Should Buncombe tourism tax pay cops, firemen?

ASHEVILLE – In Savannah, Georgia, a policeman has an extra incentive for being nice to tourists: They're helping pay his salary.

A move to raise the Buncombe County hotel-motel room tax has members of Asheville City Council saying something similar should be happening here — with police or with other services that benefit city residents.

"If the city's taxpayers are required to provide the infrastructure for tourists … it seems a tax on tourists ought to help out the local taxpayers," City Councilman Cecil Bothwell said.

People in the hospitality industry and their allies would rather use most of the money to pay for efforts to draw more tourists here. They reject the idea that any of the room tax could or should go directly into the city budget.

"There's a basic difference ... about what the tax is all about. The basic view of the hoteliers is to create a marketing fund," said Kit Cramer, president and CEO of the Asheville Area Chamber of Commerce.

For now, hoteliers have won the argument. A bill moving through the General Assembly to raise the room tax from 4 to 6 percent would continue to funnel all of money raised through the Buncombe County Tourism Development Authority, whose voting members are from the hospitality industry or related fields. A requirement that all of the money go to boost tourism will stay in place.

Three quarters of the additional money would go to increase efforts to market the area to visitors and one quarter to an existing fund used to help pay for projects to make the area more attractive to tourists, like investments in Pack Square Park or the Montford Park Players. That matches the distribution formula of the existing 4 percent tax.

Asheville for Ashevillians

The pot of money at stake amounted to $9 million in fiscal year 2013-14. At that rate, the increase would add $4.5 million to the total.

City Councilman Gordon Smith said he still hopes legislators could be persuaded to change the way the money would be spent. But he called the apparent failure of a city effort to have half of the new funds dedicated to affordable housing "a missed opportunity."

City leaders approached people in the tourism industry several weeks ago in hopes of getting their support for adding another 1 percent of the tax to go to efforts to provide affordable housing.

"Rather than a conversation and a negotiation, the industry simply got with Sen. (Tom) Apodaca and pushed legislation that cut the city out," Smith said, referring to the Henderson County Republican who has pushed the current proposal in the General Assembly. "The city approached these leaders in good faith only to learn that they weren't interested in helping with these issues."

Discussions between hoteliers and Apodaca about a room tax increase apparently had already been going on. Rep. Brian Turner, D-Buncombe, said they predate last November's election.

Smith says using room tax funds for affordable housing makes sense: "Due to the low-wage jobs that the industry supports, it contributes to the affordable housing problem."

Tourism contributes to the local economy, Smith said, but should not take too high a priority.

"We have to build Asheville first for people who live here. The fact that other people like that is great, but it's Asheville first," he said. "We need to make sure that we're not turning our city into a place for others."

Bothwell said the TDA has been approached in the past about the possibility of using some room tax money for broader city needs. The response, he said, was that an increase would make the area less attractive to tourists by adding to the cost of a visit.

The explanation didn't make sense before, he said, because people don't make their travel decisions based on the relative room tax rates charged in different cities.

Hoteliers' stance now undermines that argument even more, he said. "Now that they are overbuilding hotel rooms, they suddenly need more tax money for more advertising to attract more tourists. Let the Asheville taxpayers who provide services for tourists be damned."

Other members of City Council have been less caustic, but have also expressed disappointment.

Mayor Esther Manheimer said tourism leaders did hear the city out.

"I was very pleased that everyone engaged in a full conversation about it. They did not decide to just be heavy handed about it. We got to a little bit of a better place" by directing some of the increase to the tourism product development fund, she said.

Tourism tax for tourism

Cramer, Asheville Convention and Visitors Bureau head Stephanie Brown and at least one hotelier say the proposal now advancing in Raleigh is a reasonable one.

Cramer cited an expected increase in the number of hotel rooms in the county from 7,200 to 8,800 over the next three years. Neither the chamber nor the CVB went out and recruited hoteliers to come to Asheville and it makes sense to try to keep existing hotels and motels prosperous, she said.

When the new hotels open, "What happens to the more marginal properties who had been commanding room rates higher than anyone would have thought because of lack of supply?" she said.

Asheville's presence on so many national top 10 lists happened partly because of CVB marketing, Cramer said, and the city can't afford to rest on its laurels.

"Does Pepsi stop advertising? Does Coke?" she said.

"It baffles me that people think people are coming here (only) because it's cool. They won't come here if they haven't heard about it," Cramer said.

The idea of linking tourism with affordable housing issues may have caused hoteliers extra heartburn.

Hoteliers "don't feel that it's fair for one industry to bear the brunt of a communitywide problem," she said.

Cramer said only 6 percent of local hotel employees make less than a living wage and that providing services to the tourism industry is a major source of growth for other businesses like law firms and accountants.

State statistics say hotels are part of the most poorly paid sector of the Buncombe County economy. The average pay in accommodation and food services in the county was $331 per week in 2013, the N.C. Employment Security Commission says. That's less than half of the $720 weekly average for all workers.

Brown and Cramer say even if local leaders and legislators did agree to use some of the room tax proceeds for things not directly related to tourism, the idea would have a tough time getting approval in Raleigh.

Asheville's proposal came just after two local legislators city leaders had sometimes been at odds with, former representatives Tim Moffitt and Nathan Ramsey, were defeated in re-election bids. But Cramer said tourism industry groups statewide watch room tax legislation closely and would strongly oppose any break in state policy that room tax money benefit tourism directly.

"I think we could all go in lockstep and stand in a circle on the steps of the Legislative Office Building and it would not matter. The rest of the tourism industry would rise up to crush it because it would lift the lid off Pandora's box," she said.

Not how we do it?

Smith says the lid is already off in several North Carolina cities and counties and tourism leaders are just passing the buck when they say it could not happen here.

He cited a report by Magellan Strategy Group, a local consulting company, that says seven of the 80 counties that levy the tax can use proceeds for any lawful purpose. A couple of other municipalities can do the same.

A few additional counties or municipalities are allowed to consider spending on police, firefighting, sewage treatment and trash collection as tourism-related and thus permissable to be funded with room tax money under the laws that set up their taxes, the report says.

Outside the state, Savannah and Charleston, South Carolina, are among cities that put significant portions of their room tax proceeds toward more general needs with varying degrees of impact on tourists.

Half of Savannah's tax goes to the city's general fund. The rest is spent on tourism marketing, the city trade and convention center and its civic center. A new Georgia law will devote $5 per hotel or motel stay statewide to transportation projects

Charleston this year is devoting large chunks of its tax to renovation of a downtown performing arts center, police officers and parking enforcement.

Brown said the TDA has already restructured its grant process to make it more likely that city and county government projects will get product development funds and that money has gone to some local government projects like soccer fields in East Asheville and U.S. Cellular Center renovations in past years. The bill that would increase the Buncombe tax says product development funds could no longer go to for-profit companies.

Smith said that's no guarantee of future funding for the city.

This year, "I believe we have some solid projects that will meet the TDA's approval. It may not be the case next year or the year after," he said.

Brown said the General Assembly has tightened its policies over the years to ensure that room tax proceeds go to tourism-related projects and that other uses were only allowed in legislation approved some time ago. That wouldn't happen today, she said.

She said it is common for local governments in other states to get a share of room tax money.

But, she said, "We exist within the realities in this state."