Tuesday, May 05, 2009

Stealing a Little Gasoline

When I was a kid, we kept a tank of fuel at the ranch for tractors and equipment. We always had some acreage in oats or barley for live stock and if we didn’t finish work in a field we’d leave the tractor where we stopped to make it easier to finish in the morning.

When I was old enough to drive, I got in the bad habit of siphoning a little out of the tractor for my Jeep because I was always forgetting to fill up in town. But as you can imagine, when I went out to finish the field that next day, guess what…I’d have to drive back and refuel in order to finish the job. So my actions were short sighted and cost me in the long run.

Similarly, many North Carolina communities missed the point as the decade of the 1980’s began, when the late Buncombe County Senator Robert Swain first pioneered the local option “room occupancy and tourism development tax.” The move was farsighted but controversial. After all, many businesses then and even today aren’t even required to collect general sales tax, let alone a special tax, e.g., media advertising and personal services like haircuts, etc.

The objective of the “room occupancy and tourism development tax” was simple, yet brilliant tax policy. Re-invest 100% of the special visitor paid tax to self-fund community marketing and benefit local governments with a revenue yield of many times that amount reaped from overall taxable visitor spending.

But even after seeing the remarkable results in Asheville in just the first few years, most communities, Durham included, sought authorization to collect the special visitor paid tax but with little or nothing dedicated to visitor promotion which of course defeats the entire purpose.

Diverting the special room occupancy tax away from marketing is like me “borrowing” gas out of that tractor for my Jeep. The tractor still ran the next morning but it didn’t get as far. So communities that did this really shot themselves in the foot.

For Durham, however, four members of Durham’s Delegation to the General Assembly made sure through the years that Durham wouldn’t miss out and hopefully catch up…eventually.
  • First, then Representative Paul Pulley ensured a specific percentage, 25%, (a long ways from the 100% in Buncombe but much better than “0 %”) was set aside in Durham’s first occupancy tax bill to charter DCVB market the Durham brand and get the community on the list for consideration by visitors.

  • Next, when DCVB and Durham businesses proposed a 50% increase in the tax to make Durham marketing more competitive, the late Senator Walter Royall, enraged by an attempt to divert some of it, ensured the amount dedicated for marketing was increased from 25% to 40%.

  • Third, seeing that communities were having difficulty grasping Senator Swain’s concept, then Representative George Miller pioneered House Finance Guidelines so that other communities would use the tax more as it was intended, e.g., “no less than 2/3rds for marketing and up to 1/3rd for other tourism related projects” and communities like Durham would be conformed in the future.

  • Fourth, when rather than conform Durham to the State House guidelines, enthusiasts sought to increase the tax to fund a theater, then Senator Wib Gulley brokered a new formula that while still short of the 66% guideline will gradually bring the amount of the tax deployed to generate Durham’s full share of taxable visitor spending from 33% to 50% between the years 2020 and 2043.

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