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January 28, 2015

Cities Consider Raising Revenue Through Hotel Taxes

By Elaine Yetzer Simon

Raising taxes for a variety of projects through hotel taxes is nothing new for locations around the world. In fact, all U.S. states outside of Alaska and California impose a sales tax, lodging tax or both on overnight accommodations, according to the recently released "Lodging Tax Study-USA." And Alaska and California levy their lodging taxes at the municipal level, according to HVS Convention, Sports, & Entertainment Facilities Consulting, which conducted the study.

Maybe as part of a resolution to increase revenue in 2015, several locales have announced this month that they are considering adding, raising or amending hotel taxes. The biggest of these is London. According to The Guardian, tourists could be forced to pay a £1-a-night bed tax for hotel stays in central London as councils try to plug funding gaps.

Camden council is looking at adopting the charge to raise £5m a year, which it would spend on extra street cleaning in popular tourist areas. The council said it has been forced to consider a tourist levy because government cuts had left its finances badly depleted and it had to think creatively about other ways to raise cash for vital services, according to The Guardian.

According to The Telegraph, the council will not be able to tax hotel stays without new national legislation or a local voluntary agreement, however. It said a campaign in the coming weeks will call for greater local spending powers to be handed over to all London boroughs.

In Connecticut, State Rep. John Scott, R-40th District, has introduced a bill that would allow municipalities to charge their own hotel and restaurant tax, according to The Day.

Scott said cities and towns need alternative ways to raise money to relieve the burden on property taxpayers, and other states allow this taxing. The Day said that Scott's proposed legislation would authorize municipalities to levy a local sales tax on food and a local hotel occupancy tax, as long as the municipality reduced the amount of property taxes owed in proportion to the revenue collected.

Connecticut charges a state room occupancy tax of 15 percent, the highest in the country, according to the HVS study.

Hartford County, Md., is hoping to implement a 6 percent lodging tax for the county, according to the Baltimore Sun. The move would put Harford in line with all other Maryland jurisdictions, and many local officials, especially tourism leaders, have long pushed for the legislation to help drive tourism revenue. The tax, which would apply to stays of less than 30 days on all of the county's 2,713 hotel rooms, is expected to generate about $2.75 million in annual revenue for the county.

Fifty percent of the hotel tax collected from a hotel within a municipality will be paid to the municipality. The remaining balance of the revenue will go to the county and be dedicated to funding tourism, according to the Sun.

The Canadian province of British Columbia approved a hotel room tax within the city of Nanaimo last week. The 2-percent tax will be used to assist, develop and market festivals and sporting events, according to the Times Colonist. Under provincial law, a room tax can only be implemented with support of a majority of accommodation operators representing a majority of rooms in that market.

The City of Nanaimo first approached hoteliers about a room tax more than a decade ago. The tax is expected to generate up to $400,000 in its first year.

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