Reputable think tank muffed tourist tax study

May 22, 2014

A conservative point of view on taxes is one being embraced by many these days, but when the stance becomes anti-business, it is time to rethink the issue.

Such is the case with a recent John Locke Foundation study on occupancy taxes in Haywood County.

Occupancy taxes are ones the lodging industry lobbied for decades ago as a way to obtain self-promotion funds. Showcasing all there is to do and see in an area is a way to attract more visitors, they reasoned, but to do that required advertising funds. Later on, the industry realized that to attract visitors, more and varied attractions were needed, an undertaking that also required funds.

Not wanting to ask government to pay for the needs (or perhaps after being repeatedly turned down by government when they were asking) the industry came up with a plan to assess a fee on overnight accommodations to cover the costs. In North Carolina, the structure was for counties or cities to address the issue on a local basis — once they obtained the blessing of the N.C. General Assembly.

It is a system that has been wildly successful over the years. There are industry-funded tourism agencies in the vast majority of counties in the state that have helped the industry grow exponentially.

In response to a small but vocal group in Haywood and the obstructionist position of Rep. Michele Presnell, the John Locke Foundation did a study on the effort to increase the Haywood occupancy tax from 4 to 6 percent.

Some of the conclusions in the report were not factual, something the author acknowledged and changed. Other parts of the report indicated the tax wasn’t needed at all. The first conclusion in the summary states: “Taxation is justified only for necessary purposes of government. Tourism promotion is not a necessary function of government.”

When asked to clarify whether this indicated the John Locke Foundation objected just to the Haywood County occupancy tax hike, or to all occupancy taxes in general, author Sarah Curry had this to say. “This is not a specific stance towards the occupancy tax in your county, we objet (sic) to occupancy taxes across the state by principle.”

Though a spokesperson told a Haywood audience the John Locke Foundation supports public referendums on occupancy taxes and doesn’t necessarily oppose them in general, issuing the report, and the clarifying statement of the report author, the director of fiscal policy studies, indicates otherwise.

It is a sad day when businesses trying to help their industry — which, in turn, helps the whole state —— are greeted with hostility from organizations that should logically be in their corner in promoting free enterprise, resourcefulness and self-help.

Comments (15)
Posted by: Scott Lilly | May 22, 2014 18:58

So THIS is the pro-tax position?  All of the people that are supposedly FOR this tax increase have manifested itself here, in this opinion-based Mountaineer piece?  Well, so be it.  Let's dissect the pro-tax position:

 

"stance becomes anti-business" -- No proof or supporting evidence in this statement.  Statistically, taxing a business is not good for the business.  (Please don't make me list the statistical studies that prove this.)

 

"Occupancy taxes are ones the lodging industry lobbied for decades ago as a way to obtain self-promotion funds." -- Is it a possible explanation that when government says the TDA is to represent the government and not lodging owners or citizens, the government is what has deviated from the "self-promoting" part of the agreement?

 

"It is a system that has been wildly successful over the years." -- Site examples please.  I am thinking the NASCAR museum, the whitewater park, and Time Warner Arena in Charlotte -- all a liability for local taxpayers that are anything but successful.  The JLF sited more examples in their presentation.  The pro-tax position has not provided any examples.

 

"There are industry-funded tourism agencies in the vast majority of counties in the state that have helped the industry grow exponentially." -- Actually, there is a case to be made that these tourism-funded agencies are riding on the coattails of those that REALLY generate and attract tourism.

 

One question that was mentioned in the JLF meeting was, "has there been any noticeable benefit from the TDAs activities or since the TDA was created."  One response was that the TDA could do better, but there was benefit."  I'm not sure how widely that sentiment is appreciated, but it's something that I didn't see reported yet.  From my perspective, maybe (just maybe) we should learn how best to use the 4% tax we already collect before we ask for more.

 

If this were a proposal to impose a 6% tax on newspaper subscriptions, would The Mountaineer be in favor of it?  Would charging your subscribers an additional 6% help you sell more papers?  I'd love to see "obstructionist Presnell" introduce a bill that could make that possible.  If taxing a business (or it's customers) makes it more successful, I'm sure the public will support taxing Mountaineer subscriptions!

 

I'm glad this is in the "opinion" section!  It would fail any kind of academic or factual challenge.  "Too often we enjoy the comfort of opinion without the discomfort of thought."  (Good grief, that's the second time I quoted John F. Kennedy in as many weeks.)



Posted by: Scott Lilly | May 22, 2014 19:19

Another point: "industry came up with a plan to assess a fee on overnight accommodations to cover the costs" -- Since we're talking about how we got here, "the industry" (locally) agreed to 2%.  Someone increased that to 3% and then again to 4% and now 6%.  Did anyone in "the industry" agree to this perpetual increase?  Let's see a petition from all of those that collect this tax locally to see if they still support what is now a 300% increase from their original plan.  The JLK was clear in this: no increase in tax is appropriate without voter consent.  Put it to a vote!



Posted by: Vicki Hyatt | May 22, 2014 22:04

Earlier increases were industry-led. I recall large gatherings of motel owners at county commissioners meetings during the first increase urging the commissioners to endorse the idea of supporting a local bill. The second increase to 4 percent with the 1 percent going back to zip code areas came after the lengthy discussions of whether funds needed to be spent advertising elsewhere to attract visitors to the region or promote events locally. The compromise was to use the 3 percent for broader efforts and 1 percent locally.

The latest request came with the realization visitors would stay longer if there was more to do, thus the third request.

Early in this last process, Maggie Valley leaders surveyed accommodation owners in their community and found support for the measure. We didn't hear of survey efforts in other communities if they happened.

Why should the general public in Haywood County, who aren't likely to stay in local motels and who aren't likely to know those who do, decide if an industry can collect funds to promote itself, especially when the benefits or downfalls only impact them indirectly. Calling for a public vote on a private industry issue is an illogical stance.



Posted by: Scott Lilly | May 23, 2014 07:10

"Why should the general public in Haywood County...decide if an industry can collect funds to promote itself" --  (1) To have the public decide if taxing tourists and marketing a tourism industry is an appropriate role of their local government as defined by how the TDA has done business in the last 4 years (as opposed to how the original idea was conceived/sold), (2) If the answer to #1 is "yes", then is it appropriate to do that at a 2%, 4%, or 6% rate ("more" is needed for what purpose?), (3) Has the government been responsible, transparent, and effective in the historical spending of this tax justifying more (un-audited financial reporting is not going to cut it), (4) If the TDA builds something that requires maintenance, salaried staff, and other costs, the general public will have to pay for that in cut services or higher property taxes (the Occupancy tax already causes more than $200,000/year in government employment costs -- funds that are not increasing tourism), (5) If more taxes on visitors negatively impacts tourism in a noticeable way, everyone in the local economy will have to bear that consequence (13% total tax means families stay shorter and spend less -- worst case they go to a town with less taxes where they can spend more and stay longer), and (6) If motel owners are 2% more run down and vacant, that cuts right at the heart of attracting the tourists we're supposedly trying to accommodate and if "everyone" is supportive of this idea, then "everyone" will have to share responsibility for more run down and vacant motels.  (Every hotel owner in town could think of good ways to spend/invest another 2% if they could charge 2% more and not have their customers shrink.)

 

If there's one thing the JLF is not: it's illogical.  Sure, they are the lobbyists for the taxpayer and see things with that perspective.  But they are indeed logical and fact-based.  They too believe taxing guests to Haywood County more is a decision the community as a whole must decide.

 

When this goes to a vote, I would like to see it 3 ways:

 

The State of NC allows a maximum of 6% tax on accommodations to be controlled locally for the purpose of promoting tourism.  Currently the tax is 4%.  I vote to:

 

___ Reduce the tax to 2%

___ Keep the tax unchanged at 4%

___ Increase the tax to 6%

 



Posted by: Charles Zimmerman | May 23, 2014 09:44

              There is no such thing as a "tourism industry".

               There are individuals who own/operate certain and particular businesses that cater to tourists. These individuals/businesses are free to advertise their business as they so desire/afford.

                In no instance should "All persons" be required to pay taxes to support private business. Nor create boards to administer said taxes once collected.

                Any capitol projects must be paid for by "All persons" of Haywood county.

                 Festivals must be self-supporting or not at all.

                 No favoritism may be allowed as to how OUR taxes are spent.

                 Nor denial of "equal protection".

 

                 I am not a 'tea-bagger".

 

                  I am a liberal defender of equality.

 

                  C.Z.



Posted by: Vicki Hyatt | May 23, 2014 10:03

Scott,

The role of local government in the tourism tax issue is that of serving as a conduit through which the taxes are collected/dispersed. For that, the county receives an administration fee. That means there are no government-supported employees or tax funds directly spent on supporting the TDA.

The occupancy tax model is one that is used not only in North Carolina, but in states across the nation, as well. It is similar to the National Cattlemen's Association beef-check off program. The business where beef is initially sold subtract $1 per head for industry use to promote beef. The difference is the tourism folks are paying local governments to serve as the administrator. Perhaps the question should whether a 3 percent admin fee on the first $500,000 collected and 1 percent thereafter is enough to ensure the county taxpayers are reimbursed adequately for allowing a segment of our economy to promote itself.



Posted by: Scott Lilly | May 23, 2014 10:40

"The role of local government in the tourism tax issue is that of serving as a conduit through which the taxes are collected/dispersed." -- Does the TDA perform marketing?  Or does it do as you suggest: administer the tax collection and spending?

 

"That means there are no government-supported employees or tax funds directly spent on supporting the TDA." -- There are more than $200,000 in expenses in the TDA's unaudited financial documents.  Those expenses are paid by the Occupancy Tax revenue.  As such, I deem those paid positions and employment benefits as being paid for by taxes -- in my world, that's a government job.  If those positions are directly performing marketing, then government is competing with private marketing firms and is likely not proper.  If those positions are performing the administration of the spending of the Occupancy taxes, then I really would like more detail of why it takes so much money to decide how to spend the 4% and will increasing the funding by 50% mean there will be increased costs going to things like international travel to perform some unknown function?

 

"It is similar to the National Cattlemen's Association beef-check off program." -- Wouldn't that association be more like the lodging association?  Do you get jail time if you wanted to opt out of the $1 per head or could you sell beef in markets that do not require the $1 per head?

 

"The difference is the tourism folks are paying local governments to serve as the administrator." -- Again, employing people to tweet, post, travel to other countries, and other marketing activities is not "administration" -- that's marketing.

 

"Perhaps the question should whether a 3 percent admin fee on the first $500,000 collected and 1 percent thereafter is enough to ensure the county taxpayers are reimbursed adequately for allowing a segment of our economy to promote itself." -- Maybe.  I think if someone can positively show that the Occupancy Tax provides $1,000,000 of benefit to the local economy each and every year, that is a great way to justify the program.  So far I only see that tourism in general provides great benefit -- not that the TDA has done anything specifically that can be analyzed in ROI that can withstand independent audit.  If the TDA were to close shop for an entire year, would we track any differently in tourism when compared to surrounding counties over the same period?  I did a little analysis myself and since we increased the Occupancy Tax from 3% to 4%, we have actually lost ground compared to surrounding counties.

 

Is the Occupancy Tax a dead idea?  Am I willing to write it off completely?  Maybe not.  But I would suggest a better, more responsible way to go about this is:

 

1) Define the mission of the TDA to ADMINISTER the Occupancy Tax -- not perform any marketing itself.

2) Reduce overhead.  It should not take more than $200,000/year to decide how to spend $1,000,000.

3) There must be financial accountability.  That means AUDITED financial documents and clear analysis of ROI so we can see what works and what doesn't work.

4) If this tax is collected from lodging owners, prioritize spending that directly benefits those proprietors.  (Without favoring some over others.)

5) Perform a meaningful analysis if 4% is too much.  I suspect it may be.  If local government can apply for a raise, then local government can apply for a reduction.

6) If there is a "need" for more, everyone deserves a well-thought, well-communicated plan for what that "more" will do.

7) And then you have to find a way to appease Mr. Zimmerman and those like him.  :-)

 



Posted by: Vicki Hyatt | May 23, 2014 11:00

Scott,

TDA employees are not government employees. They are agency employees who do the work in promoting tourism in the county. It is counterproductive to to state opinions or assumptions as facts. Lynn Collins, TDA director, is the one who can answer all the above questions.



Posted by: Scott Lilly | May 23, 2014 12:04

"the stance becomes anti-business" - Opinion

"It is a system that has been wildly successful over the years." - Opinion

"There are industry-funded tourism agencies in the vast majority of counties in the state that have helped the industry grow exponentially." - Opinion

 

The JLF report that this article references is based on documented facts.  Yet the OPINION of the Mountaineer is that somehow the report is "muffed" -- no basis was given to validate the opinion.

 

"It is counterproductive to to state opinions or assumptions as facts."

 



Posted by: Vicki Hyatt | May 23, 2014 14:03

These OPINIONS were reserved for the Mountaineer Viewpoint page and clearly listed under "Our Views."

The opinion was based on the the JLF report, in which the author admitted to having used incorrect facts and assumptions (see her full response under the story we did on the report,) as well as the failure of the foundation to delineate between a "tax" and an effort within a given industry to raise self-promotion funds.

You will not find us "deeming things so." We actually find the correct answer first, not write something like this: There are more than $200,000 in expenses in the TDA's unaudited financial documents.  Those expenses are paid by the Occupancy Tax revenue.  As such, I deem those paid positions and employment benefits as being paid for by taxes -- in my world, that's a government job.

That is incorrect. Not a single TDA employee is a county or government employee and saying it doesn't make it so.

 



Posted by: Scott Lilly | May 23, 2014 16:04

The TDA is a "Government Authority".  And the employees of the TDA are employees of a government authority.  (Are we splitting hairs here?)

 

Ref: "The Haywood County Tourism Development Authority
(HCTDA) is a government authority funded by a 4%
Occupancy Tax placed on all short term rentals of less than 90
(ninety) days."

 

http://haywoodcountytourismdevelopment.files.wordpress.com/2013/04/hctda_annualreport.pdf

 



Posted by: Vicki Hyatt | May 23, 2014 16:37

Perhaps it is splitting hairs, but I would hate for county residents to think a specific industry promotion effort costs them money. Funds are industry-generated and dispersed with local government involvement being that of the entity which is a means to ensure all who benefit pay up. It is a service for which they are paid by the industry.



Posted by: John C Sanderson | May 24, 2014 09:26

Thank you, Ms. Hyatt, for providing answers to the seemingly incessant, and oftentimes ill-informed, questions coming from one particular individual. I think you have given more than enough of your time and effort in this regard, and I congratulate you on your professionalism.

Speaking as someone who grew up here, who worked for almost 30 years in our great school system, and who actually lives in Haywood County, I appreciate the information The Mountaineer has provided on this issue. I also support the editorial ("opinion") position The Mountaineer has taken with regard to the presentation by this outside group that obviously has no ongoing concern for Haywood County or any stake in the future of Haywood County, just the promotion of their rigid ideological stance about "taxes." Thank you and The Mountaineer, as well, for highlighting the "obstructionist position" of Rep. Michelle Presnell on this issue. I sincerely hope the citizens of Haywood County take the actions of the representative from Yancey County into consideration when deciding who to support this coming November.



Posted by: Scott Lilly | May 24, 2014 11:46

So to compliment Mr. Sanderson's note, I too very much appreciate the opinions stated here.  This discussion forum is the closest thing to a "pro-tax increase" side I've seen in a year.  Obviously I don't agree with the opinion of the Mountaineer, but nobody else favoring a pro-tax position will speak up with the strategy and details about it.  It takes courage to speak up.

 

I attended the JLF's presentation hoping to hear the "point-by-point" rebuttal that was reported to be prepared.  I made myself available to have any "ill-informed" position I might have had corrected.  I was told some TDA members were in attendance, but the only "challenging questions" I heard came from a reporter.  And all of the responses to her questions I thought were well-founded and logical.  I was disappointed that nobody could articulate the pro-tax position.  The bits and pieces of the pro-tax increase position that I've compiled over the past many months are:

 

1) Tourism is important to our county and we should invest in it.

2) We need to increase the tax to 6% because other counties might do the same.

3) We will figure out some capital improvement project to spend the money after we secure the tax increase.

 

That's it folks.

 

I grew up in Arden.  I have a home in Hazelwood.  I plan to retire here and my interest in the community is to help it be smart in the way it operates.  I started paying attention to this topic when I saw a front-page "news" story from The Mountaineer that harshly (unfairly) criticized someone for their opinion on this topic.

 

Debate is healthy for many reasons.  Demonizing someone for their opinion is not a constructive way to debate.



Posted by: Charles Zimmerman | May 27, 2014 10:35

            Conservatives "demonize" themselves.

            The tax collected is a tax.

            Those paying such tax should have a say in its use.

            Those administering the tax should be employees of US to be held accountable by means of OUR Constitution.

 

             Without representation, there should be no taxes collected.

             Without Constitutional accountability no action on behalf of We the people should be taken.

 

               So says this liberal;

 

                C.Z.



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