No plans for town room tax in Sylva

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No plans for town room tax in Sylva

While Sylva’s downtown sees significant tourism traffic, its city limits contain few hotels or other lodging businesses. File photo

While Sylva’s leaders have considered the idea of a town occupancy tax a couple times over the years, so far they’ve always walked away from the discussion deciding that it wouldn’t be the right move for the small town of 2,700.

Town Manager Paige Dowling said she looked into it several years ago and concluded that the process involved likely wouldn’t be worth the small amount of revenue the town would receive from the limited lodging in its jurisdiction.

More recently, Commissioner Mary Gelbaugh floated the idea as part of a March 25 budget work session. Despite a significant increase in property values stemming from the 2021 revaluation, the town board is considering raising the tax rate, partially due to a request from Police Chief Chris Hatton for more officers. The town already has more officers per capita than neighboring towns, but Hatton said that number is deceptive. Tourism activities and proximity to Western Carolina University significantly increase the number of people flowing through town, heightening demands on his force. If tourism is driving the need for more officers, Gelbaugh’s thought was, perhaps tourists should pay the tax to support them, not town residents.

The comment was an off-the-cuff remark Gelbaugh floated as one of many discussed that day as the board grappled with its budget conundrum, and it turned out to be a dead end. After doing some research, she determined that hiring additional officers — even if those officers were necessary due to tourism increasing the number of people in town — would not fit the legal restrictions governing occupancy tax proceeds.

It’s not unusual for municipal leaders to eye occupancy tax as a potential lifeline in the face of budget shortfalls, said Jackson County TDA Director Nick Breedlove, but Gelbaugh is correct in her conclusion that such funding isn’t suitable for routine budget line items like police officer salaries.

“To tap into occupancy tax for budget shortfalls is shortsighted,” he said. “If it’s truly used for destination marketing, which is what it’s supposed to be used for, that is a terrific thing, as it generates jobs for local residents.”

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In 2019, said Breedlove, the Jackson TDA received about $1 million in occupancy tax funding and used it to generate $207 million in visitor spending. Visitor spending creates sales tax, which in turn creates general fund revenues for towns and counties. Jackson County receives $9.5 million each year in sales tax dollars spent by visitors.

“If you’re starting to tap into any portion of those funds, you’re going to lessen the visitor spending in your destination, which hurts the retail, the restaurants, the small businesses, and the sales tax that pays for essential government services like the sheriff’s office, health department, teacher supplements and more,” he said. “That’s where it becomes a slippery slope.”

Talk — and action — about tapping into those dollars for non-marketing purpose is “a worrisome trend that we’re seeing nationwide,” Breedlove said.

To levy an occupancy tax, cities and counties must gain approval from the N.C. General Assembly in the form of a statute that outlines the specific rules for that jurisdiction, including the amount of tax to be levied, allowable uses for the funds and the structure for overseeing those efforts. While each piece of legislation is specific to the city or county named, the legislative committees tasked with evaluating proposed legislation look for uniform provisions in the bills they consider.

These include a county rate that doesn’t exceed 6%, or a city rate that doesn’t exceed 6% when combined with the county rate; a provision that at least two-thirds of the proceeds must be used to promote travel and tourism with the remainder available for tourism-related spending; and the requirement that net revenues be administered by a TDA.

That first provision leads Breedlove to believe that any municipality in Jackson County would have a difficult to impossible time getting legislative approval to levy an occupancy tax. While Jackson County collects only 4%, its governing legislation allows it to collect up to the maximum, 6%.

In a rural area like Jackson County, Breedlove said, it’s more efficient to collect via a countywide organization anyway.

“The challenge with smaller towns setting up occupancy tax is they have just enough money to do very little with,” he said. “In other municipalities I’ve seen levy additional taxes — they don’t have the research, insight or understanding for how to properly program funds.”

In order to use an occupancy tax, the town would need to create a TDA board, pay for a marketing plan, develop branding and fund salaries for any staff required, including a director and a finance officer. It’s hard to start a TDA — for the first three years of its existence, Jackson’s organization was run entirely with a volunteer board. Breedlove, who started his job as executive director on a contract basis in 2016 and was hired as an employee in 2017, was the organization’s first paid worker.

“It’s taken us until now to become very successful,” he said.

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