Seeking the ability to fund a possible theater downtown, the Durham City Council voted Tuesday night to ask the state Legislature for the authority to raise the hotel occupancy tax.
The council voted 10-3 to request permission to increase the tax on visitors staying in hotels or motels in Durham from 5 percent to 6 percent--although members stressed that they would not necessarily raise the tax even if given the authority to do so.
The increase would generate an estimated $1.4 million each year. That number weighs in at approximately half the annual debt payments of between $2.6 million and $2.8 million on a proposed 5,000-seat theater downtown.
Council members advocated the tax as a source of funding for that theater and other projects to revitalize downtown, such as a proposed redevelopment of the American Tobacco campus.
"I feel the occupancy tax is an excellent little mechanism to let us move closer to [revitalization]," council member Floyd McKissick said.
He pointed out that the hotel occupancy tax is already at 6 percent in neighboring Wake County.
State Rep. Paul Luebke, D-Durham and co-chair of the House Finance Committee, said after the meeting that he would support giving Durham the authority to levy the tax increase.
"My understanding is that there is a good plan recommended by the Convention & Visitors Bureau that most people are in agreement with," Luebke said. "[The increase is] a very marginal 1 percent, given that these are for the most part quality hotels."
Leaders of the Durham Convention & Visitors Bureau expressed support for the measure.
"We hope that it will lead to the legislative authority to level the tax. That will allow Durham to enter into serious negotiations [to bring in the theater]," said Bill Kalkhof, president of Downtown Durham, Inc., and a member of the DCVB board of directors. "There will be a 5,000-seat theater between Greensboro and Raleigh, and we need to make sure it's built here."
But council member Thomas Stith pointed out that the hotel tax alone would not be enough to pay for the theater.
"We're going to have a gap in funding," Stith said. "I think we need to be very up-front about that and how we plan to close that gap."
Reyn Bowman, DCVB president and CEO, agreed that some other source of revenue would be necessary.
"The occupancy tax is a stopgap measure. It would barely pay for half the theater," he said, but added that the request for the increase was still useful. "I think it gets the ball rolling on [discussions of other taxes]."
Bowman pointed to a 1 percent tax on prepared food, which would generate an estimated $3 million per year, as a possibility. Bowman said such a tax on meals would distribute the cost more evenly than the occupancy tax, which he said would put most of the burden on hotels.
The council asked the General Assembly for the authority to impose the meals tax in January, but it has not won sufficient support to pass the Legislature. Luebke, for instance, has criticized the prepared food tax as being too regressive.
"My preference is a luxury meals tax if there is to be a meals tax," Luebke said. But he added that that question should wait until the 2002 legislative session.
At Tuesday night's meeting, much of the debate centered on whether to reiterate the council's wish to levy a meals tax along with the request for the occupancy tax.
The motion failed 6-7, since some council members worried that the two measures would appear linked.
"If we tie them together, we may not get either one," council member Dan Hill said.
The council also debated whether to request the tax increase before it is certain that either the 5,000-seat theater or the American Tobacco project will actually come to fruition. But because the General Assembly is not in session year-round, council members worried that failing to make the request now could mean a long delay.
"We can't ask for legislative authority when the Legislature isn't in session," council member Erick Larson said. "Waiting two years is not a good choice," he added.
Meg Lawson contributed to this story.
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