Sussex County towns pursue lodging tax

SUSSEX COUNTY — With the ability to hike lodging taxes through changes in state law, several Sussex County towns are pursuing the option to raise money for various initiatives.

By November, a 3 percent lodging tax increase becomes effective on hotels and motels within the town limits of Georgetown. Based on revenue generated by the state accommodation tax hike, it could mean upward of $100,000 or more annually for the town.

“Really, it is to offset some of those costs that are incurred for people that are visiting — people that use your roads, that use your police services,” said Georgetown Town Manager Eugene Dvornick Jr., adding the idea is to “recover costs of services from tourism but not passing those costs back to the local residents.”

Georgetown, Seaford, Millville and Rehoboth Beach are among six municipalities granted authority by the General Assembly this year to impose a 3 percent lodging tax hike, in addition to the existing 8 percent state accommodations tax. City of Dover and Delaware City are the other municipalities. (Dover City Council last week tabled their discussion of the tax hike until Setpember.)

State legislation also empowered Sussex and Kent counties to enact an additional 3 percent lodging tax on hotels, motels and tourist homes in their jurisdictions. New Castle County already had the authority.
Seaford City Manager Charles Anderson said he has spoken to at least one of the hotel proprietors within the city limits he oversees.

“They understand the process. Of course, nobody likes taxes, right?” Mr. Anderson said. “But the biggest thing for me was they kind of wanted parity. They didn’t want one community doing it and one community not doing it, creating an unfair advantage. I think that having the county adopt it and some of our sister municipalities does help level the playing field.”

A lodging tax was not sought by the town of Millsboro, Georgetown’s neighbor to the south. Nor will it be in the foreseeable future.
“The answer is a passionate ‘no’ and the town has no plans to seek such a tax,” Millsboro Town Manager Sheldon Hudson said. “In fact, we’ve been marketing the fact that we will not have such a tax as kind of a draw with the new hotels coming to town. We’ve been kind of using that as a marketing tool.”

Any new lodging tax hike is in addition to an 8 percent state public accommodations tax of rent for occupancy of rooms in hotels, motels or tourist homes in Delaware. The lion’s share — 5 percent — goes to the state’s general fund, with 1 percent each earmarked for DNREC’s Beach Preservation Program, Delaware Tourism Office and an established convention and visitor’s bureau in each county, designated proportionately where it was collected.

In Kent County, Dover City Council voted unanimously at its July 23 meeting to table an ordinance that would have raised the lodging tax by 3 percent. Council agreed to hold an additional public hearing on Sept. 10 on the matter and put it to a vote on Sept. 23.

It’s a ‘Go’ in Georgetown
Enacted June 13 by the Delaware General Assembly, Senate Bill 64 authorized the town of Georgetown to adopt a 3 percent tax on public accommodations. Gov. John Carney on June 19 signed the bill into law and on July 10 Georgetown’s town council enacted an ordinance creating the local lodging tax.

In Georgetown, the lodging tax affects five business: Tru by Hilton, Quality Inn, Classic Motel, Microtel and the Brick Hotel, said Mr. Dvornick.
Under the legislation, the occupant pays the tax, not the business. “The business just collects it and then remits it to the state, and then to the county or the municipal,” he said.
Georgetown’s lodging tax is effective for reservations or contracts paid in full on or after Nov. 1, 2019.

“We actually started the process last year. In 2018 Middletown, Milford and Newark were able to get accommodations tax. Prior to that only the city of Wilmington had had the ability to do it,” Mr. Dvornick said. “In 2018 town council passed a resolution to request the General Assembly to modify our charter. That bill did not go anywhere. It was introduced too late in the session.”

State Sen. Brian Pettyjohn and State Rep. Steve Smyk were sponsors of Senate Bill 64.
Mr. Dvornick emphasized revenue is directly related to occupancy.
“Let’s say you have a very cold winter and a very cold summer and nobody vacations. The revenue will be down. If it’s a super-hot summer, everybody is coming to the beach. The beaches are full, so they start looking at the outlying areas. So, it will fluctuate,” Mr. Dvornick said. “Based on what the state Division of Revenue received for hotels in the 19947 zip code, in 2017 we worked some numbers backwards. I think for Georgetown, again depending on occupancy, it could be around $9,000 per month, roughly.”

Using figures from fiscal year July 2016 thru June 2017, based on what the state had for revenue and factoring in the 3 percent, Georgetown’s revenue would have had a monthly low of $3,900 and a high of $19,000.
“And I’m cautions to say that because it could be a down year. For instance, Sept. 11 (terrorist attacks on America) killed the hotel industry. It took a long for it to come back to where people were traveling,” Mr. Dvornick said.

Any new lodging tax hike is in addition to an 8 percent state public accommodations tax of rent for occupancy of rooms in hotels, motels or tourist homes in Delaware.

For all municipalities, the lodging tax was capped at 3 percent. It impacts motels, hotels and tourist homes, which have at least five permanent bedrooms for tourists or transient guests but does not have cooking facilities for the use of tourists or transient guests.

Originally, Georgetown’s ordinance was to go into effect Aug. 1. Town leaders agreed to move it to Nov. 1 to accommodate a request from one hotel that indicated it needed time to make changes from their IT (Information Technology) standpoint. “So rather than do a partial for this guy, and a partial that guy … they said Nov. 1,” Mr. Dvornick said. “We were very accommodating.”

Millsboro says “NO”
At present in Millsboro, there is one motel — the Atlantic on US 113/DuPont Boulevard. Construction of an Avid hotel is expected to begin soon, and a hotel is included in plans of Jim Parker Builders Inc. for property in the town limits. All are on U.S. 113.

“Then there is a couple possibly in the pipeline as well,” Mr. Hudson said.
But these hotels won’t be impacted by a lodging tax in Millsboro.
“We have absolutely no plans to pursue a lodging tax,” said Mr. Hudson. “There will be no town lodging tax in Millsboro. We pride ourselves in not pursing that … another reason for people to stay in Millsboro. That’s how we are trying to market this.”

In the works in Seaford
Seaford’s lodging tax bill, House Bill 67, was sponsored by State Rep. Danny Short and State Sen. Bryant Richardson.
City council held the first reading of its ordinance at the July 23 meeting. Second reading is scheduled for Tuesday, Aug. 13.
Should council accept the ordinance it will be advertised for 30 days. Then it will become effective, with effective date of actual tax collection not scheduled until mid-January 2020, according to Seaford City Manager Charles Anderson.

“We have given ourselves that period of time to reach out to all the proprietors of the hotels and motels in our jurisdiction and give them the heads-up that we have enacted this tax,” Mr. Anderson said.
The proposal would be brought back to council to address a fee and rate schedule revision that will show how much tax is proposed. Council has the authority to go from zero percent to 3 percent.
Tax collection would begin Jan. 15, 2020.
Motel 6, Days Inn, Comfort Inn & Suites, Seaford Inn, Hampton Inn are the hotels/motels in the city limits.

Projection of anticipated revenue is an unknown at this time.
“We’re not sure of occupancy rates and things like that that proprietors are experiencing, because we have never done this,” said Mr. Anderson. “We’ll have a year basically from January to June 30 to do the collections and get in the process and what the anticipated revenues are and then we’ll be able to develop a budget estimate for our FY21 budget.”

“The big thing for us is we are not familiar with and don’t know their occupancy rates. A lot of these rooms in the city of Seaford, they are not full every night all of the time,” said Mr. Anderson. “But there are some busy weekends for them. I’m glad they are doing so well here in Seaford. We have a lot of fine hotels here.”
Mr. Anderson added that city council has not yet stipulated any restrictions or remanded the city to put it into a reserve account for any specific thing. “That has not yet occurred,” he said.

Charter change in Rehoboth
Sponsored by Sen. Ernesto Lopez, the primary sponsor, and Rep. Pete Schwartzkopf and Rep. Valerie Longhurst, Senate Bill 86 amends the Rehoboth Beach charter to give commissioners the authority to impose and collect a lodging tax. It was signed by Gov. Carney July 17.

“Basically, what we were asking for is the ability to have a change in our charter so that we could look to implement an accommodations tax at some point in the future,” said City of Rehoboth Mayor Paul Kuhns.
The city is in the process of getting the charter amendment, which would be drawn by the city solicitor. The next step, possibly at the September workshop session, would figure out what percentage. “It says you can charge up to 3 percent,” Mayor Kuhns said.

As one of Sussex County’s more popular beachfront tourist meccas, there are numerous hotels and motels in the Rehoboth area.
“I don’t know the exact number of hotels, motels and tourist homes, but we have an estimate on the number of rooms that would qualify under this accommodations tax — 1,200 rooms, plus or minus,” said Mayor Kuhns.

At present, there has been no discussion on what revenue from the tax, if enacted, might be used for.
“Right now, there has not been any specific earmark,” said Mayor Kuhns. “At some point in future, I’m sure. Right now, it has not been determined.”

Millville also has authority
For Millville, Senate Bill 162, sponsored by State Sen. Gerald Hocker and state Rep. Ron Gray, amends the town charter and gives the town council authority to impose and collect a lodging tax of no more than three percent.
But Deborah Y. Botchie, Millville town manager, could not be reached for information on the lodging tax status in Millville as of press time.

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