Hoover council continues to tweak tax increase proposal for hotels

Hoover officials continue to tweak a proposal to raise taxes on the hotel industry prior to a vote scheduled for next week.

At tonight’s City Council meeting, council members reduced a proposed nightly room fee from $2.50 a night to $2 a night after additional feedback from hoteliers.

The original proposal was to raise the city’s portion of lodging taxes from 3 percent to 6 percent, but hotel operators last week convinced city leaders to modify the proposal to charge a nightly room fee instead.

Representatives for the hotel industry on Thursday agreed to a $2.50 nightly room fee but tonight said they did so under the impression that they would be able to delay implementation of that fee until the end of 2019 for contracts that already have been signed.

The proposed ordinance to charge a nightly room fee, if approved by the council,  would go into effect Jan. 1, 2019. And since Thursday night, hoteliers have learned that they cannot delay the room fee for some guests and not others, said Matt Sterley, general manager for the Hyatt Regency Birmingham — The Wynfrey Hotel.

So Mayor Frank Brocato tonight suggested the council consider a $2 nightly room fee instead.

Sterley said some hotels already have signed contracts with prospective guests all the way throught 2021. They’re concerned about losing some of those contracts if the nightly room fee is approved or concerned about having to make up for the new fee with reduced rates, he said. And those contracts are worth millions of dollars, he said.

Also, with regard to future business, “$2.50 feels like you’re nickel and diming people,” Sterley said. The $2 fee is much more palatable, he said.

Melinda Lopez, the city’s chief financial officer, estimated that reducing the fee from $2.50 to $2 per night would mean about $300,000 in less revenue per year. The estimated revenue increase would be $1.2 million instead of $1.5 million a year, she said.

Brocato said he realizes there will be less of an increase, but the city’s intention all along was to work with the hotel community to come up with something workable for them. “We’re not trying to hurt our businesses,” he said.

Nancy Thomas, general manager of the Candlewood Suites on U.S. 280, said she didn’t know anything about the negotiations that had been happening between city officials and some hotel operators.

She said the nightly room fee is really going to hurt some of the customers at her hotel, which is an extended-stay hotel. “They really can’t afford that right now,” she said.

She asked the council to consider limiting the number of nights that the room fee could be charged, perhaps to six nights.

Wade Morgan, a resident of the Sawyer Trail subdivision in Ross Bridge, told the council tonight that he liked the original proposal to raise the city’s portion of lodging taxes from 3 percent to 6 percent (and the overall sales tax rate from 14 percent to 17 percent).

Sterley last week said raising the lodging tax would put Hoover hotels at a competitive disadvantage compared to hotels in other metropolitan markets such as Nashville, Atlanta, New Orleans and Baton Rouge, where tax rates are now higher than Hoover’s rate.

Morgan said Hoover hotels still would have an advantage over those areas, even with the tax increase of 3 percentage points, because the base room rates in those markets are higher than rates in Hoover.

Aldridge Gardens CEO Tynette Lynch, who is chairwoman of the board of directors for the Greater Birmingham Convention and Visitors Bureau and a member of the state tourism advisory board, said some of those other markets have advantages over the Birmingham-Hoover market because of the amenities and attractions in those areas.

“We are not Nashville,” she said. “We have to stay competitive the best way we can.”

Other proposed tax increases

The nightly hotel room fee is just one component of a tax increase package to be considered by the Hoover City Council at a special meeting on July 10.

The council also plans to consider:

• Raising the city’s portion of sales taxes from 3 percent to 3.5 percent, putting the overall sales tax rate at 8.5 percent in the Shelby County portion of Hoover and 9.5 percent in the Jefferson County portion of Hoover. This would raise an estimated $10 million more per year, City Treasurer Robert Yeager has said.
• Raising the city’s residential real estate rental and lease tax from 1 percent to 2 percent, bringing in an estimated $1 million in additional revenue.

Brocato said he realized when he came into office in 2016 that the city was heading for financial trouble if something were not done because expenses were about to exceed revenues.

So his administration has spent the past 18 months cutting expenditures out of the city’s budget and will continue to do those things, he said. The City Council president and, he thinks, the City Council realizes the financial squeeze, he said.

“That’s why we’re going to this drastic measure of raising our sales tax by a half percent,” he said.

Anthony Coleman, a resident of the Wine Ridge community just outside the Hoover city limits who runs a business out of his home, objected to having to pay Hoover sales taxes because he is in the city’s police jurisdiction when he does not receive service from the Hoover Police Department or have a chance to vote in Hoover city elections.

“That’s taxation without representation,” Coleman said. Plus, “why is it called a police jurisdiction if the police don’t go there?”

Jehad Al-Dakka said the police jurisdiction allows police officers to enforce laws within three miles of the city limits, but calls are for service are routed to the agency with primary jurisdiction of those areas outside the city limits. In Coleman’s case, that would be the sheriff’s office, Al-Dakka said.

Coleman asked the council to join him in asking legislators to allow people who live outside the city limits but are being taxed to be able to vote in city elections.