Package of County-Level Bills Includes 1 Percent Surcharge on Hotel Rooms

John Reitmeyer | December 11, 2015 | More Issues, Politics
Legislation looks for ways to help counties raise funds while struggling with property-tax cap, new responsibilities and mandates

Asian American Hotel Owners Association representative Jagruti Panwala (center), flanked by Marilou Halvorsen (left), president of the New Jersey Restaurant and Hospitality Association and Vicki Clark, president of the Cape May County Chamber of Commerce.
County governments in New Jersey that are struggling to hold the line on property taxes while taking on a host of new responsibilities and mandates in recent years are looking to a new tax on hotel rooms for some relief.

Under a measure that cleared the Senate Budget and Appropriations Committee yesterday, county governments would be allowed to charge a 1 percent tax on hotel rooms within their borders. The new tax would be just the latest to be levied on rooms at New Jersey’s many hotels, motels, and bed-and-breakfast inns, which the state and many municipalities already target for tax revenue. For example, a new 3 percent tax levied on hotel rooms in the Meadowlands District went into effect earlier this year to replace a regional tax-sharing arrangement that local officials had long complained about.

The county hotel-tax proposal is part of a broader package of legislation that’s aimed at helping county freeholder boards maintain diverse revenue streams that aren’t tied too heavily to the property tax levy. And it’s coming through the Legislature in the final weeks of a lame-duck session, a time that lawmakers in New Jersey have traditionally used to advance bills that result in increased taxes or fees.

In fact, another measure in the county-government bill package that advanced yesterday would establish a new $5 court fee to generate revenue for enhanced security at county and municipal court facilities.

Several concerns about levying new taxes and fees, and how the new revenue would be spent, were raised during the meeting yesterday as the bills, six in all, each came up for review.

But supporters said the overall goal of the bill package is to ease the reliance on property-tax bills as the primary source of revenue for county freeholder boards. The average New Jersey property tax bill, which includes, county, local, and school taxes, increased last year to a record high of $8,161 — the highest total among U.S. states.

County governments have also been taking on new services in recent years — like emergency dispatching that used to be handled primarily at the municipal level — as the state has encouraged more regionalization and shared services. New mandates like a recent directive from the state court system calling for beefed-up security at courthouses has also affected the bottom line.

County governments, meanwhile, are also forced to abide by the same 2 percent cap on annual property tax levy increases that municipal governments and school boards must follow under a law adopted by Gov. Chris Christie and lawmakers in 2010.

“It’s squeezing county governments’ budgets,” said John Donnadio, executive director of the New Jersey Association of Counties, during the debate yesterday over the hotel-tax bill.

Donnadio told lawmakers the bill only gives counties the option of levying a hotel tax and doesn’t make it a requirement that they do so. It also puts tight, statutory restrictions on how any revenue generated via the hotel tax could be used by the counties that choose to collect it, allowing those funds go only to “reducing the amount the county is required to raise by the local property tax levy.”

“We do support this legislation,” Donnadio said.

[related]But several representatives from the state hotel industry testified against the measure, saying it could do harm to the state’s tourism industry, which is still recovering in the wake of 2012’s superstorm Sandy.

“Essentially this is creating another tourism tax,” said Vicki Clark, president of the Cape May County Chamber of Commerce.

And Jagruti Panwala, a representative of the Asian American Hotel Owners Association, said the tax burden would likely not be borne entirely by those visiting New Jersey for business or while on vacation, but also by residents from New Jersey when they go to the Shore or are attending a family member’s wedding.

“This legislation would create an entirely new tax on the industry,” Panwala said.

Sen. Jeff Van Drew, one of the lone Democrats to vote against the bill yesterday, raised a similar concern.

“I just don’t think that we have to do this at this time,” said Van Drew (D-Cape May).

And like the hotel-tax bill, the measure that would establish a new $5 court fee to raise funds for enhancing court security also cleared the committee, but not before some concerns were raised.

But unlike the proposed hotel tax, which would see any revenue go directly back to the counties from which it was collected, the revenues from the proposed court fee would instead be used to fund grants that individual governments could apply to the state for to fund proposed court-security enhancements.

Sen. Steve Oroho (R-Sussex) asked if a formula had been created yet for distributing the grants to ensure the revenue is doled out equitably among the counties based on need, and not just to the largest.

Daniel Phillips, the legislative liaison for the state court system, said the formula is still being drafted, but it would factor in things like how many trials each courthouse handles.

“It’s going to be based on their workload,” he said.

Other bills in the county government package that passed yesterday would extend the 2 percent cap and other spending restrictions to independent agencies that are funded by the counties but right now don’t have to abide by the cap when it comes to their own spending.

Another bill would also force more information about tax abatements known as “payments in lieu of taxes” to be given to county officials when municipalities strike deals with developers. Designed to generate economic activity, the tax abatements are often negotiated by just the developer and municipal officials, leaving county administrators in the dark about their impact.

But one bill also related to the court-security issue was held back after it was clear there weren’t enough votes from either party in the committee to move it forward. The measure seeks to allow county sheriff’s departments to use trained part-time officers to bolster their court-security forces in the wake of the directive from the state court system calling for beefed up security.

After concerns were raised about pension and health benefits and whether training for the part-time officers under the “Class 2” designation” is adequate for the task, the vote on the measure was postponed.
Donnadio, the county association official, said afterward that he’s hoping the concerns can be resolved going forward, and that the entire bill package could be passed by the full Senate and Assembly before the lame-duck session ends on January 11.