Government, Real Estate, and Travel & Tourism

County likely to extend hotel-motel tax soon

Kent approves a property-tax billing change that will save Grand Rapids money.

December 1, 2012
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County likely to extend hotel-motel tax soon
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The Kent County Finance and Legislative committees both agreed to a new ordinance that will extend the county’s 5 percent Lodging Excise Tax for another decade, and recommended that the full board of commissioners do the same next week. If the board agrees, the new ordinance will go into effect March 1 and be on the books until Dec. 31, 2042. As it now stands, the levy expires in 2032.

The county enacted the Lodging Excise Tax in 1975 in order to pay the debt on the Grand Center, which served as the city’s convention hall until DeVos Place opened in 2003. Today, revenue from the tax primarily pays the new convention center’s bond debt, which is $5.8 million this year.

The revenue also has provided financial support for the marketing activities of Experience Grand Rapids and the West Michigan Sports Commission and made a $10,000 annual contribution to the Festival of the Arts.

“We can’t do anything with the hotel-motel tax that the state doesn’t allow. It’s primarily for convention and arena activities,” said Daryl Delabbio, county administrator and controller. “The first and primary priority is paying the bonds.”

Revenue from the tax is expected to total $5.9 million this year and has been on an upswing as the hotel occupancy rate and room rates have risen over the past several years. Delabbio hopes the increases continue because the county would like to recoup at least a portion of the $5.5 million in general fund dollars it has sent as a subsidy the last four years to the lodging-excise account, when revenue to it didn’t cover expenses.

In fact, one reason for extending the tax is to help ensure that the county gets some of its revenue back, and a mechanism to accomplish that is part of the new ordinance. The DeVos Place bonds mature in 2031, which will free up some tax revenue for the county to recoup.

“This is the intent of the ordinance, and that (decision) is up to future commissioners,” Delabbio said. Another reason for the new ordinance is it allows the county to combine several amendments that have been made to it into a single document.

But sometime down the road, Delabbio sees a portion of the tax revenue going to the Convention and Arena Authority to maintain and make repairs to DeVos Place and Van Andel Arena. The CAA currently has a reserve of about $20 million for those purposes.

“I anticipate some funding will go to the convention authority for future repairs to the buildings,” Delabbio said.

Commissioner Stan Ponstein, though, felt the county should pay at least as much funding attention to the Purchase of Development Rights ordinance as it does to the hospitality industry. He said agriculture is the No. 2 industry in the state and accounts for roughly a quarter of all jobs, directly or indirectly.

Ponstein said farmland is the only property type in the county that has had its value rise over the past few years. “That was the only sector in our property-tax base that has had an uptick. Housing has fallen by 30 percent,” he said.

Commissioners transferred $1.3 million from the 2013 general fund to the lodging excise tax account last week and allocated $50,000 from the same fund to the PDR program for next year.

The board also adopted a general fund budget of $161 million for next year, ratified a three-year agreement with Experience Grand Rapids that allows the organization to collect 16.75 percent of the Lodging Excise Tax, and allocated $6 million to the Senior Millage Fund. “This is $321,000 less than last year,” said Commissioner Carol Hennessy. “This is a dedicated millage that doesn’t capture all of the money because of DDAs and other groups,” added Ponstein.

Failure to pay the Lodging Excise Tax on time is a misdemeanor punishable by a $500 fine, 90 days in the county jail, or both. A late payment is subject to a 1 percent interest charge each month. Earlier this year, two operators on 28th Street were $270,000 behind in their payments to the county.

On another tax matter, county commissioners agreed last week to a property-tax shift with the city of Grand Rapids, a move that city commissioners previously approved.

Most property owners in the city receive a December tax bill that includes only the county’s detention and corrections and senior millages. But around 60,000 also find a small property-tax charge. The charges are always under $100.

Those millages weren’t part of the state’s tax shift five years ago when most payments were transferred from winter to summer, but were included this year. Since 2007, administering and collecting the tax has cost the city an additional $266,000, and the revenue the city has received in return for its effort has only represented 2.3 cents of every property-tax dollar that Grand Rapids has received.

“The city has incurred considerable expenses since 2007. People routinely contact us wondering why they’re getting such small bills,” said GR City Treasurer Al Mooney. Mooney said one tax bill that was sent to a business was for $1.22, while a resident received one for 46 cents.

The county commission’s approval means the city will save roughly $50,000 next year on tax collections. All city property owners will find the county’s millages on their July tax bills in 2013. Mooney also said city taxpayers would save $61,000 in postage from the tax shift.

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