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State transportation bill's lodging tax sparks ire of local industry groups

Three Savannah industry groups are protesting a last-minute provision added to the state’s new transportation funding bill that would add a special flat tax on hotel rooms across Georgia.

HB 170, known as the “Transportation Funding Act of 2015,” was headed toward the governor’s desk this week after passage Tuesday by both chambers of the Georgia legislature.

The bill has already made its fair share of enemies in attempting to raise close to $1 billion to deal with a backlog of unfunded transportation projects through an increase in the gas tax and a number of other fees.

In successive email alerts to its membership on Wednesday, the Tourism Leadership Council, Savannah Chamber of Commerce and Savannah Downtown Business Association encouraged members to call Gov. Nathan Deal’s office to express their concerns.

Michael Owens, president of the Tourism Leadership Council, said the $5 fee would be assessed to each room per night, putting the state at a significant disadvantage for convention and group business.

“This is a big deal,” Owens said. “No one has any idea of the ramifications or impact of this.”

For a convention booking 5,000 rooms, for example, that would add an additional $25,000 to their total bill, he said.

“It makes Charleston and other cities in other states more competitive,” Owens said. “It’s one less dinner out, one less souvenir bought … it’s taking away available income that could be spent in small businesses around the city.”

The fee was originally going to

be levied on rental car companies, according to Owens, but was nixed late Tuesday night after some legislators feared that would put too heavy of a burden on Georgia residents, who make up more than half of rental car users.

What they didn’t realize, he said, is that for a town like Savannah, which is heavily dependent on tourism, the largest share of hotel room stays are also by state residents, meaning it isn’t just a “tax on tourists.”

Bill Hubbard, president and CEO of the Savannah Chamber, echoed concerns that it would put an unfair burden on the state’s hospitality industry.

“It’s just a perfect example of fixing an important problem but doing it in a way without knowing what the impact might be,” Hubbard said. “There’s no question that it’s inequitable.”

Hubbard said for a roadside hotel, the tax will be a much higher percentage of its room rate than it would be for a luxury property, disproportionately affecting customers on the lower end.

Both Owens and Hubbard said there were better options on the table for raising additional revenue for transportation. Owens said he would’ve preferred a tobacco tariff that would’ve raised $400 million, more than double the amount the lodging tax is supposed to rake in.

With Thursday being the last day of the legislative session and Gov. Deal signaling strong support for the bill, it appears all but certain the fee will go into effect beginning July 1.

In a statement, the governor said the measure is necessary to maintain the state’s roads and bridges.

“We faced obligations that could no longer be ignored, and current resources were simply not enough to preserve the infrastructure we need to get to work, to safely take children to school on buses and to keep the lifeblood of our economy pumping,” said Deal’s office.

Representative Ron Stephens, R-Savannah, voted yes for the bill but expressed misgivings about the lodging tax.

“The No. 1 industry in Savannah is tourism,” he said. “We didn’t do them any favors.”

Rep. Craig Gordon, D-Savannah, said he voted yes because it was the best option on the table.

“I think it’s the best thing we’ve had so far to keep the ball rolling,” he said after the vote.

Hubbard said it was unfortunate legislators did not leave enough time to figure out funding mechanisms more thoroughly.

“Transportation is critical and funding it appropriately is critical, but we just put a fairly large burden on the hospitality industry with little research,” Hubbard said.

 

— Walter Jones in Atlanta contributed to this report 

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