Heart attack over a hotel tax

Surprise $5 per night surcharge in transportation bill shocks local tourism industry

Heart attack over a hotel tax
The $5 a night tax will likely impact convention business throughout Georgia as well as ancillary spending by leisure travelers in tourist destinations like Savannah. Interestingly, the tax won’t apply to vacation rentals or Airbnb bookings.

HAPPENING late in the evening of March 31, some hoped against hope that it was just an elaborate April Fools Day prank.

But the literally last-minute inclusion of a whopping $5 per night hotel/motel tax in the Governor’s Transportation Bill was no joke. It quickly caused a statewide shock wave throughout Georgia’s tourism industry, from Clarksville to Thomasville.

Called by some the largest tax increase in Georgia history, the late-night passage of the epic $1 billion bill by the legislature was reason enough for debate even without the hotel tax.

The bill adds a net increase of about seven cents on each gallon of gas, and leaves the door open to local/regional sales tax increases, aka TSPLOST, to fund transportation at the county level.

For those in the tourism business, however, the real kicker was the shocking $5 per night surcharge, which local experts say will inevitably have an effect on tourist spending in Savannah and convention bookings statewide.

Intended to raise at least $150 million for road and bridge maintenance, the tax came courtesy of the conference committee burning the midnight oil to negotiate a version of the bill which could get enough votes in both the Senate and House to ensure passage of what Gov. Nathan Deal hopes to be his signature achievement.

“I got a call about 8:30 p.m. from someone I knew who was in the committee room telling me about this tax that had all of a sudden been added out of nowhere,” says Michael Owens, President/CEO of the local Tourism Leadership Council.

“Within minutes all hell broke loose. My first reaction was this was some type of ploy, that it couldn’t be real. I didn’t go to sleep that night.”

A lobbyist working on other issues in Atlanta, who prefers to remain anonymous, confirms Owens’s account.

“The hotel/motel tax was kept under intense wraps until literally 8 o’clock Tuesday night,” the lobbyist says.

That late in the game, most members who voted “yes” simply wanted to be satisfied with the final dollar amount, not necessarily where the money was coming from.

“When the conference committee was reporting on how the negotiations were going, they just told other members, ‘other fees are going to change,’” the lobbyist says.

People in Savannah’s tourism industry watched TV coverage with jaws agape, as the bill inexorably moved to final passage just before midnight.

Owens said while watching the live debate, he saw one member ask how the committee thought this might affect Georgia hotels bordering states which wouldn’t be burdened with this tax.

“A member from the committee answered him by saying, ‘Honestly, we didn’t look into that,’” says Owens. “I dropped my iPad.”

For Owens, the surprise creation of the tax is “really very concerning. The sheer nature in which it was done is largely why it got such a visceral reaction—and not just from us.”

Owens says he supports increasing funding for long-overdue transportation maintenance, but feels the hotel/motel tax—which goes into effect July 1 and would apply to convention business already booked and budgeted—is simply too high and not nearly enough thought went into it.

“I understand politics, but this tax is scaring the heck out of everybody. Particularly smaller properties throughout the state, they are really worried,” he says. “Everyone shares a sense of anger that nobody was talked to about this.”

Thus began a full-court press of frantic lobbying to get the governor to send the bill back to committee to strip the hotel/motel tax before the legislature adjourned.

“We sent out a call to action at about 9:30 the next morning in a last-ditch effort,” Owens says. “Not that we thought the governor would veto the bill, but maybe he could send it back to committee. There was time to do that at one point.”

Our lobbyist source agrees that “there’s no way the Governor was going to veto a bill this important that he himself designed. That was never going to happen.”

At the local level, Owens predicts “by and large we will probably do OK. We will lose some convention business, but 80 percent of our hotel stays are leisure travel, not convention. So we’ll make it through. But not everybody is Savannah.”

(Of note is that the new hotel/motel tax will not apply to vacation rentals or Airbnb usage.)

For now, Owens and the TLC have their sights set on lobbying the legislature to strip the tax when it convenes next year.

“I guess part of the message we want to send is, what’s the next industry to be targeted like this? This could happen to you.”

Our lobbyist source reports that perhaps the most significant single development is that the window is now open for counties to bring transportation sales taxes to a referendum—such as the TSPLOST measure which failed in 2012, and in part is why the Governor was so anxious to raise so much new revenue.

“There’s now a limited amount of time to regenerate those round tables in case local governments decide make another run at a sales tax,” the lobbyist tells us. “For example, Chatham, Bryan, and Effingham Counties could try and put together a package to finish the Jimmy DeLoach Parkway or the Effingham Parkway, or to improve Airport access, things of that nature.”

The law now allows for those local sales taxes to be fractional rather than rounded to the penny—i.e., less than one percent.

The lobbyist says while the new 26 cents per gallon excise tax—estimated to raise $60 million per penny—may sound high, keep in mind the 4 percent state gas sales tax is going away, along with local sales taxes over the first $3 a gallon.

With the current total gas tax at 19.5 cents a gallon, the tax hike amounts to about a seven cent net increase.

Many progressive-leaning folks are incensed that the bill eliminates the electric vehicle tax credit and the fuel tax exemption for school and transit buses—the latter meaning Savannah/Chatham public schools now face a $200,000 annual hit, and Chatham Area Transit about $100,000.

However, on the bright side the bill approved a $75 million bond issue to fund public transit.

“The first serious money devoted to transit in Georgia, ever,” the lobbyist tells us.


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