City Council makes case for raising bed tax three percent
Mayor Craft says it’s a better option than raising property or sales tax
By John Mullen
During a presentation at a specially called council meeting, Gulf Shores Mayor Robert Craft said the council and city staff looked at three options to raise an extra $7 million yearly to help fund what they consider much-needed transportation and other capital projects.
“We’re trying to figure out how we continue to grow this city and make it better and have it balanced,” Craft said during a presentation at the Nov. 29 meeting. “Where it supports residential, the residential growth we’re seeing and the residents in this community. And, it continues to support the tourism industry that is so important to all of us. Trying to balance all of that out is where we are.”
He presented a case that of the three, raising the city’s portion of the lodging tax from 7 to 10 percent would be the less painful option for Gulf Shores residents. The public and members of the vacation rental industry were invited to provide input on the proposed tax hike and are invited again to the Dec. 6 and Dec. 13 sessions. A vote is expected on Dec. 13 because a new tax would have to be considered in the 2022 budget which the council wants to pass before Jan. 1.
The other options considered to reach the $7 million target for new revenues were increasing the sales tax or upping property tax millage both measures that would cost residents money.
“The lodging tax is something we’ve been looking at and right now the city’s current lodging tax is 13 percent,” Craft said. “The state of Alabama gets 4 percent, Baldwin County (Lodging Tax District) 2 and Gulf Shores 7. We’ve discussed adding 3 percent to that. We think it is the most effective way to move forward on this because most of the things we want to do with this is supporting the tourism industry.”
During his presentation, Craft said even though the lodging tax in Destin is just 12 percent, his comparative analysis showed a unit in Destin would cost about $700 more a night in rental and other fees to up the total cost to about $2,300. A like unit in Gulf Shores would total about $1,500 including the 3 percent lodging tax hike. The Destin vacationer would spend about $95 in lodging tax compared to $195 in Gulf Shores.
Resident Rick Kieffer, who also owns two vacation rental properties, said he believed using Destin to compare rates and fees didn’t give a true picture.
“First of all, you picked Destin which is a much more expensive area than we are,” Kieffer said. “If you compared us to Panama City you would find that we are more expensive than Panama City. We’re also more expensive than Pensacola Beach. I sent you an email on four properties on VRBO and in each case we were more expensive. In Panama City, our daily rate is much higher. In all cases, it came out to be an 11.5 percent tax in Florida. We’re at 13 percent currently and you want to raise it to 16 percent. I remind you Orange Beach hasn’t raised theirs to 16 percent so would be at a competitive disadvantage with Orange Beach.”
Resident Robert Schwartz who lives on Sunrise Drive off of Windmill Ridge Road asked the council to pass the tax to deal with the infrastructure facing impact from the growing tourism industry.
“The other options are sales taxes and property and I don’t want those to increase,” Schwartz said. “I feel these extra services are for our guests and I personally don’t want to subsidize some landlord’s income by paying more in sales tax or property tax.”
Raising property taxes more than 7.5 percent – 9.3 is needed to raise $7 million a year – must be approved by the state legislature and be passed by voters.
Craft said 70 percent of property taxes paid in Gulf Shores come from vacation rental properties and businesses and that increase would cost an average of $418 annually to property owners. Craft said the sales tax is regressive and would hurt the “least amongst us” the most with food costs.
Geoff Gaberino of Gulf Shores Vacation Rentals, Leonard Kaiser with Kaiser Vacation Rentals and others in the vacation rental business wondered how they would collect the tax on properties already rented for 2022 at the 13 percent lodging tax rate.
“There’s been a lot of reservations already made and taxes paid,” Kaiser said. “We’ve got to go back to those people. The last time you did this in 2018 a lot of businesses had to come out of their pocket and pay the additional taxes.”
Gaberino said 83 percent of the properties he manages are booked up for next year and he asked for a slow implementation of the tax rather than a 3 percent hike all at once.
“If you implemented this on a backwards basis, I would literally have to go to every one of those guests and they will chose differently,” Gaberino said.
“I would like this to be implemented and rolled out in a much longer time. Doing it at 3 percent from the jump is going to cost me business.”
Councilman Philip Harris said the city wasn’t acting rashly with its ambitious list of projects during the next 10 years but have been studying and fine-tuning plans for them for the past 10 years.
“I keep hearing slow down but we’re so far behind and if we stop, we won’t be able to keep up with the demand,” Harris said.