‘Room Tax’ proceeds are at all-time high in Highlands

The Highlands Chamber of Commerce and Visitor Center relies mostly on “room tax” allocations to operate and promote Highlands – and every year the pot of gold gets bigger and bigger.

Its fiscal year is July 1-June 30 and according to Macon County Finance Director Lori Hall proceeds for 2018-‘19 are up 6% from last year – $665,941.38 versus $628,782.58 for fiscal year 2017-’18.

Added to that this year will be $133,221.37 in back room tax proceeds from AirBnb for Aug. 2015 through June 2019.

That means this year the Chamber/Visitor Center will have just $838 shy of $800,000 at its disposal.

Hall said from now on AirBnB will be sending a monthly check for the room tax it collects on behalf of Macon County. It’s estimated that amount will be about $2,500 to $3,000 a month.

However, Hall said the county has no way of tracking VRBO room tax proceeds “as those funds are sent to the individual owners and the individual owners are supposed to turn them into the county.” Therefore, she assumes those proceeds are already in the mix.

The county takes an 8% administrative fee from the total collected from all lodging establishments including hotels, motels, bed and breakfasts, vacation rentals, AirBnB and theoretically VRBO before it disburses it to the area Chamber/Visitor centers in Highlands and Franklin.

According to the Profile of North Carolina Occupancy Taxes and Their Allocation Revised and Updated to Reflect 2017 Changes, beginning in 1983, local room taxes enacted via legislation passed by the NC General Assembly have been a popular and effective means of growing the visitor economy in North Carolina communities. 

These taxes paid by lodging guests on the cost of their rooms have generated billions of dollars in direct tax revenue. Room taxes are typically applied to any lodging property that also pays sales tax, including hotels, bed and breakfasts, cabins, condominiums, and rental homes for short-term stays (including Airbnb in North Carolina).

Unlike sales tax, no room tax revenue is directed to state government in North Carolina – 100% remains at the local level. In Macon County, guests pay an additional 3% of their lodging rate which the business owner sends to the county on a monthly basis. Those proceeds are then sent to the county’s Tourism Development Authorities (TDA) which are part of the chamber/visitor centers.

TDA boards consist of appointed individuals – stakeholders in the local tourism economy and elected officials, as well as the executive director of the chamber of commerce. 

In Highlands, the elected officials are MC Commission Chairman Jim Tate and Highlands Town Board Commissioner Brian Stiehler who is the chairman. Currently Bob Kieltyka holds the Executive Director of the Chamber position but incoming Executive Director Kaye McHan will replace him Sept. 3. Tony Potts, who represents the Chamber Board is vice chair; OEI’s Jack Austin represents Large Accommodations; Jerry Moore, who owns a short-term rental property, represents Small Accommodations; Travis Brooks manager of Lakeside Restaurant and Realtor/builder Bill Futral both hold At-large seats.

The legislatively allowed uses of room taxes vary from both the spirit and, in some cases, even the letter of the law. But generally speaking, the use of room tax revenue in North Carolina falls into one of five categories: Destination promotion, Tourism-related expenditures – which includes uses varying from staging festivals and events to providing some municipal services in some beach towns; Funding or debt support for tourism-related capital projects such as convention centers and arenas or visitor attractions; Beach re-nourishment; and General Fund revenue and other Non-Tourism uses.

With Highlands experiencing increasing visitors which tax the town in various ways it’s the non-tourism uses of room tax funding that is raising interest.

There are seven counties in North Carolina which direct some or all of their room tax revenue into the general fund to be expended on any unspecified “lawful public purpose” as mandated by their legislation: Ashe, Cleveland, Davie, Durham, Hertford, Hyde, and Lee. This is different from room tax revenue specifically dedicated to the construction and operation of civic centers, convention facilities, arenas, and other traditional “tourism-related” venues – which is also considered an allowable use.

There are two municipalities in North Carolina which collect their own room tax and are legislatively enabled to direct money into the general fund for any public purpose – Claremont (Catawba County) and Columbus (Polk County). The city of Franklin also has an room tax separate from the county-wide 3% tax.

Dare County in the Outer Banks, which like Highlands sees large increases in its transient population during the summer season, has legislation that specifically dictates a portion of its room tax toward “services or programs needed due to the impact of tourism on the county.”

Board Chairman Hilary Wilkes said the Chamber’s big push, as evidenced by the hiring of Kaye McHan whose title is Executive Director of Tourism and Marketing, is to put more of her time in destination marketing and tourism development than in the past – hence the title change. Wilkes said the Chamber/Visitor Center aims to expand the shoulder season and bring in visitors during Highlands’ weakest times of the year.

As evidenced by room tax revenues 2018-’19, “weak times” are January through April where monthly proceeds span $21,000 to $33,000 per month. (AirBnB proceeds were not in the tally but will be from now on.) 

Compared to July 2018 at $95,000; August 2018 at $86,000 and June 2019 at $75,000 – which are the three highest room tax revenue months this past fiscal year – it’s easy to see why the Chamber wants to up the game January through April.

But the balance is precarious.

Citizens are asking “How many more people do we need? There’s no parking, streets are crowded with vehicular traffic, sidewalks are crowded with people darting here and there and we can’t get into restaurants?”

From a business standpoint these are good signs. As Mayor Pat Taylor says in his column this week (see page 2). “Highlands is now on the map. The notion that this mountain jewel in Western Carolina can somehow be hidden from the masses is long gone. For that matter, all of Western Carolina has been discovered as a great vacation getaway. Given the cool temperatures in the summer and breathtaking scenery, we shouldn’t anticipate any decline in people visiting our community. A real problem for Highlands would be if in this robust economy we had empty parking spaces on Main Street.”

However, with legislation allowing a portion of room tax to go toward “services or programs needed due to the impact of tourism” or “for use in a town or county’s general fund to be expended on any unspecified ‘lawful public purpose,’” or “dedicated to the construction and operation of civic centers, convention facilities, arenas, and other traditional ‘tourism-related’ venues,” it’s possible the town can benefit from the tourism push and thereby alleviate some of the strain put on its environs.

Pictured at the top of the article is Highlands Inn, located at 420 Main Street, Highlands, N.C.

By Kim Lewicki, Highlands Newspaper