State officials seek to avert hotel tax rise 11th-hour move still would boost promotion spending

Governor and mayor meet

Maryland's tariff would be reduced, city's would go up less

April 06, 1996|By Gary Gately | Gary Gately,SUN STAFF

Warning that a planned hotel tax increase would devastate Baltimore's convention trade, Gov. Parris N. Glendening and legislative leaders pushed an alternative yesterday that would substantially boost promotion spending without increasing the tariff for hotel guests.

The 11th-hour move would hold the overall tax on hotel bills at 12 percent, while increasing the amount to attract conventions and tourists to as much as $5 million, from the current $2.8 million.

The move comes a week after Mayor Kurt L. Schmoke announced plans to increase the city's hotel room tax rate from 7 percent to 9.9 percent. Adding in the 5 percent state sales tax, the mayor's plan would have raised the tariff for a night in a city hotel room to 14.9 percent, the highest on the East Coast.

Mr. Schmoke's announcement prompted warnings that hotel bookings would suffer.

"Putting in that tax increase," said state Sen. Tommy Bromwell, "is absolutely the wrong thing to do.

"I mean, that's like throwing the hotels a lead lifesaver when they're drowning."

Mr. Glendening and other state senators echoed the sentiments expressed by Mr. Bromwell, a Democrat representing parts of Baltimore County and city and a leader in the effort to seek an alternative.

The tax increase, they said, would price Baltimore out of the competitive market for conventions.

For its part, under plans still being worked out last night, the state actually would reduce its sales tax on downtown hotel bills by 1.8 percent -- from 5 percent to 3.2 percent -- for one year.

That apparently would be the first time ever for the state sales tax to be reduced in only one jurisdiction.

The state also would kick in $1 million more in state funds for promoting the city.

The city under the plan would increase its 7 percent hotel tax by 1.8 percent to help pay its $50 million share of the $150 million expansion of the Baltimore Convention Center and spend up to $3 million more to market the city.

The plan, which is expected to go to the Senate today in an amendment, comes amid growing concern that the Convention Center expansion is at risk of becoming a costly failure after years in which convention bureaus in other cities have been spending two to three times as much to market their centers.

Bookings for major conventions, generally reserved three to five years in advance, are dismal for 1999.

Mr. Glendening said that during a closed-door meeting yesterday he emphatically urged the mayor to scrap the planned tax increase and seek an alternative that also would boost marketing money.

"We must fully market the Convention Center; we must make it competitive," Mr. Glendening said. "After all, we've got $150 million of taxpayers' money in that Convention Center."

Mr. Schmoke, a week after calling the tax increase inevitable to finance the city's share of the Convention Center expansion, emerged from the meeting pledging to work closely with the governor and Senate leaders on the alternative.

"I think most people would see the plan as a solution that's a win for the state, a win for the city and a win for the private sector," Mr. Schmoke said.

Support and opposition

The move has the backing of key senators, including Democrats Barbara Hoffman, of Baltimore, and Mr. Bromwell, who represents Baltimore County and parts of the city.

But it could face a rough ride in the House, where Speaker Casper R. Taylor vowed to fight the bid to reduce the state sales tax for hotels in the city.

"That's absurd," Mr. Taylor said, "I would be firmly against it."

The Allegany Democrat suggested that reducing the state sales tax in one jurisdiction would set bad precedent and that others would expect the state to do the same.

No similar situation

Mr. Glendening acknowledged that the temporary reduction in the state sales tax would be an unorthodox approach.

"It's unique statewide, but nowhere in the state do we have a $150 million convention center," he said.

Ms. Hoffman, who chairs the Senate Budget and Tax Committee, said she is confident that the amendments would pass the Senate, but she would not venture a guess about the House.

"Everybody understands what's tied up in our investment," she said. "We can't raise that hotel tax to 15 percent. I mean, you wouldn't have any customers."

While convention centers in themselves almost never make money, they're built or expanded primarily on the basis of projected tax revenues and creation of jobs. Without dramatic intervention, Ms. Hoffman and other lawmakers say, Baltimore's expanded center will fall far short of its promise of pumping an additional $336 million a year into the economy, generating at least $15 million in new tax revenues a year and creating 6,600 jobs.

Hoteliers and leaders of the Baltimore Area Convention and Visitors Association have made the same argument for years.

Lobbyist pleased

Yesterday, the effort to seek an alternative to the tax increase drew praise from one key lobbyist, Mary Jo McCullough, president of the Maryland Hotel and Motel Association.

"We're very pleased the legislature and the leadership understand our concerns about increasing the hotel tax and what it would do to the industry," she said.

rTC "And we're very grateful for them for trying to work out a plan to pay for the Convention Center expansion and for marketing without jeopardizing the industry. The health of the hotel industry in Baltimore is in their hands."

Pub Date: 4/06/96

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