Tourism Tax

N.J. tourism tax deal no winner, locals say

By PETE McALEER Statehouse Bureau, (609) 292-4935
Published: Saturday, June 2, 2007

TRENTON — When the state adopted a 7 percent lodging tax in 2002, it cushioned the blow with a promise seemingly backed by the force of the law.
By statute, the Legislature dedicated a portion of the revenue from the room tax to tourism and the arts. The win-win scenario had the state collecting more tax dollars from the lodging industry but investing more into tourism to attract new visitors.

Five years later, half of that scenario has held true. Guess which half.

“The only part of the bill that they enacted is the part about taking the money,” said Diane Wieland, director of tourism for Cape May County.

Tax revenue from hotel and motel visits continue to grow each year, bringing $78 million to this year's budget and a projected $87 million in the upcoming budget.

Meanwhile, tourism officials are back in Trenton, fighting for money they thought had been guaranteed. The state cut tourism funding from $12.76 million to $10.1 million last year and proposes to spend the same $10.1 million this year.
“The state is reneging on a promise they made,” said Aldo Tenaglia, owner of the Royal Canadian in Wildwood and Shalimar Resort in Wildwood Crest.

For hotel and motel owners, the tax puts their businesses at a disadvantage not only with other states but with their neighbors, Tenaglia said. Hotels and motels must charge both a 7 percent sales tax and a 7 percent lodging tax. The state does not collect either tax from condominiums or rental properties.

While hotel and motel owners feel shafted, state treasury officials are pointing to the fine print. The statute recommends the state spend $12.7 million on tourism, but it allows for a minimum appropriation of $9 million, said Treasury Department Spokesman Mark Perkiss.

“When you look at the statute, it doesn't say ‘you must,'” Perkiss said. “We're in compliance.”

John Siciliano, executive director of the Wildwood Convention Center, said the state takes the wrong attitude toward the tourism industry.

“This is a $47 billion industry for the state, and we're going to be sitting down arguing over $2 million,” Siciliano said. “I'm shocked we're even having these conversations.”

Two weeks ago, Assemblyman Jeff Van Drew — who is chairman of the Tourism and Gaming Committee — held a hearing about the issue. He plans to rally tourism officials to attend an upcoming budget hearing and fight for full funding.

“Our argument is we know the budget is tight, but the city of Philadelphia spends more in tourism promotion than the entire state of New Jersey,” Van Drew said. “I think as distasteful as that tax is, the redeeming factor was there would be a statutory requirement to fund tourism. You really are breaking the intent and the spirit of the legislation.”

Van Drew said he will introduce legislation that requires the state to fund tourism fully or eliminate the occupancy tax. He said the bill will not move in time for this budget, which must be adopted by July 1.

A similar “poison pill” amendment requires the state to fund beach replenishment fully if it wants to collect the real estate transfer tax. Those types of arrangements typically are set before a tax is adopted and not after.

State Sen. Nicholas Asselta, R-Cape May, Cumberland, Atlantic, said the Legislature pulled a similar trick when it promised to direct money from an income tax increase toward property tax rebates, then later cut the rebates while keeping the tax.

“Where does it end?” Asselta asked. “We should be fighting for more money, not what's owed to us. This is the livelihood of the state, tourism, and you're shorting them $2 million in marketing money. Is this maybe one of the underlying reasons for why we still have a deficit? It's penny-wise and pound-foolish.”

For Weiland, the director for Cape May County's tourism department, the biggest concern is that the numbers show a trend toward daytrippers. She said Cape May County's accommodations industry has remained flat for three years at $2.2 billion annually, while revenue for attractions has risen 60 percent.

“If we reduce tourism funding by $2 million, are we doing everything we need to do?” Weiland asked. “We need to use every penny of that to expand our market and open new markets to create overnight stays.”

Statewide, tourism has fallen from the state's second largest industry to its third, behind pharmaceuticals and technology. Marilou Halvorsen, president of the New Jersey Travel Industry Association, said the state's own study shows every dollar spent on tourism promotion brings back $29 to the economy.

“I don't know any investment on Wall Street that yields that kind of return,” Halvorsen said.

To e-mail Pete McAleer at The Press:PMcAleer@pressofac.com