County approves lodging tax

The Sussex County Council this week unanimously approved imposing a 3-percent lodging tax in unincorporated areas of the county, effective in January.

The tax will be on hotels, motels, bed and breakfasts and other lodging accommodations with five or more bedrooms and generate more than $1 million for the county. It will affect about 40 lodgings or tourist homes, defined as structures where tourists or guests sleep, but will not include short-term rentals or Airbnb’s.

After hearing testimony from those opposing the tax at a public hearing during their Tuesday, Nov. 12, meeting, council members passed the ordinance, with many saying money realized will help maintain infrastructure and waterways.

“I’ve heard a lot of complaints about dredging and lack of dredging and people come here to use the water,” Council President Michael Vincent said.

Among objections during the public hearing was that short-term rentals are not taxed.

Julie Cummings of Frankford, who owns a motel in unincorporated Fenwick Island, suggested the council send the matter back to the state “and tell them until they institute a fee on other short-term rentals, you are opposed to it.”

“The state, in my opinion, is biting the hand that feeds it. If I’m forced to do it, I’ll do it, but I think you’re making a mistake in accepting it the way it’s written right now,” she said.

“To date there has not been a will to impose tax on short-term rentals, but it makes sense,” Vincent said. “We can certainly ask the question from this council. We’re all concerned about Sussex County and keeping people coming here.”

Short-term rental patrons also use the beaches, Cummings said, so it’s not fair for only hotel and motel patrons to pay the tax that will be used for beach nourishment, dredging and other waterway maintenance.

“For 30 years I have collected, first 6 percent, for the state, then 8 percent for the state, and now they want me to collect another 3 percent for the county,” she said.

But Councilman Doug Hudson said he voted in favor because “the county needs more services all the time and wear and tear on our county infrastructure, roads, things like that, is a factor.

“These taxes will help pay for that. There are a lot of other reasons, but I vote yes,” he said.

Councilman John Rieley said he doesn’t support taxes often, “but in this instance we’re asking our visitors to help share the cost of the infrastructure.”

The ordinance restricts tax money usage to seven categories — beach nourishment, waterway dredging, economic development, tourism, recreational activities, water quality and flood control.

“Maintenance of these seven things is not cheap,” Councilman Irwin G. “I.G.” Burton said.

“Expenses aren’t going down, either. Without maintaining them, I don’t think we’ll have the same tourist draw. It’s a chicken and an egg thing. So, I hear the concerns, the level playing field is upside down. It should be a level playing field. I agree and there’s quite a bit of movement to level the playing field in any way we can but I have faith in the county being able to lock box this money and the council to be able to use it for the good that it is to have for us,” Burton said.

Dan Kramer of Greenwood opposed the tax, saying it isn’t needed.

“You have surplus monies in the budget. There is absolutely no excuse for this money, not one dime. If you were broke, it would be a different story but you’re not broke by a long shot,” he said.

The owner of Anchorage Hotel said his business is independent, not part of a large chain of hotels, and he tries not to financially burden guests.

“I care about my guests and how I treat them,” he said, explaining he keeps the nightly cost at around $200, even in peak tourist season.

“Last year we had great weather. It was beautiful. Our motel numbers were down. It wasn’t just here. It was all the way to Ocean City and now we’re having more taxes put on? I hate burdening my customer base more than I have to. Costs for running a motel aren’t going down,” he said.

Scott Thomas, executive director of Southern Delaware Tourism, cautioned council members to be “very conscious of what other hotels in the region are charging with hotel tax.”

“We have to make sure we stay competitive. With equalization, the pressure we’re all feeling from short-term rentals is here. It’s part of the shared economy. We have to look at that. I ask the council to be very conscious of that, with future legislation,” he said.

Last summer, the Delaware General Assembly passed a bill to allow Sussex County to impose the additional 3 percent lodging tax. The state currently has an 8 percent lodging tax.

Other state bills passed this year authorized towns including Millville, Georgetown, Rehoboth Beach, Seaford, Dover and Delaware City to impose the same tax. On June 11, the town of Millville passed a resolution to impose the tax on hotels, motels and bed and breakfasts, but at this time the town doesn’t have any of those accommodations.

Ocean View Mayor Walter Curran said town council members will discuss the matter, although hotels are not currently permitted in Ocean View. “There may be a bed and breakfast in town but as for hotels, we don’t allow them. Many years ago it was decided … because of the high traffic in a residential area,” he said.

More than a year ago, enabling state legislation allowed New Castle County to enact a lodging tax.

“With legislators’ support, both Sussex and Kent counties were successful in having the General Assembly pass enabling legislation for the remaining two counties this year,” County Administrator Todd Lawson told council members at the Oct. 22 county council meeting, directing their attention to a copy of House Bill No. 228. It was sponsored by state officials including Sen. Gerald Hocker and Speaker of the House Pete Schwartzkopf.

Lawson said county staff has been working on preparation for passage of the ordinance, Lawson said, explaining vouchers will be collected.

“We are developing a portal on our Website where people would submit a  voucher and payment monthly. Staff has also been in contact in discussions with the state … because they are undergoing an upgrade to their software for the state collection of taxes.

“In that first cycle of upgrades the accommodation tax the state collects currently is going to receive a software upgrade. Therefore, it is our hope that the state will couple this lodging tax, and the other two counties lodging taxes, with that collections process. In the future it will be all done electronically — and not be a voucher,” Lawson said.

By Susan Canfora
Staff Reporter