North Carolina tourism leaders on Monday criticized “concerning comments” by some Charlotte City Council members about putting tourism tax revenue into infrastructure projects, leading city leaders to backtrack on the idea’s potential.
In a letter emailed to council members, Mayor Vi Lyles, city manager Marcus Jones and news outlets, the NC Restaurant & Lodging Association said such a move could impact businesses and their employees. It also noted that another North Carolina county was taken to court over its “misuse” of occupancy tax money it put towards public safety.
The letter came a week after council member Renee Johnson floated the idea of using dollars from the city’s hospitality fund, which typically go toward projects like stadium renovations, to help pay for transportation needs. Some other council members said it was an idea worth discussing, but not everyone was on board.
Charlotte has struggled for years to find a way to fund its multi-billion dollar transit plan amid pushback from the state legislature over a potential sales tax increase. The city needs General Assembly help to get a tax increase on the ballot, but Republican leaders in Raleigh have called the plan impractical and said it needed to be more focused on road capacity instead of public transit.
“We have resources in another pot,” Johnson suggested at the April meeting of the council’s Transportation, Planning and Development Committee.
The NCRLA said the tourism taxes that go into the hospitality fund are “targeted taxes” that can and should only be used for tourism-related expenses.
“These (are) very real needs, but they are needs of the community at large and should not be paid for on the back of one industry that is already singularly taxed for many expenses that tourists and locals greatly enjoy,” NCRLA President and CEO Lynn Minges said in the letter.
After receiving the letter, city leaders said changes are unlikely to move forward.
What was proposed at City Council meeting?
Currently, Charlotte’s hospitality fund — revenue from hotel occupancy, rental car and prepared food and beverage taxes — can pay only for projects that fall within three buckets:
- Convention Center, which includes convention center facilities, marketing, amateur sports facilities and stadiums with more than 60,000 seats.
- Tourism, which includes marketing for programs and events that draw visitors and construction as well as maintenance of convention centers, civic centers, auditoriums and museums
- The NASCAR Hall of Fame, which includes construction and maintenance of the Hall of Fame, the Crown Ballroom and associated parking facilities.
At last week’s committee meeting, Johnson suggested the city follow Asheville and work to amend state law to allow the fund to also pay for transportation needs. Johnson said it appeared Asheville’s effort to amend the law was supported by the hospitality industry.
But in Monday’s letter, the NCRLA pushed back on that claim.
“The passage of HB 1057 did have local hospitality industry support, but the way the language is now being manipulated and misinterpreted by local leadership in Asheville, is not,” the letter said.
It also noted that the North Carolina Court of Appeals ruled in March that Currituck County misused occupancy tax money when using it “for police and other emergency services.”
‘We urge you to stay the course’
The NCRLA said in its letter the state’s occupancy tax was originally conceived to help municipalities promote tourism. The hospitality industry agreed to it with the understanding it would bring in more business for them, according to the letter.
“No other industry has targeted taxes. Those targeted taxes should not be used to pay for general fund expenses that are primarily used by the community at large and other businesses. If the original need of tourism promotion is no longer needed, and the tax has met its goals, then that tax should be lowered or eliminated,” the letter said.
The group added it was “ready to help you and support you in finding other mechanisms by which to pay for infrastructure needs.”
“We urge you to stay the course in funding your infrastructure needs through the proposed increase in sales tax,” the letter said.
‘Creates more problems’: Lyles, council members respond
In a response to the NCRLA, Mayor Vi Lyles said in an emailed letter the conversation that took place about the use of hospitality funds “does not question or indicate any change in city policy.”
“The City of Charlotte does not intend to change how we utilize funds generated by hospitality taxes or work with our hospitality industry,” she wrote in a Tuesday letter.
Council member Malcolm Graham, who called Johnson’s proposal “a terrible idea” during the committee meeting, told The Charlotte Observer Monday, “in no way do I support” the idea.
“It creates more problems than it fixes,” said Graham, who chairs the council’s economic development committee
Graham emphasized the proposal was not an official agenda item during the transportation committee’s meeting.
“It is not and should not be an agenda item for public discussion,” he said.
Council member Ed Driggs — who chairs the transportation committee and said previously Johnson’s idea was “a conversation worth having” — said Monday he doesn’t “expect the suggestion to gain much traction on Council.”
“Charlotte is very different from Asheville, and there are many reasons why a diversion of hospitality funds would be a bad idea here,” he said in a statement to the Observer.
Johnson did not immediately respond to a request for comment on the letter.
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