Tourist-area restaurant tax proposed $2.5 million a year would be generated to promote Baltimore

Some merchants like idea

City's tourism industry is called in danger of 'severe erosion'

January 12, 1996|By Gary Gately | Gary Gately,SUN STAFF

Warning that Baltimore's $1 billion-a-year tourism industry is at risk of "severe erosion," an influential business group is recommending a new restaurant tax to raise some $2.5 million a year to promote and market the city.

The Greater Baltimore Committee is proposing the 1 percent tax on tabs at about 125 restaurants in a "tourism district" that would include the Inner Harbor, Convention Center and Camden Yards areas, as well as Little Italy, Fells Point, Federal Hill, Mount Vernon and Charles Village.

Basing its recommendation on a consultants' study that it commissioned, the GBC said the estimated annual $2.8 million operating budget of the Baltimore Area Convention and Visitors Association, a nonprofit agency that performs convention and tourism marketing under contract to the city, must increase to more than $5 million to compete with better-financed rivals.

And that, the report said, was a bare minimum needed "just to get in the game."

The proposal, which needs state authorization and city approval, won qualified support from Mayor Kurt L. Schmoke, whose staff is drafting potential legislation that could be presented to the city's General Assembly delegation. But Mr. Schmoke said he would move forward only if city restaurants demonstrated "substantial support."

"Nobody likes to tax; nobody wants a new tax," he said. "But there is clear consensus that there needs to be more money put into promotion."

Baltimore's tourism industry, the city's second biggest, behind health care, stands at a crossroads, the report said. The Convention Center is undergoing a $150 million expansion and renovation, and more than $400 million worth of city attractions -- including a new football stadium, a major Inner Harbor entertainment and retail complex and a Disney-designed children's museum -- are planned.

But at the same time, many other cities are broadening their offerings and, moreover, spending a whole lot more to tell potential visitors about them.

Scores of cities have built or expanded convention centers, tripling their number to more than 350 since the 1970s. Major convention and visitors bureaus have grown fiercely competitive, and plan to increase spending for a second straight year by an average of 16 percent to boost marketing and mount slick advertising campaigns, the report said.

Baltimore, meanwhile, reduced BACVA spending $400,000 this fiscal year after a tug-of-war over spending and control between Mr. Schmoke and BACVA leaders.

The report warned that inadequate funding threatened Baltimore's tourism industry, which generates $26 million in annual city tax revenues and another $51 million in state taxes and provides 16,000 jobs.

"Yet," the report said, "this important source of jobs and taxes is in danger of experiencing severe erosion because the resources are not available to mount effective convention- and tourism-marketing campaigns."

But the Restaurant Association of Maryland, representing 2,300 restaurants statewide, argued that the proposal would unfairly burden restaurants with the cost of the BACVA funding increase and said it opposes any city restaurant tax.

"Restaurants want to do anything they can to avoid increasing costs to their customers, and there has been little sentiment to support this tax," said Brendan Flanagan, a spokesman for the restaurant group.

But while the association's governing board unanimously opposes the tax, a few dozen major city restaurants have backed the proposal, the GBC said.

And Mr. Flanagan hinted that the restaurant group may rethink its stance. "If there's information out there that this would be good for restaurants' business," he said, "then we would revisit our position."

The consultants' report and GBC leaders predicted a 1 percent tax -- at restaurants where about 40 percent, or a "significant portion" of total receipts come from food sales -- would not hurt business. And both the study and the business group called the proposed tax the fairest way to raise more money for BACVA.

In the study, Economics Research Associates and Madigan Pratt & Associates, both convention and tourism marketing consultants, and Porter International, a management and organization specialist, said they considered other potential sources.

But the city government, facing a major budget crunch, says it can't afford to increase BACVA funding. Hotel guests already pay a 7 percent city room tax on top of the 5 percent state sales tax. Visitors to other tourist attractions pay a 10 percent city amusement tax in addition to the sales tax.

Restaurants, the second-biggest beneficiaries of the tourism and convention trade (behind hotels), pay no tax beyond the state sales tax, the consultants and the GBC pointed out.

Rather than taxing all city restaurants, the proposal is designed to target those with the highest visitor traffic in an effort to minimize additional tax burden on city residents.

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