Hotel tax gives city small hope for revenue


The Henderson City Council’s first budget session of the year on revenues came up with one potentially lucrative source of new money for the city: a tax on people who stay in hotels in the city.

But any such tax would have to win the approval of the General Assembly, where it likely would run into opposition from the North Carolina Travel and Tourism Coalition.

Council member Mike Rainey proposed a city tax on hotel guests during Monday night’s special budget session of the Finance and Intergovernmental Relations Committee, which all of the council except John Wester and Elissa Yount attended.

“It’s something to look into in lieu of raising property taxes,” Rainey said. He cited the 14.5 percent tax on his hotel bill during his visit to Washington last month for the National League of Cities conference.

No one at Monday’s meeting, which included City Manager Eric Williams, Finance Director Traig Neal and accounting supervisor Peggy McFarland, spoke against the idea. Several offered support.

“I’d like to make money off them … motels,” Ranger Wilkerson said. “It’s not even local money.”

Vance County has a hotel occupancy tax that the legislature first authorized in 1987. For years, the tax was 3 percent on the cost of hotel stays. Half the money went to tourism and half to the general fund.

“We had a debate about this once,” Williams said. “It’s not an insignificant amount of money.”

“No, it’s not,” said Rainey, who recounted seeing motels packed with Kerr Lake fishermen this past weekend.

Legislation in 2001 authorized Vance to double the hotel tax to 6 percent, but it also required that all of the money go to the Vance County Tourism Development Authority, minus a nominal amount to cover the administrative costs of collecting the money. The law reads: “The Authority shall use at least two-thirds of the funds … to promote travel and tourism in Vance County and shall use the remainder for tourism-related expenditures,” which can be anything the Tourism Commission judges to be helpful in luring visitors to Vance.

That 2001 law, as written, would block what council members suggested as the quickest, simplest way for Henderson to get a city occupancy tax: by bypassing the General Assembly and working with the county.

FAIR Committee Chairman Bernard Alston said the county could raise its occupancy tax by, say, 3 percentage points and give that additional amount to the city, which is home to almost all of the county’s hotels. Under that scheme, Vance Tourism Director Nancy Wilson would have just as much money as she gets now for her activities, and the city would get new revenue.

“We’ll look into it. It’s a good thought,” Williams said. He said such a tax could be justified by the services the city provides the hotels, such as police and fire protection.

But the state law specifies the amount Vance may charge, so the tax couldn’t rise above 6 percent without General Assembly action. And Henderson could get a piece of that revenue only if Vance tourism officials agreed to share and if they could count certain city programs as tourism-related.

Council members made clear that their intention with a hotel tax would be to raise money for the general fund and that they don’t want to cut into the money Wilson receives each year.

“We’re not asking them to give us anything,” Alston said. “Just charge more and give us the difference.”

Several local bills now before the General Assembly address hotel occupancy taxes, and Henderson conceivably could piggyback on one of those bills. But all of them dedicate the money to tourism uses.

Henderson still has time to submit its own legislation this year through the use of blank bills filed on its behalf. But under lobbying pressure from the Travel and Tourism Coalition, the General Assembly since at least 2001 has limited hotel occupancy taxes to tourism authorities and projects designed to bring in tourist dollars, such as convention centers.

For example, a Henderson hotel tax would fit the bill if the proceeds were designated for the creation and operation of the East Coast Drag Racing Hall of Fame, a project Wilson has championed, or the Embassy Square performing arts center. A bigger stretch would be funding for the library, whose programs might draw people from neighboring counties.

(For those who like to track comparisons between Henderson and Roanoke Rapids, which seem to come up weekly, here’s another one: Roanoke Rapids has a 1 percent occupancy tax. The money goes to the Halifax County Tourism Authority, which must spend the money on tourist activities inside the city.)

“I don’t know how we missed out on that to start with,” Wilkerson said of the hotel tax revenue.

Williams recalled that the city discussed sharing the county revenue, then asked the county to consider increasing the tax and heard “the hue and cry of endangering tourism.”

City Council members dismissed any potential harm to hotel occupancy.

Lonnie Davis said he couldn’t see lake visitors, for instance, avoiding city hotels over such a tax. “They don’t have anywhere else to stay.”

Williams said business travelers will stay where they need to be, without worrying about the tax on the room.

“I don’t believe I’ve ever selected a hotel in my live based on hotel tax,” Alston said.