Plan to boost hotel tax rate to 9% from 7% draws fire

June 03, 1994|By JoAnna Daemmrich | JoAnna Daemmrich,Sun Staff Writer

Baltimore hoteliers clogged fax machines at City Hall and crowded the council chambers yesterday to denounce a planned increase in the hotel tax rate that could make it the highest in the Northeast.

The Schmoke administration has proposed raising the hotel occupancy tax to 9 percent from 7 percent in 1996 to finance its share of the $151 million Baltimore Convention Center expansion. Baltimore must contribute $50 million to the largely state-supported project.

Hoteliers and restaurateurs argued that the tax increase would erode the economic boom new conventioneers are expected to bring.

Tourism, the city's second-largest industry, would be "devastated," said Wayne C. Chappell, head of the Baltimore Area Convention and Visitors Association.

He handed the City Council's Finance Committee a two-page statement that cited a potential decline in tourists and resulting layoffs because many convention planners have become "increasingly sensitive to excessive hotel rates."

A visibly upset Gary A. Oster, general manager of the Stouffer Harborplace Hotel, said he has 600 employees relying on him for jobs.

"I guess the question I have is how many of those employees are going to be affected by a bed tax increase," he said. "I implore the council, I beg you on behalf of the 600 people who work for me and the 15,000 in the industry . . . to at least postpone."

Combined with the state's 5 percent tax, the proposed increase would raise the surcharge on Baltimore's 7,000 hotel rooms to 14 percent. Hoteliers pointed out that the tax would be the highest among major Northeastern cities, including New York, which is rolling back its tax to 12 percent. Washington, Boston and Charlotte, N.C., have rates of 12 percent or lower.

Even with the increase, Baltimore probably would still attract tourists and conventioneers because its hotel rooms are cheaper JTC than those in some other cities, said Dr. Michael Conte, an economist at the University of Baltimore.

"While there probably is cause for concern in terms of the rate itself, we may still be pretty competitive," he said. "Also, we're a real center for discount airfares."

City Finance Director William R. Brown Jr. said the city has to raise its 7 percent tax, which yields about $8.2 million a year, to fulfill its commitment to pay one-third of the cost of the Convention Center expansion.

"I find it somewhat ironic that we would meet with such resistance from the hotel industry when the average room rate has increased by 5.2 percent," he said.

The city plans to seek $63 million in revenue bonds by September to help pay for doubling the size of the 14-year-old center on West Pratt Street. Together with expected growth in hotel activity, the tax increase would cover the annual $5.2 million in debt service on the 25-year bonds.

Mayor Kurt L. Schmoke and finance officials said they were determined to avoid dipping into the city's general fund, which is financed mainly through property taxes.

"I said very early on in the process that the taxpayers of the city would not have to pay for that," Mr. Schmoke said yesterday morning.

Several hotel managers said they were led by the administration to believe that economic gains from the Convention Center expansion would more than offset the need for a tax increase.

Council President Mary Pat Clarke said all $8.2 million in annual revenues from the hotel tax should be put into a separate enterprise fund. That could more than cover the debt and even provide much-needed aid for homeless services, she said.

Administration officials said such a move would require cuts in city services or a property tax increase.

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