia than Friday Harbor going there alone. The Legislature created these restrictions and has changed them many times since 1967. House Bill 2270 shows that legislators are already willing to consider changing them again. This might be a good time for our mayor, Council, County officials, and legislators to help gather the communities affected by this and see whether something more substantial can actually be accomplished.
There is something backwards about a system in which the people living here struggle with utility bills and drive over deteriorating streets while the Town has substantial sums of money held in legally restricted tourism funds. The Christmas tree didn’t create that problem. If anything, it illuminated it. And for $45,000, it ought to be pretty well lit.
– Jeremy Nash