A little over 16 months ago, I was sworn into office as your county executive. We inherited a government that for each of the prior four years spent more than it received as revenue. Our cash reserves were dwindling fast, and over 88 percent of expenses were locked into long-term contracts.
We immediately got to work cutting the fat out of county government. Over the past year, we have reduced our annual expenditures by over $6.3 million, by scrutinizing all hiring and every expenditure of your hard-earned tax dollars. My proposed Fiscal Year 2019 budget includes an additional $4.7 million in expenditure reductions. We also have identified inequities in our tax system.
Hotel tax addresses an inequity in our county tax system
One of the most glaring inequities is the hotel tax. There is a statewide 8 percent percent tax on hotels and motels. Over a decade ago, the state legislature gave the city of Wilmington the authority to raise the tax on hotels in the city up to an additional 3 percent. As a result, visitors who stay in Wilmington hotels pay a higher tax than visitors who stay at hotels in New Castle County outside of the city.
House Bill 377 enables New Castle County to do the same thing Wilmington has been able to do for over ten years: raise the existing hotel tax by up to 3 percent. That means up to $3 of additional charge to a visitor
on a $100 hotel room.
Visitors use services that residents pay for
This is not just a matter of leveling tax rates across the county. Hotel visitors actually use county government-provided services at a much higher rate than most county residents do. For example, we have received 4,656 calls from hotel visitors to our 911 center since January 2016. There is a cost to each of these calls, a cost to our police, fire, paramedic and 911 services. It is important that you as residents do not unfairly bear the brunt of paying for such calls.
In fact, other cities and counties in the region do a much better job of making sure their residents do not pay the cost of visitors’ emergency services. Almost all neighboring jurisdictions such as Cecil County, Chester County, Delaware County, Harford County, Cherry Hill, and Philadelphia levy higher taxes on hotel guests. If you stay at a hotel in Philadelphia, your hotel tax and sales tax will add up to more than double the taxes you would pay staying at a hotel in New Castle County.
Opponents of this bill are voicing concerns about the impact that a higher hotel tax could have on business. The hotel and lodging industry association and their paid lobbyists are raising alarm, indicating this will devastate the hotel industry. On the contrary, the higher hotel tax rate has had no noticeable impact on hotel occupancy rates in Wilmington. In fact, all indications are the hotel market in Wilmington is booming and growing. A downtown Marriott Hotel opened six weeks ago, and three more hotels are planned in Wilmington.
Moreover, studies have indicated that increases in hotel taxes have no negative impact on the hotel business. The National Tax Journal studied hotel taxes and concluded hotel taxes have a negligible impact on real
Acting responsibly to balance the county’s budget
Your county government’s expenses have exceeded revenues for years. I committed to balancing the budget this year so that we can sustain critical local government services for years to come, services that protect public safety, maintain our quality of life and support increases in your home property value. Balancing our budget is an opportunity to scrutinize and identify government waste that can be eliminated and to ensure that local taxes are charged fairly.
House Bill 377, enabling the counties to raise a hotel tax in the same manner as the city of Wilmington, is fair and will enable us to deliver more efficient critical services to you.