Dover’s proposed lodging tax ‘to be continued’

DOVER — After more than an hour of trading opinions and pitching details for a proposed lodging tax in Dover, members of the Legislative, Finance, and Administration Committee voted to move the matter forward “with no recommendation” to the next City Council meeting on Sept. 23.

Dover City Councilman Tim Slavin said he motioned to pass it on to council without recommendation “in the spirit of dialogue.
Council can then continue the dialogue in two weeks. Hopefully, in the two weeks’ intervening time, we’ll have time to sit down and hopefully work out a compromise.

“I’d like to think there is room to move for the people who have expressed their concerns and we’ve certainly exhibited our ability to move on this issue.”

Council President Timothy Slavin
Tim Slavin

His motion passed 8-3 at Tuesday night’s Council of the Whole meeting at Dover City Hall.
A prior proposal by Councilman David Anderson to insert language that would set the city’s initial lodging tax rate at 1.5 percent — keeping the language of the proposed tax “up to 3 percent” in his motion — was defeated by a 7-4 vote.

The city’s proposed lodging tax, enabled through state legislation passed in June, has been a hot topic because it could be stacked with a potential lodging tax imposed by Kent County. The two combined on top of the state’s existing 8 percent lodging tax could make the city’s rate the highest in the state.

Joe Fitzgerald, with the Delaware Hotel and Lodging Association, warned against the dangers of adding the taxes to the industry during Tuesday’s meeting.

“We oppose this tax increase,” Mr. Fitzgerald said. “We are concerned about the economic impact of this tax. Obviously, if we got to the 14 percent … New York City has a 14 percent lodging tax … Philadelphia. I’m not sure this market can sustain that, and frankly, we’re concerned about the economic impact.”

Dover received the ability to impose and collect a lodging tax in late June after the General Assembly approved a number of bills enabling municipalities as well as Kent and Sussex counties to do so. Two separate bills gave the green light to Kent County and the city of Dover each to impose up to an additional 3 percent lodging tax on hotels, motels and tourist homes.

Legislation enabling Kent to raise its tax earmarked the additional lodging tax revenue — an estimated $950,000 — for the Kent County Regional Sports Complex Corp., the nonprofit partnership that owns the DE Turf sports complex near Frederica. Kent County Levy Court, the body that must approve a county-wide tax, has not scheduled discussions on the increase.

Five individuals spoke during Tuesday’s public hearing, all speaking against the proposed tax, including three who are involved directly with the hotel industry.
Victor Schimp, sales director of Home2 Suites by Hilton in Dover, has been a resident of Dover since 1969 and involved in the hospitality industry since 1973. He has served as a former chairman of the Delaware Hotel and Lodging Association, as a former chairman of the Kent County Tourism Corp. and as a former chairman of the Central Delaware Chamber of Commerce.

“As I have a vested interest in the hotel industry, tourism and business in general, I cannot sit idly by and watch our industry get hit with a potential 75 percent increase in the public accommodations tax (PAT),” he said, “and putting Dover at the highest PAT in the state and on par with exotic resorts and cities of destination far, far larger than Dover.
“The city tax of 3 percent has to be considered with the Kent County tax of 3 percent. Although for different objectives, they will still adversely impact the industry. From a hoteliers’ perspective, they are not mutually exclusive.”

City Councilmen Fred Neil and Tanner Polce leant their support to the proposal.
“Should we implement this lodging tax, (hotels) will not pay that tax nor will the city taxpayers,” Councilman Neil said. “It is a lot cheaper to pay the small additional fee than to pay for the gas to travel to New Castle or Sussex County to stay — and more convenient, too.

“If the city uses this additional money for infrastructure, as I hope it will be used, then I regard this as a User Fee that currently falls solely on the city taxpayers.”

Mr. Schimp disagreed with the notion that Delawareans will not be affected by the tax — only tourists. He insisted that isn’t so.
“I’ve heard the argument that out-of-state visitors would be paying the burden of the tax,” said Mr. Schimp.
“That argument makes the false assumption that no Delawareans stay at Delaware hotels. I have taken vacations in Delaware with my family at the beach, and we stayed at hotels in Rehoboth.”

Sam Chick, a businessman who owns Puffster on Loockerman Street in downtown Dover, also took issue with the proposed lodging tax.
“This is an assault on the economy of Dover,” he said. “It will be borne by the hotel leaders and the lodgers and it will be borne by the people of Dover and it will be borne by the businesses of Dover. The economy does not operate in a vacuum.
“When you take that money out through the lodging tax that means it can’t be spent in the city and it will affect occupancy. You will have people who will not come to Dover because we have increased the rate 3 percent.”

City Councilman Roy Sudler Jr. said there were too many unanswered questions to move the lodging tax proposal forward, while fellow councilman Ralph Taylor questioned whether the city’s residents should be burdened with another tax hit after property taxes were increased by the city this spring and the Capital School District passed a tax referendum.

Sara Herbert, a resident of Dover, also spoke against the tax increase.
“I think it’s the job of the council of Dover to protect its businesses, not to make it harder on them,” she said. “I’ve been hearing 1 percent (when it comes to a potential tax increase) and I don’t trust it.
“I’m curious as to why would you set a tax rate before you know what Kent County’s going to do, because it may be the only way to save our businesses.

“We have a wonderful city, but we have a downtown that needs work. We’re working on infrastructure and I agree that we have to make Dover better.”

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