Tax revenues confounding town, Tourism

Fri, 03/23/2018 - 9:45am
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The members of the Tourism Council didn’t have much to say after their first glimpse at the proposed Tourism budget for 2019 because they felt, in some way, it was written in disappearing ink.

The reason for that is this: In comparing hotel tax revenue for the past two full calendar years — 2016 and 2017 — the latter year’s revenue dropped by about $85,000. Hotel tax revenues for January through December 2016 were $364,751. For 2017, the number was $277,319. This money is by far the largest chunk of income for the local Tourism Council. “That’s significant, to say the least,” Executive Director Jessica Willi said of the drop in revenue. (The Council receives 42 percent of five percent of the hotel tax collected on the Island.)

As far as building a budget on numbers that seem uncertain, Willi said, for now, they have to “rely on the unreliable.”

Given that, Willi said it was difficult to say just what the Council’s revenue was going to be in the coming year and that made it difficult to put together a budget with any reliable forecast.

What is confounding about these numbers is that a corresponding tax that goes to the town of New Shoreham — the one percent of revenue generated by the cottage tax implemented two years ago — has gone up so precipitously that Town Finance Director Amy Land is watching those numbers closely. 

Land said the first year that tax was implemented it generated $80,000 for the town, which Land said seemed about right. The next year, however, that tax generated $137,000 for the town, which seemed high, said Land. This year, so far — July 1, 2017 through February 2018 — that tax has already generated $235,000. These numbers, said Land, catapulted the town into “an area of uncertainty.”

Land said that the revenue could be an error, but that was “speculation.” She also said that while she has for the past two years tended to include a conservative projection of that number into the town budget, this year she has included a number that more accurately reflects that revenue, which is in the $603,520 State Aid/Hotel Sale Tax budget line item. When asked if the town could be penalized if it was found out the high tax revenue number was allocated in error, Land said she has been told “no” by the state, but that it would be readjusted in the future.

On the other hand, Willi said when she asked the Division of Taxation if the Tourism Council would have monies returned if it was found out that the hotel tax revenue had been calculated too low, she received the same answer: “No.”

Complicating matters is the increased presence of airbnb on the island, Willi said. Homeowners and hotels can rent rooms through this online service, but even though these rented rooms are still charged the traditional 13 percent tax that is attached to room rentals, that money does not filter down to the local tourism councils in the state (as it would if someone was booking a room at a hotel directly), but rather to cities and towns and RICommerce, the state agency in charge of marketing.

Willi said she had a meeting scheduled with the state Division of Taxation in early April to take one more stab at figuring this out. In the meantime, the Tourism Council is looking at projected total expenses for 2019 to be $314,750, with $274,150 as projected income. This deficit means that the Tourism Council is expected to dip into its own reserve funding for the first time.

Council members also took a brief look into the future.

Member John Cullen said that such local organizations and events, such as the Glass Float Project or the Fourth of July Fireworks that receive annual gifts from the Tourism Council, may see some cut to that in the future. The discussion came up as the Council approved a $3,000 stipend for the Blues on the Block concert series held at the Beach Pavilion during the summer.

“We may have to meet with some of these groups,” said Cullen. “We’re not going to be able to support them like we’ve been supporting them for the past 10 years. If there’s no money, our hands are tied.”