Mayor proposes increase in Baltimore hotel tax Schmoke ready to push city's tab to 14.9%, highest on East Coast

March 30, 1996|By Gary Gately | Gary Gately,SUN STAFF

In a move that drew warnings of dire consequences for Baltimore tourism, Mayor Kurt L. Schmoke said yesterday that he plans to increase the city's hotel tax to nearly 10 percent, making the total tax on a city hotel room the highest on the East Coast.

The nightly room tariff would rise from 7 percent to 9.9 percent on June 1, to cover the next fiscal year's $4.3 million principal and interest payments on the city's $50 million share of the Baltimore Convention Center expansion.

The room tax is in addition to the 5 percent state sales tax, raising the total tax to 14.9 percent.

"This is not a discretionary matter," said Mr. Schmoke, noting that a 1994 city ordinance specifies that the tax would take effect unless additional hotel tax revenues covered the city's annual share of the expansion cost.

At the same time, though, the mayor delivered some news for which the tourism industry has long lobbied: a one-year, 80 percent increase in city spending -- from $2 million to $3.6 million -- for the nonprofit agency charged with luring tourists and conventions.

The tax increase, which goes to the mayor-controlled Board of Estimates Wednesday, came as a result of 1994 compromise in which Mr. Schmoke withdrew a proposed room tax increase but also pushed legislation laying groundwork for it in the future.

That measure specified a tax increase would take effect if new revenues -- above the $8.2 million a year collected in 1994 -- failed to cover principal and interest on the city's Convention Center expansion tab.

While some hoteliers said they knew a tax increase could eventually kick in, they expressed shock and disappointment that the mayor planned such a steep increase so soon.

At a time when bookings for major conventions, typically reserved three to five years in advance, are dismal for 1999, critics suggest that the room tax increase would further reduce bookings.

"A tax increase of this magnitude will bode very poorly for our industry," said Gary A. Oster, general manger of the Stouffer Renaissance Harborplace Hotel.

"To raise the bed tax from 7 to 9.9 percent is not only unfair, it could prove devastating to our city's ability to attract future convention business. I don't think Baltimore wants to be known as the city that has one of the highest tax rates in the country."

Those who book conventions and trade shows pay close attention to a city's hotel tax rate in deciding on destinations.

"You can literally tax the golden goose into oblivion," said Ed Griffin Jr., chief executive of Meeting Professionals International, and it's important in this highly competitive marketplace."

Mr. Schmoke said that the Greater Baltimore Committee and hoteliers knew all along that a tax increase was likely, based on the 1994 compromise they helped negotiate. The mayor also said he was forced to increase the tax because the city promised bondholders it would do so if necessary to finance the city's share of the expansion.

Tourism industry leaders were quick to point out that the compromise came before Mr. Schmoke slashed spending for the Baltimore Area Convention and Visitors Association (BACVA) and ousted its governing board in a dispute over spending and control last spring.

The convention bureau now receives only about one-third to one-half of what competitors spend, and the lack of marketing money has been blamed by a wide range of lawmakers, business leaders and others for the city's failure to attract conventions.

Despite the impending doubling of the Convention Center's size, bookings for 1999 and 2000 are well below current levels.

Critics, including some key state legislators and influential industry trade groups, suggest that the city should commit more of the estimated $8.7 million a year in hotel room tax revenue to marketing the city and financing the expansion. All of that money now flows into the city's general fund.

And Baltimore is one of the few cities in the nation without a dedicated source of funding for its convention bureau. BACVA, after repeated cutbacks in city spending, now receives about $2.8 million a year, $2 million of it from the city. Hoteliers and BACVA leaders also point out that the proportion of the city's hotel room tax revenue the agency has received has declined from nearly 50 percent in 1984 to 22 percent today.

Brendan Flanagan, spokesman for the Restaurant Association of Maryland, bristled at the suggestion that the city has no choice but to increase the hotel tax.

"It's as if the Schmoke administration's been hell-bent on destroying the tourism industry from the beginning, and his first few attempts failed, so now he's trying something else," Mr. Flanagan said. "I see no evidence to believe otherwise."

But Mr. Flanagan, whose statewide organization led the opposition that sank two proposed new taxes to raise money for marketing the city, said the restaurant group and the tourism industry share the blame for the crisis for "not doing an adequate job of impressing upon the city the importance of tourism."

Taxing rates

Mayor Schmoke plans to raise the total tax on a hotel room in Baltimore from 12 percent to 14.9 percent. Here are the rates of some other cities:

City ............................. Total tax

Columbus, Ohio ................... 15.75%

Chicago .......................... 14.9%

Los Angeles ...................... 14%

New York ......................... 13.25%

Philadelphia ..................... 13%

Washington ....................... 13%

Pittsburgh ....................... 12%

Atlantic City .................... 12%

San Francisco .................... 12%

Boston ........................... 9.7%

Las Vegas ........................ 8%

Pub Date: 3/30/96

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