ANNAPOLIS — A bill that would cap the county’s hotel tax at 3 percent has passed the Frederick County delegation and will be introduced in the General Assembly.
The vote on the proposed bill was 5-3, with all five Republican members of the delegation — Sen. Michael Hough, and delegates Kathy Afzali, Barrie S. Ciliberti, William Folden and David E. Vogt III — voting to cap the tax at 3 percent.
All three Democratic members of the delegation — Sen. Ron Young, and delegates Carol L. Krimm and Karen Lewis Young — voted to keep the state law as currently written, which allows the tax to be set between 3 and 5 percent by the Frederick County Council. The three lawmakers also represent an area that covers the city of Frederick.
County and city leaders were looking to increase the tax to the current 5 percent cap, which would allow about $4.3 million from hotel tax revenue to help fund a hotel and conference center in downtown Frederick.
About $44 million of the cost to construct the $82.47 million development will be paid by the hotel’s developer, Plamondon Hospitality Partners. The remaining funds would come from a combination of city, county and state funding, as well as tax revenue generated by the project, according to a memorandum of understanding signed by the city of Frederick.
Debating the tax
Hough, District 4, who drafted the bill cap to hotel tax at 3 percent, said it was “patently unfair” to increase the tax rate for all hotels in the county to benefit one.
Supporters of the current hotel tax law countered that the tax is not paid by businesses, rather by people visiting Frederick who stay in the hotels. Krimm said Hough’s proposal would remove local control over the issue, which is inappropriate.
“That is a decision that the County Council should be making,” she said.
In 2004, lawmakers approved a bill that said simply that the county’s local government was authorized to charge a hotel tax which cannot exceed a 5 percent rate. The 3 percent rate was set by, and can be changed by, the county government.
Hough said he worried that an increase in the tax would harm business owners because higher overall room rates could make Frederick County rooms less enticing and drive visitors to nearby counties.
Krimm said she doesn’t think the difference between a 3 percent or 5 percent hotel tax rate would have any effect on consumer behavior.
Currently, Frederick and Cecil counties have 3 percent hotel tax rates, the lowest rates in the state; Harford County had no hotel tax until a six-percent tax was implemented in 2015.
Each of the counties surrounding Frederick, including those in Pennsylvania, have a hotel tax rate of at least 5 percent.
Local lawmakers expressed dismay after the delegation’s 5-3 vote.
“It’s really, to my mind, a vote against tourism,” County Executive Jan Gardner said. “It’s not really a vote against the hotel and conference center. Because the hotel-conference center has a lot of momentum, and it is going to move forward with or without the decision you just made.”
Mayor Randy McClement said the hotel tax increase would have helped the Tourism Council of Frederick County expand its operation by creating a capital budget.
Most of the money from the hotel tax — about 97 percent in 2015 — is allocated to the tourism council to promote the county and give grants to local nonprofit organizations.
“This tax has a great benefit to the entire Frederick County community,” McClement said.
Another battle ahead
The tax cap bill sets the stage for continued debate on the downtown hotel and convention center. A Maryland Stadium Authority bond bill, which is being drafted by Krimm, will seek approval for the largest chunk of public financing for the hotel and convention center, about $14.8 million in bond funding.
That bill will be on the agenda for next week’s delegation meeting.
While Friday’s vote on the hotel tax included much discussion about the downtown hotel proposal, the final tally does not necessarily reflect lawmakers’ positions on the stadium authority bill.
Some delegation members have not declared an official stance on the hotel project, and Hough said last week that he wanted to consider the hotel tax cap and stadium authority bills separately partly because the hotel tax increase was the greatest source of disagreement in the downtown hotel proposal.
Nevertheless, the stadium authority bill could be filed before some members of the delegation are ready.
Krimm said she may go ahead and introduce the bill herself before the delegation’s next meeting, because lawmakers are under pressure to file bills early in a year when more than 3,000 measures — more than were considered in all of 2015 — are still being drafted.
If the delegation wants to hold a vote on whether to sponsor the bill as a united front, co-sponsors could be added through an amendment, she said.