Consider this case for an added tourism tax

Jan 30, 2014

My husband and I own two businesses in Maggie Valley, a photography studio and three vacation rental homes.   I also currently volunteer as a board member of the Haywood County Tourism Development Authority.

The TDA is a not-for-profit organization with 15 board members representing the county and towns of Canton, Clyde, Waynesville, Lake Junaluska and Maggie Valley.  Its mission statement is: “to promote the travel industry as sustainable economic development for the benefit of Haywood County.”

Playing devil’s advocate, let’s do away with the TDA.  What would our tourism dependent county look like?  For starters, we would likely be the only tourism centric community that did not have a tourism not-for-profit organization in the entire U.S.A.

The TDA collects money from lodging businesses such as motels, hotels, B&B’s, cottages, vacation homes, cabins, etc.

The tourism tax rate is currently 4 percent of room or house rental fees.  The TDA retains 3 percent for its programs while 1 percent is returned to the zip codes where the funds are collected.

This tax is paid by the tourists staying at the accommodations of their choosing.  The lodging business owner collects this tax as part of their guest’s bill and pays it monthly to the TDA.

The tourism tax is in addition to the 7 percent North Carolina sales tax.    The total tax rate that any lodging facility charges is therefore 11 percent of their rental rate.

The rate at one of my properties is $75 per night resulting in an additional $8.25 per night totaling $83.25.

That $8.25 is collected on behalf of the county and is not regarded as income for my business.  Of that $8.25, $3 per night goes into the TDA coffers; the balance goes to the state.

Locally, the funds are used solely for the promotion of tourism in Haywood County through a variety of mechanisms.

Keep in mind, the tourism industry in Haywood County accounts for more than $126 million in economic impact for the county and employs more than 1,300 of your family, friends and neighbors which totals nearly $24 million of payroll incomes.  State and local tax revenues attributed to travel in Haywood County amounted to $11.4 million last year.  Evaluated from an alternate perspective, that’s a $192.10 tax savings for each resident in the county.

What would the negative impact be to the county’s tourism trade if the TDA ceased operations?

Aren’t the businesses in the county and their employees the beneficiaries of the marketing program which potentially bringing visitors and the money they spend to our community?

Individually, many of the county’s tourism-related businesses would not be able to promote Haywood County with billboards, attend marketing shows, advertise in magazines or produce maps and literature.

Pooling resources through the TDA and asking our visitor’s help in keeping our tourism trade vibrant makes these things possible for our small community.

I have never in the eight-plus years that I have been offering vacation rentals had a renter tell me that my tax rate was too high.   The additional tax that has been proposed was regrettably presented poorly.

Knowing what I do now and hearing the rhetoric that’s resulted, I have to ask, how many of you would like to see local businesses have the opportunity to expand, initiate new projects or build on a vision?

Who has a business idea that has been nagging them for years to attempt but just didn’t have the capital to try?

Do you know of a business that is located elsewhere that would fit really well into our community but needs some additional incentive to make the final decision to move to Haywood County?

The additional 2 percent tourism tax is designed for capital expenditures.  This tax would be paid by tourists, collected by the lodging facilities and sent monthly to the TDA.

A tourism product development committee would be appointed by the county commissioners to review applications and recommend funding allocations for projects to the TDA.

These are funds for the community, paid for by our visitors to help us along in growing our infrastructure for their enjoyment.

An increase in infrastructure brings a chance for more jobs, an opportunity for new business, an increase for existing businesses from both residents and visitors and in general creates a heighted sense of well-being for the community at large.

The growth of this capital will not happen overnight and it will take some time to see results.  But, if we don’t start now, we are delaying opportunity which costs everyone in the county.

I hear from business owners that they want to know what is being done to bring business into the county.  Well, we currently have one method; the 4 percent tax for marketing expenditures.  Now, a 2 percent tax is being proposed for capital expenditures.

Going back to my situation I used earlier with an increased tax rate from 11 percent to 13 percent would result in the following; charging a base rate of $75 per night the total would increase from $83.25 per night to $84.75 per night; an increase of $1.50 per night.

How many tourists will a $1.50 per night chase away?

That’s it folks.  So, you are either for it or against it.

There doesn’t need to be any mudslinging, negative talk or salacious comments.  It’s simply business marketing and capital of which we need both to be successful.

 

Beth Brown

Maggie Valley

Comments (9)
Posted by: Scott Lilly | Jan 30, 2014 17:31

Mrs. Brown, that was the most educational summary of this new tax I've seen since I started paying attention a few months ago.  Thank you!

 

You seem to be well-qualified and "in the know", let's get a little more detail:

 

You volunteer as a TDA board member.  Does the TDA employ people directly as full-time, part-time, or contractual employees?  What percentage of the TDA funding goes toward employment and employment-related benefits.  One issue I've seen at other non-profits and government agencies is that they typically don't compete with anyone.  That means performance is something that is not easy to measure.  So that would add a lot of emphasis on "effectiveness" -- something that MUST be measured or else a big argument can be made that the organization is ineffective.  (Waste of money?)  Not even knowing if the TDA has employees, I make that remark out of total ignorance -- not as an accusation.

 

The Mission Statement "“to promote the travel industry as sustainable economic development for the benefit of Haywood County.”  What measurable metrics are used to evaluate if the TDA is being effective at accomplishing their mission?  For example, can they say that they sponsor a festival that costs $200,000 and brings in 20,000 tourist with 10% of them staying in local hotels at an average rate of $50?  That would be a ROI of 50% just in the hotel business alone for that event.  (Not counting overhead.  But in total, the overhead should be factored into the measure.)

 

"Locally, the funds are used solely for the promotion of tourism in Haywood County through a variety of mechanisms." -- What are those variety of mechanisms?  And are those mechanisms each measured for effectiveness?  If we're talking about Facebook and YouTube things, I'm quite sure most anyone with a business and a computer can easily do those things.

 

"Keep in mind, the tourism industry in Haywood County accounts for more than $126 million in economic impact for the county." -- Let's see the annual data on a historical chart with an indicator of when the TDA last got a raise.  Let's see what kind of improvement of the economic impact was realized after the TDA got that raise.  That could be a powerful data point to reference to make your case.  Alternately, not having that data doesn't do much for the case to get another raise.

 

"beneficiaries of the marketing program which potentially bringing visitors and the money they spend to our community" -- key word: "potentially".  Proof is needed here to make a strong case.  If the TDA has been effective, then the case should carry a lot of weight.  The TDA has had 3% for how many years?  By now they should be able to take the word "potentially" out of the equation.

 

"promote Haywood County with billboards, attend marketing shows, advertise in magazines or produce maps and literature" -- I'll make a weak argument here... but I've never decided to vacation somewhere because I saw a billboard.  I'll bet just as many people decide to visit Haywood County based on a billboard as are chased away by a higher occupancy tax.  :-)

 

"The additional tax that has been proposed was regrettably presented poorly." -- Ok.  Let's pause here.  Let's REALLY spend some time here.  The TDA has a mission statement to promote using marketing mechanisms.  Does anyone find it odd that they poorly promoted or marketed the concept of the additional tax?  If one were to measure the effectiveness of the promotion and marketing of the request for a tax increase, how would they score?  And why should we believe they do any better promoting and marketing our county?  (With all due respect, an answer to that one is necessary.)

 

"how many of you would like to see local businesses have the opportunity to expand, initiate new projects or build on a vision" -- A good concept.  The concept of venture capital comes to mind.  Or municipal bonds.

 

"Who has a business idea that has been nagging them for years to attempt but just didn’t have the capital to try?"  Oh, no!  This is what is referenced commonly as government picking winners and losers.  If two people have ideas, one gets government money and the other does not?  Who gets to decide that and how do they decide that?  I fear if the truth about this slips out, you might not find too many supporters.

 

"An increase in infrastructure (also) brings..." maintenance costs, liability insurance, staff to support it, etc.

 

Mrs. Brown, Please continue your writing.  It is so refreshing to read real facts.  (Also, I wonder how you are able to contribute more than the 300 words that is typically the limit for this paper?)

 



Posted by: Scott Lilly | Jan 31, 2014 09:06

Whoa.  I found some TDA reports online.  The last raise the TDA had was in 2008 from 3% to 4%.  In 2008, the total tourism revenue was $952,663.  In 2013, the total tourism revenue was $954,996.  Adjusting for inflation using CPI, that 2013 figure should read $882,624 in 2008 terms.  Or another way to look at it, adjusting for inflation Haywood County occupancy tax DECREASED by $70,039 or 7%.  (Someone check my math.)

 

Also in that figure, in 2013 an additional 50 new Occupancy Tax accounts were added to the pool apparently resulting from an audit of some sort.  If you take those new accounts out, across the last 5 years the loss of Occupancy Tax revenue is more than the 7%.

 

Also to consider, over that 5-year span of time the TDA received about $4.5 million.  So the final analysis should look something like this:

 

At a cost of $4.5 million over the last 5 years, the TDA has seen tourism revenue collected from area accommodations drop by 7% after adjusting for inflation.

 

Of course the last 5 years has not been a kind economy so one must be careful when considering if a 7% drop in business is a good thing or a bad thing.  To determine how to consider that 7% drop in occupancy taxes realized, one must compare the same span of time with neighboring counties.  I’m not sure Buncombe is the best county to compare, but they came up easiest in my 2-minute search.  Their lodging increased 2009-2012 by about 8%.  That’s not an apples-to-apples comparison, but it doesn’t look favorable to how our TDA performed when compared to another TDA.  Before drawing a conclusion, someone smarter than I should check the figures.

 

My point is that before we blindly jump into a tax increase, check to see how effective the existing taxes are being used.  The term “throwing good money after bad” comes to mind.  Or perhaps the TDA needs a little more time to mature to more efficiently use their funding?  (Benefit of the doubt here.)

 

One more point.  I’m not sure I’m reading the 2014 plan correctly but it seems that there is a budgeted $298,627 for marketing planned.  If the expected revenue would be somewhere in the neighborhood of $1,000,000, where is the other ~$700,000 going?  I ask because everyone knows that a good measure of a non-profit is to consider the percentage of each dollar to the cause vs. overhead.  I can’t find that measure anywhere in the report.  I hope the TDA board will publish that kind of statistic for consideration.



Posted by: Scott Lilly | Jan 31, 2014 09:10

Potential correction: I did not inflation-adjust the Buncombe County lodging increase and I assume their report did not either.  I think that period of time is a 7% CPI so while we lost 7% over 2008-2013, Buncomb only gained something like 1% (inflation-adjusted) from 2009-2012.



Posted by: Charles Zimmerman | Jan 31, 2014 11:22

           What Mr. Lilly said.

            Has anyone thought of contacting Dolly Parton and making a connection between Maggie & Dollywood.? Or the Casino? There could be bus/tram type service between the two whereby customers could leave their vehicles in Maggie go where-ever, enjoy themselves and return to Maggie to kick-back.

              I don't like requiring any buisness to pay a tax other buisness bennefit from. Nor do I believe any such tax is constitutional as it fails to equally protect "all persons". "Tourism" taxes should be volentary. Or they should be applied uniformly to all taxpayers. As it was pointed out, all taxpayers bennifit at the very least indirectly, whether they know it or not.

 

                 C.Z.



Posted by: Scott Lilly | Jan 31, 2014 12:08

"Has anyone thought of contacting Dolly Parton and making a connection between Maggie & Dollywood.?"  -- Ooooh, that's a VERY good idea.

 

I once thought it would be interesting if that tourist train from Bryson City could come just a little more north into Hazlewood or Frog Level to drop off tourists in a place where they can spend their money.  :-)  I was amazed how fast the little town of Dillsboro woke up with hundreds of people shopping that got off that train.

 

"Nor do I believe any such tax is constitutional.."  No taxation without representation!  (Where have I heard that before?)  I'm not sure how to think about this one with regards to the Occupancy Tax.  The TDA says on the website that they represent so many area lodging places.  Yet the argument is made that it's the patrons that are taxed -- not the area hotels.  Is it possible to have it both ways?

 



Posted by: Ken Brown | Jan 31, 2014 15:56

Has anyone thought of contacting Dolly Parton and making a connection between Maggie & Dollywood.? Or the Casino? ....

 

You just did.  Build the business plan and make it happen.  If this tax becomes effective, you can even apply for funds to help defray your capital costs for buses.

 

Of course, I'm not sure if local businesses will support your idea of exporting tourist dollars to TN.  So, you might be dependent on TN willingness to give up tourist dollars to NC by promoting the idea of having their customers stay over here and commuting two-ish hours.  Of course, you also have to determine the viability of the demographic willing to suffer that two-ish hour ride twice a day.  Would there be a net benefit?  I don't know.  Build the plan and see how the numbers work out.

 

I am equally skeptical that Harrah's would like the idea of a shuttle bus taking gamblers over the mountain to Haywood County where their slots and tables can't be fed.  They have voracious appetites after all.  Bring people in? No problem.  Take people out?  Potential problem.  Part of building the business plan would be to understand that dynamic.

 

Taxation without representation

 

Ever pay sales tax when visiting another state?  Ever pay occupancy tax when staying in a hotel where you don't vote?  Ever bought a piece of property or run a business in a community where you can't vote because you live elsewhere? Probably enough said about that.

 

Constitutional

 

Pretty sure the constitution is made up of negative federal rights in deference to state's rights.  State's imposing taxes for whatever reason seems pretty constitutional from that perspective.  Yes, all sorts of specific cases could show where state laws were held to be unconstitutional.  This one has already passed that test I assume as it's been part of state law for some time although at the discretion of the counties.  I'm way more concerned about the federal gov't working within the boundaries of the constitution than I am Haywood County.



Posted by: Scott Lilly | Jan 31, 2014 16:11

"Probably enough said about that." -- Just because it is doesn't make it right.  :-)  Kind of like how eminent domain can be used to take private property for the benefit of "redevelopment".  Yes, it's legal says the Supreme Court.  Still, it doesn't make it right.



Posted by: Ken Brown | Jan 31, 2014 16:13

Agreed but a far larger and complicated issue that even the Fair Tax model doesn't accommodate.



Posted by: Charles Zimmerman | Feb 01, 2014 11:10

          We are happily retired, thank you very much. The ride without the distraction of driving would be of bennefit to many people. There could be regularly scheduled drops/pick-ups to accomodate people who want to hike, etc, etc. Many possibilities available. We are at that age where our relatives and friends are dieing or need taking care of. That and we didn't get to spend much time together until we sold the farm and moved down here.

           "Taxation without representation" is not the issue. "Equal protection" is. As was noted in article, all citizens of Haywood county by and large bennefit from the tourism industry. Therefore, instead of just requiring tourism related industries to pay an additional tax, it should be applied uniformly to all taxpayers. As someone who has traveled by occupation of owner/operator, I can assure you I chose to stay at locations that don't put surcharges on the bill. People vote with their wallet and their feet. And why not eliminate the state, especially now that it is clear that there are people who use their influence to sway pressnell, etc to not approve of local decisions. As was documented, the state takes a large chunk of the room tax. Eliminate it altogether. Tourists will take notice. Fund the non-profit ass. by volentary means. Fund all projects thru the commissioners. Only true way to be fair. Keeps control local and simple.

 

           C.Z.



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