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City vacates hotel-motel tax hike

April 9th, 2014 8:57 pm by Gary B. Gray

City vacates hotel-motel tax hike

(Photos by Lee Talbert/Johnson City Press)

On March 6, the City Commission approved a first reading of an ordinance to raise the local hotel-motel tax from 5 percent to 8 percent on lodging costs charged by operators.

That’s the last time the increase was mentioned, and it is not likely to come up for discussion again any time soon.

It turns out a 5-percent cap was placed on that tax in 1980, when the General Assembly first passed legislation authorizing Johnson City to levy a 3-percent “privilege tax.” The City Commission voted to increase the tax to 4 percent in 1982 and 5 percent in 1989.

But that’s as far as the city can go for now.

Johnson City must weave a bill into the General Assembly specifically requesting it be granted an increase, and that won’t happen until next legislative session. The increase would have generated between $400,000 and $450,000 a year.

“The bill that was passed allowed us to go to 5 percent, so the two increases were done by the City Commission without any further action required by the Legislature,” City Manager Pete Peterson said this week. “We were without a lawyer when the first reading was done.”

Peterson said Jim Epps IV, the city’s staff attorney, and Eric Herrin, a private attorney who represents the city, were both out of the country when the vote ensued and he and commissioners were not aware additional action was needed at the state level until they returned.

“Obviously, based on recent action of the House, it doesn’t look like we will get the necessary legislative approval to increase the fee during this session,” Peterson added.

On Monday, the House Local Government Subcommittee, which last year routinely approved the tax increases, killed all bills authorizing Tennessee city and county governments to levy or increase taxes on hotels and motels.

The subcommittee made that decision after Greg Adkins, president and CEO of the Tennessee Hospitality Association, called for defeat of bills permitting local hotel-motel taxes. He displayed a letter from Grover Norquist, Americans for Tax Reform president and nationally known anti-tax crusader.

The matter came to a head when a bill that would have allowed the City of Columbia, which now has no hotel-motel tax, to impose a levy up to 5 percent. That bill, as well as others from Wilson County, the city of Spring Hill, the city of Fayetteville and Lewis County were all rejected.

Rep. Joe Carr, R-Lascassa, who chairs the subcommittee, denied there was any concerted effort to “kill” the bills, according to a Knoxville News-Sentinel report. Carr is challenging incumbent Lamar Alexander for the Republican U.S. Senate nomination.

Carr, who was critical of the Columbia bill, said, “I don’t believe in tax increases.”

Johnson City and other Tennessee municipalities do still have the right to petition the state for an increase.

“This denial of the proposed legislation before the Legislature does not affect us,” Peterson said. “Those bills were directed only to certain communities, and Johnson City was not one of them. However, there is currently a statute that limits our tax at 5 percent, so we can’t raise it any higher until and unless the legislature passes a bill that would allow us to raise higher than 5 percent.”

The Johnson City-Jonesborough-Washington County Chamber of Commerce and its Convention & Visitors Bureau requested the increase. Gary Mabrey, chamber president and CEO, and Lottie Ryans, chamber board chair, sent City Manager Pete Peterson a letter on Feb. 18 indicating their interest in putting the additional revenue into a Visitor Enhancement Fund.

Their desire was to use the additional funds to expand the city’s softball/soccer fields near Winged Deer Park, upgrade to Kermit Tipton Stadium/Liberty Bell to make it appealing for college-level track events, to make Freedom Hall improvements and to install signage leading into the city.

Commissioners were OK with setting up the fund, but they also decided not to earmark money for any particular project. For now, that point is moot. The task at hand — if the city still wants to pursue the hotel-motel tax increase — is to connect with state representatives and get legislation moving. Very specific legislation at that. 

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