Commentary: Is the increased equity really going to the public good?

How can we make the best decisions regarding the raising of public funds and the use of those funds?

This question comes to mind when reading about state authorization for Kent County and the city of Dover to levy a lodging tax to generate revenue. Recent articles state that Kent County funds will be targeted to the DE Turf sports complex, while the Dover City Council has not yet determined the best use of the $600,000 to $800,000 potential annual revenue stream.

There are several issues to consider.

First, classic public policy principles concerning optimal taxation focus on equity and efficiency. Adding a tax to charges being collected by hotels is efficient if those hotels are not overburdened by the effort. This leaves the question of equity: while it is apparent that all users of public lodging would be treated equally, does this necessarily mean that equity is applied?

Most who utilize local hotels and motels live elsewhere, meaning that the burden of additional taxation falls on those who are not local residents. Surely this appears desirable to those who may benefit from the tax without having to pay for it. Some using local lodging facilities will also be coming to the area to visit DE Turf and its events. A small number, however, are residents of the cheaper local motels because they cannot provide the security deposit needed to rent an apartment in the competitive Dover-area rental market.

Many of these folks would otherwise be homeless. Currently, they struggle to pay for the weekly rate charged, as it may require 85% of the income of someone working full-time at minimum wage. This does not permit saving for a future security deposit and move. An additional tax would mean an additional burden. The local impact, therefore, falls disproportionately on those least able to pay, while no benefit of the tax accrues to this vulnerable group.

On the expenditure side, the study of economics argues that the generation of public revenue is best used for the provision of public goods, defined as those which private resources are unlikely to cover and which benefit the community as a whole. This raises the question about DE Turf: is this really a public good? Was it not planned to bring economic development rather than to create a demand for more public funds?

Dover City Council President Bill Hare hinted that infrastructure might benefit from the funds generated. This is certainly a public use. In light of current efforts to address homelessness, however, I wish to suggest that the city and county consider using some of the additional revenue to create opportunities for those experiencing homelessness.

Is doing so consistent with my admonishment regarding “public” goods? I would argue that it is, based on the fact that many in the community at large complain about loitering and homelessness downtown.

There are numerous ancillary problems that homelessness causes, among them high usage of hospital and emergency facilities, which must be paid for by the public. Reducing the presence of the homeless in public areas along with their overuse of publicly funded health care would be a public benefit well worth the outlay in public funds. A tax related to accommodation to provide resources for those who lack it also has a certain symmetry or consistency, relating revenue to expenditures.

Both city and county officials have expressed concern with homelessness in our community while lamenting the lack of revenue to address it. Surely a measure of additional revenue generated by a lodging tax could be well used for this purpose while ensuring that those who rent accommodation on a long-term basis are not charged a penalty for their poverty.

Local officials know that there is a demand for shelter and for affordable housing. Devoting perhaps half of additional revenue generated by a lodging tax over the next few years would be a significant contribution to the relocation and expansion of the current Dover Interfaith shelter and would facilitate the creation of affordable housing opportunities, reducing public costs experienced by homeless individuals using the library, downtown streets, and the hospital emergency room.

Regardless of the use of funds, surely public officials can identify projects, which would generate a true public benefit and rank them based on need and public impact.

Jeanine Kleimo is chairwoman of the Dover Interfaith Mission for Housing.

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