Kent County to seek lodging tax

DOVER — Kent County Commissioners are looking to level the revenue generating playing field by asking legislators to approve Senate Bill 288 and their ability to create a lodging tax.

While New Castle and Sussex Counties have gained from a lodging tax in recent years, Kent County lags behind with a $4 million budget deficit and no lodging tax.

“We could run Kent County with Sussex County’s surplus,” Kent County Administrator Ken Decker told the Delaware Business Times.

In New Castle and Sussex Counties, that lodging tax is legislatively capped at 3% for short-term rentals in unincorporated areas while the state has an additional accommodations tax of 8% for “occupancy of a room or rooms in a hotel, motel or tourist home.” Several incorporated towns across the state also collect lodging taxes such as Dover, Smyrna and Georgetown in addition to the state tax.

Kent County was previously granted the ability to assess a 3% lodging tax to benefit the DE Turf Sports Complex near Frederica through the Kent County Regional Sports Complex Corporation. After much controversy, county officials declined to move forward on adopting it on a local level and the Delaware legislature passed a bill that undid the measure in 2020.

“At this point, the commissioners just want the enabling legislation to level the playing field. The money would benefit the county, not just the sports complex,” Decker said. “The expectation I heard Commissioner [Jody] Sweeney mention regarding a possible hotel tax was between $1 and $1.5 million per year. Because we’re in a budget deficit, any money would be useful.”

If legislation is approved for a lodging tax in Kent County, Decker added that commissioners would still have to adopt an ordinance to set the tax in motion.

“Most people don’t understand how different we are in terms of our tax base and budget. We’re the poor county,” Decker told DBT referencing the rural nature of the county. “For other counties, this is not a big deal. But we have to provide the same level of services as our sister counties with a fraction of the budget.”

While Kent County tries to reconcile its $4 million deficit with talks of a lodging tax, Decker said it’s not quite time to sound the proverbial alarm. The county currently has $37 million in its general reserves fund, but he explained the goal is to offer a balanced budget for the county before it’s too late.

“Commissioners raised taxes last year from 30 to 36 cents and we still ended up with a budget deficit that’s staring us in the face. We know we can’t put all of our eggs in one basket and we’re kind of already there with real estate taxes. We’re just not seeing any new money coming in,” Decker explained.

Aside from general operating expenses, the county also uses tax revenue funds to pay for services such as public safety needs like 911 – something he said needs to be used for residents and travelers alike.

“The real problem here is that Delaware is unique. Most states and counties have a couple of revenue sources including property and income taxes or sales tax so you have a three-legged stool. But in Delaware, it’s a one-legged stool and Kent County can’t get ahead easily. And the truth is, nobody wants to pay for it. Asking our visitors to help foot the bill for things they are using, too, makes sense,” he told DBT.

A portion of the revenues collected from the state’s accommodation tax and from Sussex County’s lodging tax supports tourism and economic development activities, as well as the general operating needs such as public safety issues. The lodging tax in New Castle County, which is the same verbiage sought by Kent County leaders, has no such specification. 

“You make it harder to sell rooms if you have a tax,” said Bill Sullivan, manager of the Courtyard by Marriott Newark who sits on the board of the Delaware Hotel & Lodging Association told DBT. “They should offer some revenue to the tourism budget. Issues with the tax come up less with individual travelers than groups. But it does come up when we have a larger group for a conference. They’ve not allocated any money back into marketing.”

Kent County Commissioners and leaders will meet with legislators Friday for a luncheon to discuss the need for a lodging tax in the central county. 

Go to Source:https://delawarebusinesstimes.com/news/kent-county-to-seek-lodging-tax/

Author: Jennifer Antonik