A state Senate committee on Wednesday approved a new proposal to increase Buncombe County’s hotel-motel room tax by a third, with most of the proceeds to go to marketing to draw more tourists in the face of a large expected increase in the number of hotel rooms in the county.
The tax would increase from 4 percent to 6 percent with three-quarters of the extra revenue going to advertising and other marketing efforts and a quarter to the Buncombe County Tourism Development Agency’s product development fund. The fund gives grants or loans to projects expected to draw more tourists to the area, like sports fields or the Grove Arcade.
The plan pushed by local hoteliers and Sen. Tom Apodaca, R-Henderson, squelches hopes by Asheville officials to have some of the room tax go directly to city government to cover what Mayor Esther Manheimer called “much-needed items like affordable housing and, in our minds, some of the effects of having a tourism economy.”
But Manheimer said the additional money going to product development and a restriction that would be added to the law barring those funds from going to for-profit businesses will increase the city’s chances of winning money for greenways, riverfront improvements and similar projects. That will in turn free up city money to be spent elsewhere, she said.
The number of hotel and motel rooms in Buncombe County is expected to increase from around 7,200 today to 8,800 in about three years’ time, said Stephanie Pace Brown, executive director of the Asheville Convention and Visitors Bureau.
The new hotels, many planned for downtown, are likely to draw guests away from existing hotels and motels around the county, Brown said, raising the prospect of falling room rates.
The tax yielded a little more than $9 million in fiscal year 2013-14. Three-quarters of the proceeds are spent on marketing and the remaining 25 percent on projects like renovation of the U.S. Cellular Center or a RiverLink project to improve boating access to the French Broad River.
If spending on hotel rooms were to remain steady, the higher tax rate would bring in an extra $4.5 million a year, with $1.1 million of that going to product development.
Jack Cecil, head of local development and hospitality company Biltmore Farms, said he and other hoteliers have been discussing the prospect of an oversupply of hotel rooms and decided to seek an increase in the tax as a result. Some remembered a disruption in the local market when the number of available rooms jumped in the early 2000s, he said.
“Looking at purely simple economics, we all said we need to do something about this,” Cecil said.
He said hoteliers hope the additional marketing dollars will allow the area to draw more people from areas a five-hour drive away and more.
Hoteliers considered asking for all of the tax increase to go toward marketing, he said, but decided it was better to devote some of the money to projects that will also benefit the rest of the community.
Cecil said the tourism industry statewide would oppose any attempt to allocate funds directly to city government and it would not be right to do that with proceeds of a tax hoteliers are essentially imposing on themselves.
Hoteliers also felt that tax proceeds should not go to private businesses, as has sometimes happened in the past. A 2012 Buncombe TDA grant to expand the Navitat zipline business in Barnardsville drew criticism from another zipline owner and others.
Manheimer said she would like to see more of the money going to city or Buncombe County government projects, but hoteliers “probably did have the political pull with Apodaca to run roughshod over us” and not increase product development funds that the city would be able to tap.
“We have to reach some compromise, primarily because of where the legislature is right now,” she said.
Apodaca could not be reached for comment Wednesday.
Of the 21 tourism product grants or loans made so far, four have gone to for-profit businesses, Brown said. They amount to less than 10 percent of the total funds awarded.
Some city projects have received TDA money over the years, including the John B. Lewis Soccer Park in East Asheville and improvements in the River Arts District.
Brown said new procedures enacted by the Tourism Development Authority will increase the chances of the city or county getting money in the future. New rules make it easier for the TDA to commit to funding larger projects over several years, she said.
The TDA is a government body with members appointed by the city, county and Asheville Area Chamber of Commerce. Brown said the TDA has not taken an official position on the increase.
The room tax in several other larger counties in the state is already 6 percent and it is unlikely that raising the tax here would deter many visitors from coming, she said.
This year’s deadline for new legislation to be filed affecting the tax has passed. The new plan was added to a bill affecting the Graham County room tax in the Senate Finance Committee Thursday afternoon.
Sen. Terry Van Duyn, D-Buncombe, said she will “enthusiastically support” the increase.
“I certainly appreciate the position of the hotel owners in Asheville. With all of the new capacity coming, we want to keep all of the hotels busy and one of the ways to do that is to market Asheville as a destination,” she said.
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