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Beach Towns Meet With County Leaders On Room Tax Distribution

County and Town leaders recently met to discuss various issues concerning Southern New Hanover County. On item concerned beach nourishment funding sources. See report below...

Managing Editor

CAROLINA BEACH - The New Hanover County Board of Commissioners and the Town Council's of Carolina Beach and Kure Beach held a workshop meeting to discuss various issues on July 25th. The agenda included numerous items covering Room Occupancy Tax, Beach Nourishment, Carolina Beach Inlet Dredging, a proposed smoking ban on Beaches in New Hanover County as well as other issues.
There was detailed discussion of when Room Occupancy Tax collections dedicated to the Wilmington Convention Center could be freed up to pay for beach nourishment projects.
Currently for the entire county there's a 6% room occupancy tax on all hotels, motels and vacation lodging. The first 3% collected is distributed with 60% for beach nourishment. The remaining 40% is  used by the Tourism Development Authority (TDA) to promote travel and tourism throughout the county. The additional 3% collected in the unincorporated area is distributed for beach renourishment.
For Wilmington, there's a "Wilmington Convention Center District" where a 6% room tax is distributed to the Convention Center. Outside the Convention Center District, the first 3% is distributed at 60% for beach nourishment and the remaining 40% is to be used by the TDA to promote travel and tourism throughout the county.  These funds shall not be used to plan, construct, operate, or maintain a civic center, convention center public auditorium or like facility.  The additional 3% collected will be used exclusively for the convention center.
For Wrightsville Beach, Carolina Beach and Kure Beach, each charge their own 6% room tax. The first 3% collected is distributed at 60% for beach nourishment and the remaining 40% is to be used by the TDA to promote travel and tourism throughout New Hanover County and shall not be used to plan, construct, operate, maintain or in any way promote a civic center, convention center, public auditorium or like facility.  The additional 3% collected in each individual beach community is dedicated to establishing two funds each to be used exclusively for that beach; at least one-half of the tax collected is to be used to promote travel and tourism and the other fund is for TDA approved tourism related expenditures that are designed to increase the use of lodging facilities, meeting facilities or convention facilities or to attract tourists or business travelers to the area and includes tourism-related capital expenditures as approved by the TDA Board of Directors.
All hotels, motels, inns, short term rental cottages or houses, tourist camps or any other such short term rental accommodations must report their monthly sales to the County Tax Department.
As of the end of May 2012, there's $39,773,907.00 in the room tax fund. In the unincorporated area fund, there's $711,189.00.
Mayor Ray Rothrock said, "We've been told several times by legislators in Raleigh, don't go messing with it because instead of the 60/40 you may end up with 50/50" on distribution. He said, "We don't want to shoot ourselves in the foot" by asking the legislature to amend the room tax laws.
County Commission Chairman Ted Davis said the law is a little confusing, "But it does set out how long that's supposed to go on and then it provides what happens after the Convention Center reach whatever criteria is called for in that legislation to create the" Convention Center District.
He said, "To me it was a little bit confusing about what the funds are actually supposed to be used for. It talks about the proposed convention center. Well, it's not proposed anymore, it's here. It talks about setting up the funding. Well, the funding is set up, so do we continue on still paying off the convention center or does it stop now that the city has a plan in place."
He said, "I really think before anything can be done definitively concerning the future of those funds we really need to have a clear understanding of the criteria of that district, how long it is going to last" and other issues.
Kure Beach Mayor Dean Lambeth said he heard Mayor Bill Saffo of Wilmington would like to continue getting the tax funds after the convention center mortgage is paid off to update furniture, painting and other items at the center.
County Commissioner Rick Catlin said the County projected room tax collections and the recent elimination of state and federal funding for a beach nourishment project in Kure Beach later this year was one of their top worst case scenarios.
He said, "Projecting it forward we are not sustainable. About twenty years out we start crashing and burning. If there was a way when the debt service was paid off on the convention center that that money can be reallocated back to sand" for beach nourishment projects, "Then that starts bringing us back up or at least keeps it even."
Catlin said of the Convention Center room tax, "That's a discussion we need to have. I know there's no sunset on that and also the projected amounts continue to grow over what the debt service is. When the convention center funding was passed the Ports, Waterways and Beach Commission was not asked or involved in that at all. As chairman I had to read about it in the newspaper."
He said, "We do have a problem now and I think a constructive discussion with them just to begin the idea of maybe someday we could put that back to use for sand."
Davis said, "You are correct, there is no definitive sunset date but there are factors set out in the" legislation, "and once those have been met it was to be used otherwise. I think we need to have a clear understanding with everybody on the same page before we can really do anything."
Davis said, "We need to have a meeting of the minds" including all local governments to discuss the issue, "It's all about us, the county tourism and the importance of tourism" for each community.
He said contact has been made with the City of Wilmington to discuss the issue.
Kure Beach Councilman David Heglar said, "From our standpoint, any funding source that will help us we believe is important because I think everyone in this room thinks that federal and state funding is going away. They are trying to take it away as fast as they can. It came faster than we expected this year."
Davis said, "I have the understanding from Kure Beach and Carolina Beach that whenever it is determined what that language says and when that funding for the convention center ends, you want it. You want it as soon as it's there, then I have my marching orders."
Davis said he will contact the Mayor of Wrightsville Beach to discuss the issue in more detail.
Catlin said, "I think there are a lot of questions and we need to get our facts straight" and update the projections on the room tax fund" with new realities and make sure we've got most of the questions answered and probably have a separate meeting with the City of Wilmington to discuss that and then have the beach communities there and we can vet that fact finding process through the Ports, Waterways and Beach Commission."
Heglar said, "The funding stream you have set up... and people before all of us in this room, has done a great job, we have time. But I think everyone in the room recognizes we want it to be self-sustaining."
He said it's true if the federal and state governments continued sharing funding for beach nourishment projects it would all be self-sustaining. He said, "Now we're not because that's changed. I think all of the beach communities are in favor of let's make sure it’s sustainable however we do it. I understand you're input from the state, don't go messing with the legislation, but they need to understand to we need to be sustainable. Because the citizens of the three beach towns can't pay for beach renourishment. That's more than our annual budgets so that would double the tax rates in all three Towns just to fund beach renourishment."
Heglar said, "The citizens of New Hanover County, the same issue. You guys can't just fund it either. The whole purpose of the room occupancy tax in my mind was to fund that by the people that are coming into the communities and using the beaches and if we need to change the balance to make it sustainable I think that's what we need to do. The second part of it, which is even more unpopular for some people, is all this advertising money is nice, but you have to have a beach before you advertise it."
Heglar said if the percentage of advertising to beach nourishment funding needs to change to make it self-sustainable, it will take combined efforts to convince the legislature to make such a change.
Catlin said all of the facts need to be in order because, "When we open this up, we are opening Pandora's Box" asking for changes to the state law.
Catlin pointed out the tax collected for the unincorporated beaches in the county is pointless because they have no beaches outside of the municipalities that receive beach nourishment. He said that portion will continue to grow without being able to spend it.
County Commissioner Jason Thompson said it's a good discussion but is certainly opening Pandora's Box with respect to the City of Wilmington who will likely oppose such a move. He said, "If I were them, I'd look at it and say hey, your 3% local match. If you're so concerned about beach renourishment why don't you direct activity funds to beach renourishment because you won't have any activity without a beach. They will go down all kind of roads like that."
Earlier this year the Town of Carolina Beach was fortunate to receive Federal funding of $4.4 million dollars and State funding of $1.18 million. Kure Beach didn't receive a dime from the Federal government and the state eliminated it from their budget. The Carolina Beach Town Council and New Hanover County worked together on ways to reallocate funding towards Kure Beach to ensure the entire beach nourishment project, called Carolina Beach and Vicinity, will be fully funded.
That project is in the planning phase. The Army Corp of Engineers is expected to require payment later this month and award bids in September with work starting this fall.