Controversial John Locke Foundation report to be discussed Monday

By Vicki Hyatt | May 15, 2014

A report by the John Locke Foundation that has concluded Haywood County would place its local hospitality businesses at a competitive disadvantage if the county’s occupancy tax rate increases will be discussed at a luncheon meeting Monday.

The report questions Haywood’s need for additional tax revenue, along with the process county officials would use to raise the tax rate.

“Those pushing for the tax increase argue that more money collected through the occupancy tax means more money for promoting and marketing the county,” said report author Sarah Curry, JLF director of fiscal policy studies. “In reality, it just means county government would take more money away from businesses and consumers to be spent in a way government officials have decided is best for them.”

Ken Stahl, chairman of the county’s tourism development authority, (the board that decides how the industry-generated funds are distributed) said there are many errors in the report.

“I think they had a preconceived notion about how this was going to turn out,” he said, “because there are numerous things that are just plain wrong.”

The agency is preparing a point-by-point rebuttal.

Haywood County now assesses a 4 percent occupancy tax rate for hotel rooms and other overnight  rental accommodations. Proposed legislation would allow Haywood to raise that rate to the state maximum of 6 percent.

The report states none of Haywood’s neighboring counties charges an occupancy rate that high, another point TDA officials dispute. Stahl notes neighboring Jackson County has the authority to raise the rate to 6 percent and said several neighboring counties have both a county and city tax, which brings the rate travellers pay to 6 percent.

Since a majority of hotel reservations are made online, customers can compare rates quickly for hotels in Haywood and surrounding counties, Curry said in her report. “A higher rate might initially boost revenue collections, but over time the tax increase can be expected to reduce local businesses’ revenues.”

Stahl said of all the years he’s spent in the motel industry, never has the occupancy tax rate been a factor.

While Curry’s report stresses the added tax will create more promotion funds she contends aren’t needed, the report fails to acknowledge that the added tax has been earmarked for capital projects that will give tourists more to do in the county.

“Our industry has been struggling and is under a lot of pressure from Cherokee and Buncombe, which seems to be doing very well,” Stahl said, noting both regions have invested in the type of projects that could be built in Haywood if funding was available.

If lawmakers approve the proposed tax increase, Haywood County commissioners could adopt the higher tax rate by resolution. Curry’s report suggests the county should go a step beyond what’s required in state law and hold a countywide referendum for the new rate to be effective.

“Taxation is justified only to raise money for necessary purposes of government,” Curry’s report states, noting that tourism promotion does not meet that standard.

The meeting will take place from 11:30 to 12:30 p.m. Monday, May 19, at Bocelli’s Italian Eatery,  319 N. Haywood St., Waynesville. The cost is $6.95. All are invited. The guest speaker will be Becki Gray Vice, president of outreach, and Kory Swanson, executive vice president, who make up the “Public Policy Think Tank.”

Comments (6)
Posted by: Scott Lilly | May 15, 2014 16:37

"Controversial John Locke Foundation report to be discussed Monday" -- Oh, goodie.  Now we all agree this topic is "controversial".

 

"need for additional tax revenue" -- Well put.  "Need" is something we can't do without.  Let's talk about that.

 

"The agency is preparing a point-by-point rebuttal." -- Beautiful.  But don't only come prepared to argue the points against the tax.  Please also come prepared to justify the NEED for the tax.  I hope all will listen respectfully.  I really want to hear the pro-tax side of this.

 

"both a county and city tax" -- An interesting perspective.  I wonder how much less controversial this might be if Maggie were to tax the 50% increase instead of the 50% increase Haywood County will impose upon Maggie.

 

"Stahl said of all the years he’s spent in the motel industry, never has the occupancy tax rate been a factor." -- Has he been involved in the industry when the tax was as much as 6%?  Was he involved in the industry when there was a deep recession?  If using "tax has never been an issue" as the justification, can we impose a 100% tax and use the same argument?

 

"the added tax has been earmarked for capital projects that will give tourists more to do in the county." -- There's nothing stopping the existing taxes from being used for capital projects now.  Do away with the overhead and use what we use for overhead for capital improvements -- if that's really the issue.  If someone wants to make a specific argument that a specific capital improvement needs to be made, let's argue that "need" against the "need" to send someone from the TDA out-of-country for some unknown purpose.

 

"both regions have invested in the type of projects that could be built in Haywood if funding was available" -- Multiple thoughts here:  1) Provide a specific proposal for which this tax increase will be used so that we don't have to look at neighboring counties to see "examples" but can consider precisely what is on the table.  2) I read that Haywood County tourism is improving lately -- why try to change that with an increased tax structure?  3) Buncombe has WAY more population to tax -- using them as a comparison of what's possible is likely not a good comparison.  But bring your specific case and we will hear it out (respectfully I hope).

 

"hold a countywide referendum for the new rate to be effective" -- True, it's not required.  Also true this is "controversial" enough to let voters decide.  I hope we will hear specifics about how the TDA has spent the taxpayer's ~$1,000,000/year over the last 4 years.  The pro-tax people are asking for "more".  That request for "more" is only proper if there is a clear accounting for how the existing budget has been used over the last 4 years.  (And for what that "more" will be used.)

 

I think I've heard enough "politics" on this matter.  I'll be there to see first hand if this request for a 50% increase is well-founded enough to convince me.  And if those representing the case for more taxes aren't well-versed in debate or public speaking, I truly hope someone will help draw out their position in the best way.  I REALLY want to hear the best case to be made for more taxes.



Posted by: Grass Roots WNC | May 16, 2014 00:37

It would be refreshing to have the counter point arguments and rebuttals (from both sides) printed in future news articles - from now on.

John Locke Foundation representatives will be here Tuesday night 6 pm for a presentation on the upcoming legislature in Raleigh.

"No man's life, liberty, or property is safe while the legislature is in session." -- Mark Twain (1866)

Every one wants to know what the plans are for Education, Tax reform and regulation reductions - that Free up our economy.

“I have never understood why it is "greed" to want to keep the money you have earned but not greed to want to take somebody else's money.”  ― Thomas Sowell, Barbarians inside the Gates and Other Controversial Essays



Posted by: Scott Lilly | May 16, 2014 07:37

I heard these statements made under the context of "conundrums":

1. America is capitalist and greedy - yet half of the population is subsidized.
2. Half of the population is subsidized - yet they think they are victims.
3. They think they are victims - yet their representatives run the government.
4. Their representatives run the government - yet the poor keep getting poorer.
5. The poor keep getting poorer - yet they have things that people in other countries only dream about.
6. They have things that people in other countries only dream about - yet they want America to be more like those other countries.



Posted by: Vicki Hyatt | May 16, 2014 21:43

I thought online comment readers may be interested in this email I received from Sarah Curry, the author of the John Locke Spotlight Report. My questions appear first, and her responses are in italics.

1) Local occupancy taxes started everywhere in North Carolina at the request of the tourism industry, which was seeking a uniform way for accommodation owners to better promote their business. The process requires either a city or county to receive the blessing of the General Assembly, and then approval from the county governing board before it is enacted. The county merely serves as a conduit for the industry funds.

Your study seems to vilify Haywood for following an avenue where a targeted industry can self-tax. Do you object to this form of industry promotion only in Haywood County, or in counties and cities across the state?

 

As a principle of individual liberty and freedom, our organization promotes referendums for tax increases so that the entire public can have an input on the pending tax.  The sales tax serves as a good example, before a county can increase the sales tax, it must pass a vote of the people. In the case of the occupancy tax, those that are being taxed have no say in the tax they are paying since the majority of people visiting Haywood are from out of town or out of the county.  So in principle, we object to any tax that is imposed without the taxpayer having a voice against or for the tax.  This is not a specific stance towards the occupancy tax in your county, we objet to occupancy taxes across the state by principle.

2) Your study indicates any increase in the occupancy tax rate should be put forward in a referendum, a requirement not stipulated in the state law. Is your organization suggesting this change needs to be made in the state law, or do you just want a different standard in Haywood?

 

Yes, we argue that the method in which the occupancy tax is approved should be changed statewide.

 

3) Your study seems unclear on where the funds come from and where they are going. While the county reference is used often, Haywood only receives a small fee for administration of the pass-through industry funds. Your study states that decisions on how to allocate funds are made by the HCTDA with the help of the Tourism Product Development Committee that operates within TDA. However, there is no product development committee or earmarked product development funds at this point. This would only be true if the General Assembly approves the local industry request to allow a higher rate. Do you stand behind each statement in the study on these points?

 

To address the funds location, we used data from the HCTA on the level of funding generated from the occupancy tax and for the spending of those funds we used the HCTDA funding worksheet from the most recent year.  The Department of Revenue and the Department of Commerce reports were cross-referenced to ensure accuracy of tax collections.

After reading your comment, I did more research and found that the committee would only be created upon the passage of the legislation.  After confirming this, we have updated the report to state that the HCTDA directs the funds, not the committee.  Thank you for bringing my attention to this mistake.  To clarify, explanation of the legislation was requested from legislative staff and this was their response.  This is the information I used when writing the report, and I misunderstood the information about the committee in Haywood.

“The only other Product Development Fund, funded by an occupancy tax, that I’m aware of is in Buncombe County.  Buncombe’s Product Development Committee is established by the county TDA, and the majority of committee members must be hotel operators/owners.  I think there is a drafting error in HB 307 because there is no provision for the establishment of the TDA, only for the Product Development Committee.  I spoke with the drafter, and he said this was an oversight.  As currently drafted, the board of county commissioners would appoint members to the Product Development Committee, and the voting members must represent the various zip codes in the county.  The bill also states specifically who the 4 nonvoting members are.  Therefore, to answer your question whether there are other committees appointed the same way as under H307, the answer is no since there is only one other and that committee is appointed by the TDA, not the county commissioners.”

4) Your study also states large capital projects have been asked for and denied. How would your organization characterize the Maggie Valley Festival Grounds, which has been built with the help of TDA funds? Your report also states additional funding would likely not be used for capital projects, yet the proposed legislation specifically states otherwise. What do you have to say about this issue?

 

The reference in the report was made towards the proposed sports complex and an ice skating rink - both of these projects have not received funding from the HCTDA.  There was no mention or reference to the festival grounds.  Again, the legislative staff also addressed the issue regarding capital projects and their response is below:

“The money may only be spent on tourism-related capital projects, which would include buildings.  Generally speaking, any project would have to increase the use of lodging facilities in the county.

On a final note, the bill as currently drafted does not conform to the House Finance Committee’s Guidelines on Occupancy Tax, which requires that at least 2/3 of occupancy tax proceeds be spent on tourism promotion.  Under this bill, 100% of the proceeds would be spent on tourism-related capital projects.”

Because the current law does not conform to the House Finance Committee’s Guidelines on Occupancy Tax, it is under the assumption in the report that the bill would be amended to meet those guidelines and the provision allowing proceeds to be spent on capital projects would be removed.  Current guidelines state that at least two-thirds of the proceeds from the occupancy tax must be used to promote travel and tourism and the remainder must be used for tourism-related expenditures, which may include beach nourishment. If the bill were to be enacted meeting the current guidelines, at least two-thirds of the Haywood County occupancy tax proceeds would be used to promote travel and tourism, not capital projects.

 

5) The comparison occupancy tax rate only compares the county rate in adjacent counties, not the county + city rate in areas such as Franklin and Robbinsville, which brings the total to the amount proposed in Haywood where no municipalities levy a charge. The report also neglected to say Jackson County is authorized to increase the rate to 6 percent if the local tourism industry officials request it. Was overlooking the total tax rate in nearby cities, where the majority of the overnight accommodations are located, intentional or an oversight?

 

The report did not focus on the maximum allowable tax in the counties; it focused on the actual and tax rate the counties were currently using.  The rates that were used were the county rates, and that was done using a chart published by the Department of Commerce.  Since Haywood is proposing an increase to their county rate, we felt it to be an accurate comparison to only include the county rates.

 



Posted by: Scott Lilly | May 17, 2014 11:29

Thank you, Ms. Hyatt.

 

"Yes, we argue that the method in which the occupancy tax is approved should be changed statewide." -- I wonder if Haywood County could lead a tourism tax reform like NC is leading the unemployment reform?



Posted by: Grass Roots WNC | May 18, 2014 09:56

All land owners in Maggie Valley pay for the expenses of maintenance and up keep of the Festival Grounds - "all" residents and home owners (not just businesses). It does not pay for itself.

"Government-run" businesses are expensive and are not always money makers - they often Lose Money instead - I have not seen this possibility discussed much. Socialism in Europe and Russia are being replaced with more Free Market options - because it is not working for them.

Thanks for asking, "How would your organization characterize the Maggie Valley Festival Grounds, which has been built with the help of TDA funds?"



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