Public Hearing Set for Lodging Tax Increase

By DORIE SOUTHERN
Cape Charles Wave

March 24, 2014

Cape Charles Town Council voted 5-1 March 20 to hold a public hearing on increasing the town lodging tax. Only Council member Frank Wendell opposed the action. The Town Code would be amended to raise the 3 percent transient occupancy tax to 3.7 percent, effective July 1, and cap the contribution to the ESVA Tourism Commission. The public hearing will be 6 p.m. April 17 at St. Charles Parish Hall.

In addition to raising the tax rate, Town Manager Heather Arcos is suggesting other “updates” to the Town Code – most significantly, deletion of language allowing Northampton County to levy a 2 percent lodging tax in the town. This provision in the Town Code is in fulfillment of the 1991 Annexation Agreement between the town and the county. Under state law, a county cannot levy a tax within a town without the town’s permission. The town granted that permission to the county when the county allowed the town to annex the property that became Bay Creek on the south side of Cape Charles.

Another “update” is deletion of a requirement that the town treasurer “ascertain the name of every person . . . who fails, refuses, or neglects to collect such tax. . . .”

Councilman Tom Godwin asked Arcos if she suspected there were many violators. Arcos responded, “I would say that the homeowners that rent without a Realtor or management company – yes.” She added that it was “very time-consuming” for staff to try to monitor the tax payments.

Council member Joan Natali noted that one way to monitor rental activity is by checking vacation websites. “If we have any good citizens who would like to dedicate a couple of hours a week, a month, or whatever, to do some of that research and then provide the treasurer with that information, it could then be followed up in a more targeted way,” she said.

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Other proposed “updates” to the Town Code include:

— Increasing the maximum fine to $1,000 for filing a false lodging tax report;

— Removing tax exemptions for government officials and health and elder care providers;

— Removing a requirement for landlords who go out of business to immediately pay any tax they may have collected;

— Removing a 5 percent discount to landlords as compensation for collecting the tax

According to Assistant Town Manager Bob Panek, the town is proposing all the above changes without consulting an attorney. CLICK to read all the changes.

Virginia Code cited as the basis for the Transient Occupancy Tax says that counties “may levy a transient occupancy tax not to exceed five percent, and any excess over two percent shall be designated and spent solely for tourism and travel, marketing of tourism or initiatives that, as determined after consultation with the local tourism industry organizations, including representatives of lodging properties located in the county, attract travelers to the locality, increase occupancy at lodging properties, and generate tourism revenues in the locality.”

Councilmember Chris Bannon told Council that he would vote on the measure even though he is the owner of a Bed and Breakfast in town. He said the tax is a pass-through tax and does not affect him personally. He has not requested an advisory opinion from the Commonwealth’s Attorney on the matter.

Mayoral candidate George Proto spoke during public comments about his involvement with the proposed tax increase. He said that a letter from the Cape Charles Business Association (CCBA) to the Town on March 11 was written with the unanimous approval of the Board. Proto is the president of the Business Association. “The letter was not the product of one person, myself or anyone else,” he said. The letter was written in response to a query from the town about how the Business Association might support the Cape Charles by the Bay website and marketing. The Business Association did not take a position on whether the tax should be increased, he said.

Two B & B owners also spoke during public comments. Donna Onley Kohler, owner of Fig Street Inn, told Council she would consider support for the tax increase but was not willing to give a blanket endorsement. She said that she has been involved with the “Cape Charles By the Bay” website from the beginning and that it should be sustained. She could accept an tax increase to maintain the website.

Henry (Hank) Mayer, owner of Chesapeake Bay View, said he supports the tax increase and wants to see it used to promote tourism in Cape Charles. He urged Council to create a tourism board or committee to create a coordinated plan for tourism.

The town clerk read a message from Montaigne Cree of Blue Heron Realty expressing concern over when the tax increase would take effect. Many vacation rental properties already have summer bookings at the current tax rate. It would be difficult to adjust billing to accommodate a sudden rate increase, she wrote.

Transient Occupancy Tax receipts have increased substantially in recent years. The 2012 audit report shows an increase just over $9,000. In 2013 receipts went up by $9,600 and so far in 2014 receipts are up $6000 with 4 months to go in the fiscal year. That equals a $25,000 increase in three years.