County manager discusses proposed Occupancy Tax hike with islanders, another meeting scheduled

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By Connie Leinbach

A special public meeting to further discuss the proposed occupancy tax rate is scheduled for 5 p.m. Tuesday, May 30, in the Ocracoke Community Center.

Hyde County Manager Bill Rich has proposed raising the occupancy tax rate to 5 percent, up from the current rate of 3 percent. This tax is added on top of the 6.75 percent sales tax to all hotel room and rental house fees.

The commissioners must pass the 2017-2018 budget by July 1 and a hearing on the budget is scheduled for the June 5 commissioners meeting at 6 p.m.

A meeting with members of the island’s lodging industry earlier this week (May 15) yielded questions and concerns.

Rich presented his rationale, saying this request would balance the budget.

If this tax was implemented, it could raise an additional $320,000, he said. Of that, $9,600 would by law go to Hyde County for administration and $310,000 would go back to Ocracoke for tourism promotion and infrastructure.

“This idea was totally up to me,” Rich told the 20 in attendance. In addition to this additional tax funding an island advertising plan, he cited EMS services, which the county beefed up a few years ago when the Ocracoke Health Center no longer offered after-hours emergency services. This additional tax also would go to improving the trash site on Ocracoke, which serves residents and tourists.

“We don’t want to raise the (property) tax rate to fund this,” he said. “I think it’s justified to put it on the tourists.”

Nevertheless, for the 2017-2018 budget, the commissioners will indeed raise the property tax rate to $.0071 or $.0072 per $100,000 of assessed valuation, up from the current rate of $.0064.

This is necessary because of the county-wide property revaluation done last year and which lowered the overall property valuation in the county downward to $900 million, down from $1 billion, Rich said.

Revenues from property taxes yield the county $6.5 million and because of the revaluation, some property owners will pay less and some more even with a rise in the property tax rate.

“Over time, there has been a steady lack of support from the state and feds for county budgets,” said Alton Ballance, owner of the Crews Inn. “I would like to see a basket of other taxes available. When you have these county needs—EMS, fire department—you need an increase in property tax. It’s spread around.”

Occupancy taxes are authorized by the N.C. Legislature. Ocracoke has had a 3 percent rate since 1992, and while most all other of these taxes must be use strictly for tourism promotion, Ocracoke has been an exception where it may distribute the collected funds for “any legal purpose.”

However, a second legislative decree in 2006 allowed for Hyde to also enact another 2 percent raise, but this tax could be used only for tourism promotion.

The Ocracoke Civic and Business Association is working with Magellan/Element of Asheville to determine the island’s target audience, message and an advertising plan, expected to be completed in the summer.

Some of the 3 percent Occupancy Tax has been awarded to the OCBA for this purpose, and Rich said that part of the additional 2 percent would go to the OCBA for advertising thus freeing up more of the 3 percent coffer for other island nonprofits.

All the counties surrounding Hyde have a 6 percent occupancy tax rate, he said, except for Chowan, which has a 5 percent rate.

Currituck County raises $12 million from occupancy tax; Carteret $6 million and Dare County raises $25 million.

“They’re laughing all the way to the bank,” he said about these other counties.

Attendees at the meeting were concerned that raising the occupancy tax rate unfairly targets the lodging industry.

Some suggested a fairer way to raise more money would be to raise the sales tax on all items or raise the property tax rate.

“The fairest tax is a sales and use tax that encompasses all of the village,” said George Chamberlin.  He suggested that the county look at other things. “We don’t need such as fireworks.”

“Day trippers are literally and figuratively getting a free ride,” said Bob Chestnut, owner of Ride the Wind Surf Shop. “A sales tax impacts everyone.”

Rich said to raise the sales tax would require a voting referendum that could not be voted on until the local election in 2019.

But Rich stressed that tourism revenues fund the island infrastructure—trash, EMS services and the fire company.

“We’re fighting against ourselves not to want this 2 percent,” he said. “The tourists help support the infrastructure here.”

Jack Whitehead, general manager of Ocracoke Island Realty, said that rental house rates haven’t changed much since 2008, but owners’ expenses have, reducing their total income.

“If you raise the Occupancy Tax rate it impacts the homeowners’ ability to make money,” he said.

But Rich noted that with a professional advertising campaign by the OCBA aimed at the off season, rental homeowners would have a chance to make more money.

Later that evening during the continuation of Hyde County’s budget hearing, Ocracoke Commissioner Tom Pahl noted that the 2 percent solution didn’t get a very favorable reception at the earlier meeting.

“I know there are people who feel otherwise,” he said. “Bill made a good argument. Among that group I hope those who buy Bill’s argument are willing to step forward. If they don’t, it will put me in a tough position.”