Arundel debates hotel tax rise

Proposal would funnel money to school system

May 19, 2008|By Steven Stanek | Steven Stanek,Sun reporter

Anne Arundel County Executive John R. Leopold's proposal to raise the hotel tax to generate revenue for the financially strapped school system has drawn sharp opposition from state and local tourism officials, who say it would have a devastating trickle-down effect on the county's economy.

The measure - which combined with Maryland's 6 percent sales tax would give the county the state's highest checkout fee and one of the steepest in the country - will drive visitors to competing destinations, officials predicted, saying they've seen it happen elsewhere in Maryland.

"People will be laid off, they will lose jobs, shops will close, and hotels will go bankrupt - the mid-size hotels that can't survive this - if we have a decline in visitors coming here," said Connie Del Signore, president and CEO of the Annapolis and Anne Arundel County Conference and Visitors Bureau.

Leopold said the measure, which would raise the hotel tax from 7 percent to 10 percent, is necessary to raise much-needed funds for schools, and his officials say the projected damage to the tourism industry is being exaggerated.

"I am making as many efforts as I can, using all the many arrows in the quiver, to help out the school system," said Leopold, a Republican whose budget proposal came in $51 million short of the school board's request, but still represents a 5 percent increase over this year. "Because of the well-established aversion to any increase in property and income taxes here, it requires me to secure revenue for our public school system through other means."

The tax increase is expected to generate $6.3 million a year and is the largest source of new revenue in Leopold's $1.2 billion operating budget. The council is scheduled to vote on it and the $214 million capital budget May 29.

Anne Arundel County, home to Baltimore-Washington International Thurgood Marshall Airport, historic Annapolis, the Naval Academy and Arundel Mills mall - the state's busiest attraction with 14 million annual visitors - brings in more tourism dollars than any other Maryland county.

Tourists spent $2.8 billion in Anne Arundel County in 2006, and the industry accounted for 24,000 jobs, according to the Maryland Office of Tourism Development. Baltimore City was a distant second with $1.4 billion in revenues and 16,000 jobs.

Six new hotels with 1,052 rooms sprung up in the county during the past year, a supply increase of 12.3 percent, said Larry J. Beiderman, general manager of the Loews Annapolis Hotel.

Travel experts said a tax increase could have a chilling effect, particularly as gas and food prices rise.

"If the cost of everything keeps going up, people aren't going to be able to travel," said Mary Jo McCulloch, president of the Maryland Hotel and Lodging Association. "This plain just isn't the time."

This kind of attempt to put the burden on nonresidents, as Leopold attempted last year with a failed rental car tax proposal, has had mixed results elsewhere.

Prince George's County passed a similar increase in 1989, when lawmakers doubled the bed tax from 5 percent to 10 percent to fund the salaries of 100 additional police officers. The increase led to a sharp decline in revenues, said J. Matthew Neitzey, executive director of the Prince George's County, Maryland Conference and Visitors Bureau Inc., and was repealed gradually during the next six years.

The combined 16 percent tax rate in Anne Arundel would be sixth-highest in the country, according to the American Hotel and Lodging Association. The rate of 17.25 percent in Chattanooga, Tenn., is first, followed by Houston and Cincinnati, each at 17 percent.

In Maryland, the new National Harbor complex on the Prince George's waterfront is hitting visitors with a 10 percent bed tax. Baltimore County visitors pay 8 percent and Baltimore City's tax is 7.5 percent.

The last jurisdiction in Maryland to increase the hotel tax was Worcester County, home to Ocean City and ranked fourth among counties for generating tourism dollars, according to the Maryland tourism bureau. Worcester County raised the hotel tax from 4 percent to 4.5 percent on Jan. 1, after two years of deliberations. The new revenue will go into marketing the destination, said Donna Abbot, public relations director for Ocean City.

The Anne Arundel visitors bureau would only get a $100,000 bump from the tax increase, and tourism advocates, who showed up in force at a public budget hearing Wednesday night, say they were given less than a week to react to the change.

Alan R. Friedman, Leopold's director of government relations, said the doomsday scenarios are unrealistic, adding that Anne Arundel's unique qualities, both as a center for the defense industry and as a historic destination, will keep people coming back.

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