$144 million in hotel taxes draws scrutiny
PA ponders reform
HARRISBURG — Pennsylvania counties took in about $144 million from hotel taxes in 2012, but where that money goes largely depends on where it was collected.
Allegheny County — Pittsburgh — collected more than $29 million in hotel taxes in 2012, coming from its 7 percent local tax on hotel rooms. A majority of those dollars went to pay debt service to the David L. Lawrence Convention Center, while some went to promotional agencies, including VisitPittsburgh, according to state data.
Across the state in Montgomery County, the county’s 2 percent tax earned a more modest $3.7 million. The county held onto $27,000 of it, and the rest went to the county’s tourism promotional agency, where the money could be used for anything promoting tourism.
Pennsylvania’s local hotel tax laws are piecemeal, the result of county-specific legislation passed since the late 1970s. Counties can only raise the local tax with state permission and can generally spend it on things related to “promotion.”
This concerns the tourism industry, which says the money should be targeted toward the agencies that launch campaigns to draw visitors. But for counties, using the money for local projects is a way to continue promoting their respective areas.
Some say, though, there’s a better way, and they’re willing to let the private sector have a say in how Pennsylvania is advertised to travelers at large.
House Tourism and Recreation Chairman Jerry Stern, R-Blair, said the practice of counties and regions marketing themselves individually — and not pushing Pennsylvania as a whole — doesn’t sell the state as successfully as its neighbors. Who hasn’t heard “I Love New York,” “Virginia is For Lovers,” or more recently, “Stronger than the Storm?”
Pennsylvania may lack such a slogan, but it still does OK in getting people to spend money their here: Overall, travelers generate $3.6 billion in tax revenue throughout Pennsylvania.
Stern believes getting the private sector to help would increase the bottom line even more, especially as state funding dedicated to tourism is down to about $3 million.
He envisions incentivizing the private sector to invest in advertising Pennsylvania and rewarding businesses with $15 million in tax credits in a dollar-for-dollar exchange. A newly created board would sign off on statewide promotion. Doing so would limit reliance on hotel taxes and keep the money targeted toward tourism, he said.
Stern’s proposals dovetail with concerns from the state’s tourism lobby. Hotel taxes should are generally used to support the “tourism promotional agencies,” or TPAs, as the industry calls them. But since counties can interpret uses of the tax broadly, money ends up going elsewhere – debt service, for instance.
Washington County’s hotel tax revenue contributes $50,000 a year toward CONSOL Energy Park payoffs, and another $75,000 goes for debt service on county fairground buildings. In Berks County, 80 percent of its hotel tax revenue goes toward the county’s civic center authority.
Scott Drenkard, economist with the Tax Foundation, said hotel taxes generally act as a subsidy for local businesses, one way or another. And public officials who otherwise might balk at a tax vote are often more lax about raising them, since the visitors who pay them aren’t local voters.
“If you think that sort of thing is a good idea, to promote tourism with your tax dollars, it’s not because you care about how much fun tourists have in your state,” Drenkard said. “It’s because you’d like them to spend money at local businesses.”
Rob Fulton, CEO of the Pennsylvania Association of Travel and Tourism, said sometimes local governments look to taxing tourists as an “easy target” for raising money, which can be used to fund community projects not related to promotion.
Fulton said counties have “significant leverage” in distributing the money. For example, if the TPA doesn’t cooperate with the county’s desires it could give the hotel tax revenue to another agency, or for bricks and motor projects.
That includes proposals like Senate Bill 838, which would allow fourth-class counties to raise hotel taxes and use a portion of revenues for grants to municipal projects.
But civic centers, parks and quality infrastructure play a role in promotion, at least to the counties distributing this money. Doug Hill, executive director of the County Commissioners Association, said the association supports retaining local control of hotel tax revenue.
It supports authorizing all counties to increase their hotel tax up to 6 percent, making the system more uniform.
Hill said county commissioners support the idea of defining “promotion” at the local level, including projects related to tourism.
“The definition of the term in the (Tourism Promotion) act — whether limited to promotion or expanded to include bricks-and-mortar, whether limited to promotion of attractions or expanded to include infrastructure in support of those attractions — should remain a matter of local collaboration.”
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