Editor’s note: we have received a few more comments on Hyde County’s proposal to enact a new Tourism Development Authority (TDA) especially for Ocracoke. This authority would raise the occupancy tax rate another 2 percent for a total of 5 percent on all short-term lodging rentals. From the proceeds, the TDA board would hire a full-time executive director to handle marketing on Ocracoke. The county commissioners are looking to enact this concept at their March 2 board meeting so that the tax rate can be raised this year and work can begin. Below are three new comments on this subject.
Hyde County Planning and Economic Development Director Kris Noble. Photo by C. Leinbach
From Al and Linda Scarborough Reasons for supporting an increase of 2 percent in the occupancy tax
The right for any county or municipality in North Carolina to levy any tax can only be authorized by an act of the legislature. Basically, there are only two taxes which are available to all counties in NC– sales and property. Others, such as food and beverage taxes, land transfer taxes and occupancy taxes, must be authorized by acts of the legislature. House Bill 882 was ratified in 2006 giving Hyde County the ability to increase the current occupancy tax.
Why not have a food and beverage tax and/or a land transfer tax rather than increase the Occupancy tax? The General Assembly has not approved these in years due to the strong restaurant and real estate lobbies.
What about the sales tax? Hyde can raise it .25 percent (one fourth of one cent). This could raise around $100,000 a year and not necessarily benefit Ocracoke.
The current occupancy tax of 3 percent is the lowest of any coastal county in N.C. (Indeed, I suspect it may be the lowest of any occupancy tax on the East Coast).
Hyde is one of the 10 poorest counties in North Carolina Dare is one of the 10 richest counties. One thing the rich counties have in common is access to higher occupancy taxes–some have a food and beverage tax, and some have a land transfer tax. Dare has all of these revenue streams.
If we had been collecting the additional 2 percent tax when it was first authorized by the state in 2006, Ocracoke would have benefited by over $2 million (revenue from the additional 2 percent is estimated to be in excess of $250,000 every year). That is the fire hall and the ball field.
Don’t be fooled. Businesses only collect sales taxes and lodgings only collect the occupancy tax. They do not pay the tax.
While two thirds of the 2 percent additional tax (approx. $160,000 after the administration fee) must be used to “promote tourism,” one third (approx. $80,000) can be used for “tourism related expenditures.” Ninety percent of the original 3 percent tax can be used for any purpose for “the direct benefit of the island.” What this means is Ocracoke would have access to approximately $500,000 every year to benefit the island at no cost to over 800 island residents and taxpayers This is $500,000 controlled by Ocracoke.
Given that Ocracoke’s tax will not exceed adjacent counties, it is a poor argument to suggest that people will choose to not stay on Ocracoke. I doubt that anyone vacations on Ocracoke because of the lowest rate, and I feel confident that Ocracoke has a lot more to offer than low occupancy tax rates. How could the expenditure of $160,000 on promoting tourism benefit all businesses and specifically the lodging industry? What has done the most to fill up motels and cottages during what was once a slow week?
Thanks to the dedication and forward thinking of Gary Mitchell and David Tweedie the first weekend of June (Ocrafolk Festival) is now a virtual sellout for beds on Ocracoke. What if we had a paid promoter? How long can we expect people to volunteer their time and energy to organize events that fill the motel rooms and restaurant seats Yes, the increase in occupancy tax can have a direct effect on motel occupancy during the “off season” if only we quit relying on volunteers.
There is great potential in the Pirate Festival, Fig Festival, Oyster Roast, Blackbeard play, running events, fishing tournaments, women’s arm wrestling, and what creative ideas might be centered around the new ball field? It just needs someone with time to devote to these events.
No one stands to benefit more than the lodging industry. Just one more three-day weekend with 100 percent occupancy will more than offset any perceived loss due to an increase in the occupancy tax.
Tourism is the economic engine for Ocracoke. As good hosts, we should be obligated to provide 24/7 emergency services, public restrooms, trash disposal, fire and law enforcement protection, access to the waterfront and courteous and helpful assistance. Unfortunately, Hyde County’s limited resources do not address many of the needs.
Money from the current occupancy tax has supported Hyde EMS, OVFD, Ocracoke Child Care, the Community Center, WOVV, Friends of the Library, the Ocracoke Community Park, OPS Museum and various events that attract visitors (Fourth of July, Ocrafolk Festival, Blackbeard’s Pirate Jamboree, the British Cemetery Ceremony.) Having the additional 2 percent would allow more support for these and other needs as what is now spent for marketing would come from it.
Look at the big picture. Let visitors know what the occupancy tax helps to provide.
From Fred Westervelt:
Thursday’s meeting on this topic, spearheaded by Kris Noble’s (aided by Sarah Johnson) informative presentation focusing on occupancy tax, was spirited, broad-based and quite lengthy for such on the island. I was disappointed that the crowd was not larger, and that no commissioners attended. Perhaps this speaks relevant volumes: it’s not really convenient to get here.
Tourism at its simplest involves attracting visitors, facilitating their journey, providing them a safe and enjoyable stay and encouraging them to return. If there is a deficiency in this four-point approach it is in travel access. We all agree that is the most frequently addressed choke point, but that is for another time.
As life on our sandbar has morphed into the 21st century the needed services and their costs have increased, Seldom is the ambiance of Ocracoke faulted, leaving aside the restrictions to beach access, fishing and Nature’s occasional unfriendliness. Rather, it seems it is the earning power of our facilities and services that are perceived as falling short of overall Hyde County needs and wants, even though after all the allocations of occupancy tax monies our thoughtful Occupancy Tax board has managed to squirrel away nearly 3/4 of a million dollars in reserve funds for the inevitable rainy day.
The purpose of this (new) proposal is to create a costly Hyde County-based Office of Marketing, or some such, to direct tourism and its advertising. At present Ocracoke’s relevant activities are volunteer based (see OCBA, criticized because of personnel turnover (read elections, the American way). Individual businesses market according to their perceptions and budgets. Perhaps they simply need advice from the pros as well, which would seem less imperious, and less costly.
To be brief, I believe we should look more broadly for added funding, rather than hit the lodgers further. I know, the occupancy tax is 5 percent or more elsewhere, but we are not elsewhere. Meals and beverage come to mind (think Dare County) and spreads out the burden logically to a larger clientele. Is our Sales and Use Tax properly structured? A glance at mainland farming might be lucrative. Perhaps there are state funding sources worthy of study. Surely a major push in support of the seemingly overwhelmed DOT might bolster tourist numbers with benefit. All this requires broad public involvement, thought and input. With due credit, “If we do not hang together, we shall hang separately.”
The moment of truth fast approaches. Think on this, talk it up, let your government know how you feel. In the words of my favorite bumper sticker, “Preserve Ocracoke.”
From Finley Austin:
Based on my many years in business and public policy I would submit there is a third option that should be on the table:
Option 3 – use a portion of the Occupancy Tax reserve (don’t raise taxes) to hire a consultant to perform and manage many of the suggestions under Option 1 (create a Tourism Development Authority). Pay them enough of a base to attract bidders, but to keep out-of-pocket expenditure to a minimum offer as incentive a predetermined fraction of or percentage of increased OT revenues in 2016.
I’d have to look carefully at the numbers to determine how much and whether to bench mark it against previous year or an average. This could also be scaled (e.g., 5 percent for the first $10,000, 1 percent for the next…). If it works, the OCBA can renew the contract or negotiate a new one. If it doesn’t work the contractor can be dropped and someone or something else tried.
As to Option 2: They can always start a new government entity (such as this TDA). The reverse can prove difficult. If they go this route then there should be clear metrics that must be met, or the new entity should be dissolved. And there should be a sunset so even if metrics are met, “Do we still need this?” should be asked every few years. And it should require proactive reauthorization.
Additionally, in my business experience, this level of primarily descriptive analysis, while useful, would not support raising taxes or forming a new entity. Before undertaking such big steps, contracting would be utilized if the manpower and/or expertise was not available to do needed activities (e.g., improve the website, etc.). Even then, it should be clear what is expected to be derived.
For a new entity to be considered, they would need to provide a detailed business plan (including budget, metrics and expected return on investment (ROI) with modeling of the numbers) for the new entity. Moreover, from a public policy perspective, a pilot and sunset would seem to offer a prudent course allowing for easy correction, if needed, and if Option 2 is seriously considered.
In any case, if they want to raise the tax they should spell-out clearly the upsides (quantitative and qualitative) to be derived, as well as the potential downside risks (if it negatively impacts visitor numbers what is the break-even point for OT revenues? With higher taxes fewer visitors may still support greater OT revenues, but then what does that spell for other businesses?) This can be modeled to allow scenario comparisons.
From Tom Cain:
Bravo Finley! As an unabashed free marketeer, I love your option 3! The profit motive beats government every time. If it doesn’t work, a contract can end. Government never does.
