Some residents have expressed confusion about how the Something in the Water (SITW) sponsorship is working. Hopefully, this explanation will help clear things up for those who may be concerned.

The City is providing $500,000 up front from the Tourism Investment Program (TIP) fund to assist SITW with marketing expenses. The TIP fund is comprised of mostly taxes generated by visitors. 

The City is also setting aside $2 million this month as a part of the planning process for the festival. The $2 million set aside is an estimate of potential taxes to be generated by the festival based on a economic analysis of the 2019 festival with the assumption that more tickets sold for the 2023 SITW event will generate additional revenue. This $2 million set aside is an estimate of “but for taxes." But for taxes in its simplest form can be defined as “if not but for the 2023 SITW festival, the City would not have received this tax revenue." It is that very same $2 million that is the focal point of the sponsorship agreement.

At the conclusion of the event, the event organizer will produce documentation of the amount of tax revenue generated by the event within the defined geographical boundary (between 4th and 15th streets). Until that point in time, the set aside amount is only an estimate. After the event concludes, city staff will review the tax receipts and ensure any amount paid out as a result of the sponsorship agreement was in fact generated by the event. 

To clarify any confusion, hotel, sales, entertainment and restaurant taxes generated outside that 11-block area go back to the City to benefit residents and are not included as a part of the sponsorship payment.

Hypothetically, let’s pretend the festival generates an additional $2.0 million of tax revenue between 4th and 15th streets above what would normally be collected inside that area if SITW didn’t happen. The City would take out $500,000 (what was provided to SITW for advanced marketing) and give $1.5 million of it back to the festival so that the total payment made to the event organizer was in line with the $2 million in tax revenue generated by the event. 

Again, ALL local taxes generated outside of the festival boundaries – when visitors eat at a restaurant, stay at a hotel, visit the Aquarium, rent a beach house and shop with local retailers during their stay – all those taxes go back to the City and are both reinvested in tourism and support the general fund, offsetting the money residents and local businesses pay in taxes.

A true up of the agreement will occur ensuring that the payment made to the event organizer does not exceed tax revenue generated. It is possible that an additional study could be done to determine the overall quantitative economic impact of the region; however, what is impossible to measure and determine will be the qualitative impacts - community goodwill, positive media coverage, etc. - that this event will have on Virginia Beach and its residents.