Hotel/Motel tax among ‘replacement’ revenue sources EDAC discusses

With consideration being given to hire a part-time Tourism coordinator with an annual salary of $41,000, part of Town of Farragut’s Tourism Program implementation, leaders are looking for new sources of revenue.

During Economic Development Advisory Committee’s monthly meeting Wednesday morning, Aug. 2, in Town Hall community room, Town administrator David Smoak reminded the committee “about the changes that have been going on at the [state] legislative level over the last couple of years” that would impact the Town’s General Fund.

“They have started to impact our local budgets. The biggest one being the Hall’s Tax, which is going to be going away here in the next four years. … I think within three years we’ll be down $250,000,” Smoak added. “Those are just the initial estimates we got … Of course, we won’t know until we actually see the numbers start coming in. The Hall’s Tax is decreasing 17 percent per year.”

While a state gas tax increase, 3 cents per gallon, will trickle down creating “extra money into the road fund,” Smoak added. “They reduced the tax on food. And so when that happens, that decreases our General Fund. The General Fund goes to pay for all the other activities and other Town services.”

The overall state changes “transitioned a lot of money from the General Fund over to the state street aid. That’s really our issue,” Smoak said.

Another avenue to create revenue is to finally, after a few years of consideration, implement “a hotel/motel tax,” Smoak said. “The county has a 5 percent tax on lodging, the City of Knoxville has a 3 percent tax on lodging. … Lenoir City has a 5 percent tax on lodging, Oak Ridge has [5 percent as well]. Alcoa has a 2 percent tax and Maryville has a 1 percent tax on lodging.”

“I think it’s time to seriously consider it,” Vice Mayor Ron Pinchok said. “Back in April I did a survey of all the hotels in Farragut, all the hotels in Lenoir City and a few in Cedar Bluff.”

Pinchok said he asked personnel at each hotel, “what is your rate per day on Thursday and what is it for [Saturday]? Everyone that responded, responded with a room rate not including tax, it was a base rate. The range of hotel prices in Farragut was $50 to $124 on Thursday. On Saturday it was $61 to $116. … It was interesting that the hotels in Farragut were all considerably higher for the same days [from 15 to 18 percent more].

“… The point is, if we were to charge 3 percent on a $50 room that would be an extra $1.50,” Pinchok added. “If we were to charge 3 percent on a $125 room that would be $3.75. The question is, is that going to effect someone staying at a hotel?

“… Hopefully it wouldn’t be detrimental to the hotels. The idea is we want to work with the hotels to promote them.”

Smoak said the Town would have the option to increase its percent of Sales Tax revenue on Town business from the current 2.25 percent.

“Most of the cities around us actually charge 2.25 percent. You can go up; state law allows 2.75, but that’s a referendum process so you’d have to take that to all the voters,” Smoake said. “… It would be a special election process.

“So for those reasons we didn’t see that option as being a very viable one at this time,” Smoak added.

Pinchok said about the 2.25 percent, “We get half of that.”

“The other half goes to [Knox County] Schools,” Smoak said.

As for proposed marketing cost additions, “We’re talking around $130,000 overall budget-wise,” Smoak said. “Many of these things are one-time items.”

Adding about $160,000 “that we’re currently budgeting, that’s an overall budget of just under $300,000,” Smoak said.