After more than a half-year of debate by county politicians, the County Council plans to vote later this month on whether to raise hotel rental tax rates in the county.
The council heard from more than two dozen people at Tuesday night’s meeting, the majority of whom support County Executive Jan Gardner’s proposal to increase the rate from 3 percent to 5 percent.
The rate increase would translate to a little more than $900,000 in estimated additional revenue each year.
The county collects the tax and passes about 97 percent of the revenue to the Tourism Council of Frederick County.
Gardner (D) introduced a bill to the County Council to increase the rate, coupled with a memorandum of understanding agreement that outlines how the money will be spent by the Tourism Council.
The agreement includes stipulations that could allow some of the tax revenue from a proposed downtown hotel and conference center to be returned to pay debt on the project through a rebate.
The tax rebate would be limited to 85 percent of the revenue from that hotel. No money from other hoteliers would be funneled to any proposed downtown hotel project in the county, according to the agreement.
County and tourism officials have said the language was added to the agreement to assuage concerns about the proposed tax increase from some county lawmakers and opponents of the proposed downtown hotel and conference center project during the 2016 General Assembly session.
However, one of the county businessmen who pays the tax remains adamantly opposed.
Randy Cohen, owner of the FSK Holiday Inn, said his business pays about 20 percent of the county’s hotel tax revenue each year. He called the hotel tax bill “very harmful” to other county hoteliers because one business would get an advantage in paying down its debt.
“If the government helps build your competition, they will tip the scales,” said Cohen, who is redeveloping his own property near FSK Mall to include a newly renovated conference center.
Richard Griffin, the city’s director of economic development, said the hotel tax will support $3.5 million in debt payments for the conference center for the 25 years the agreement covers.
Griffin said the city is making sure the conference center is protected as a public investment, which will spur economic development in the county.
Frederick Mayor Randy McClement and Thurmont Mayor John Kinnaird testified in favor of the bill Monday, highlighting its local economic development spending. Newly elected Brunswick Mayor Jeff Snoots stood with Abbie Ricketts, chair of the Brunswick Main Street board, which supports the increase.
With the increased rate, the Tourism Council would receive an estimated $2 million each year for tourism-related programs, according to a county breakdown. A majority of the total revenue, 62.5 percent, would go to Visit Frederick marketing and operations.
The remaining funds would be divided between an existing grant program, a new grant program for municipal Main Street enhancements and a new destination-based program that would promote community events, agritourism, and other economic development and tourism projects.
The state legislature authorized the county to implement a hotel tax in 2004 and gave county government the authority to raise the rate to a maximum of 5 percent.
An increase to 5 percent would still leave Frederick County’s hotel tax among the lowest in the state.
For fiscal 2016, hotel tax rates in the state ranged from a low of 3 percent (Frederick and Cecil counties) to a high of 9.5 percent (Baltimore City). The counties that border Frederick had rates equal to or higher than the proposal: Montgomery’s rate was 7 percent, Washington County was set at 6 percent and Carroll’s rate was 5 percent.
A bill by Republican members of the Frederick County delegation that would have frozen the tax rate at 3 percent was introduced during the 2016 General Assembly session, but failed to gain traction.
The Frederick County Council is scheduled to vote on the bill at its Aug. 30 meeting.