Raising Hotel Tax Makes Good Dollars and Sense

But new fund’s board must be transparent

As a rule, for politicians, particularly those sitting on city council, raising taxes is never a no-brainer. Raising a tax to fund anything other than schools or reduce our pension debt is even dicier, one would think.

This maxim is true for almost every proposed tax except the one proposed by the Greater Philadelphia Hotel Association late last month: a 0.75 percent increase to the current hotel tax. The new tax would add $1.50 to the cost of a $200-per-night room, estimated to bring in $5.8 million in the first year, increasing to over $7 million by 2022.

The move is designed to create a fund that would allow the city to competitively bid for more large-scale tourist events similar to DNC 2016 or the 2017 NFL Draft.

But first, let us turn down the comforter on this one.

Philadelphia’s current hotel tax is in no way out of line with cities of comparable size. Indeed, there are some cities of far lesser stature whose hotel tax is far greater than ours. According to Yahoo! Finance here is how we stack up:

Houston - 17%; Indianapolis -17%; Columbus - 16.75%; San Antonio - 16.75%; Chicago - 16.39%; Los Angeles - 15.5%; San Francisco - 15.5%; Austin -15%; New York - 14.75%; Philadelphia - 14.2%; San Jose - 14%; Phoenix - 13.27%; Dallas - 13%; Jacksonville - 13%; San Diego - 12.5%.

Adding .75% to the current hotel tax would result in our only jumping one notch, above New York City, on the list and by a negligible amount at that.

An increase in the hotel tax dedicated to creating a fund to lure big events to Philadelphia just makes good business sense. Just look at the two biggest events to come to our city in the past year alone: For DNC 2016, we took an $85 million investment and returned $200 million; for the NFL Draft we took a $5 million investment and turned it into $80 million.

As reported by the Philadelphia Inquirer, “Julie Coker Graham, president and CEO of the Convention and Visitors Bureau, said conventions are often looking for such perks when weighing locations. She said other cities have dedicated funds for incentive packages. San Diego, for instance, has $35 million, Portland, Ore., has $10.7 million, and Seattle $6 million, according to numbers provided by the hotel association. Philadelphia has no such fund.”

Most importantly, the tax is being proposed by the only people in Philadelphia who could be adversely affected by it: the folks running the hotels. If they felt the new tax would push price points too high, thereby losing customers, they would be the last to propose a tax increase.

Our reservation about the tax comes in how the revenue will be spent. According to the Inquirer, “[Greater Philadelphia Hotel Association executive director Ed] Grose said the money, to be managed by a volunteer board with 14 voting members from the hotel industry and one from the city, would be given out as grants.”

Here’s the problem. We already have too many cooks in the tourist-luring kitchen. In 2014, City Controller Alan Butkovitz issued a 38-page report that found that lack of coordination, interagency friction, and administrative overlap between the city’s two marketing arms — the Philadelphia Convention and Visitors Bureau (PHLCVB) and Visit Philadelphia — was undercutting Philadelphia’s ability to sell itself to visitors. The report called for a merger of these agencies. Now along comes a third non-profit with 14 voting members and its own budget authority.

The bigger problem is in how this new board will identify the events it chooses to support. Take the 2017 bike race. Oh yeah, there is no 2017 bike race. Why? Because no one could raise the $750,000 needed to pay the city to host it. The bike race lost out to the Dad Vail Regatta and the NFL Draft precisely because it was a one-day event that did not fill hotel rooms. The Mummers were on life support in 2011 when Congressman Bob Brady found the money to save it. But the Mummers Parade does not fill up hotel rooms. When these events come to the hotel board, will they be shot down because they do not meet the new board’s bottom line.

We do not know the answer. But we do know this, these decisions should not be made behind closed hotel room doors.




Raising Hotel Tax Makes Good Dollars and Sense

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