In 1998, the City approved Ordinance 98-03 in accordance with RCW 82.08 and authorized by RCW 67.28.181 to levy an additional 2% tax on charges for lodging activity. In order to collect the additional 2% tax the City is required to form a Lodging Tax Advisory Committee. The committee must consist of at least five members of which at least two are representatives from businesses that collect the tax, at least two which are persons involved in activities funded by the tax, and one member from the city who acts as chair. Beginning in the 2011 grant process, those organizations that apply for the funds cannot vote on allocation of the funds.

The City accepts proposals from various groups and organizations for use of the remaining 2% lodging tax for special funding projects related to the cost of tourism promotion, acquisition of tourism-related facilities, or operation of tourism-related events and facilities. In 2009, a new marketing strategy was instituted using the second 2%.  The Greater Poulsbo Chamber of Commerce has led the Marketing Coalition for two years, with member organization representatives sitting on the Coalition.  The group uses the second 2% to establish a pot of marketing funds for the community. Any project proposal submitted is reviewed by the Lodging Tax Advisory Committee, which in turn make recommendations to the Community Services Committee prior to coming before the full Council. There is approximately $50,000 available for special funding requests, including the Coalition, using these hotel-motel tax funds each year.

2011 Applications for Continued Funding projects

2011 Applications for Special Grant Funding projects