Gulf Shores considers raising bed tax an additional three percent
Expected $7million per year windfall will be used for roads, schools
By John Mullen & Fran Thompson
Gulf Shores City Council discussed raising the lodging tax on vacation rentals in the city by 3 percent, taking the total condo, beach house, camping, hotels and individual houses rented short term to 16 percent, during its council work session on Nov. 15.
The increase would make the city’s portion of the tax 10 percent. Council could vote the increase into law as soon as its Nov. 22 regular session, but it is also possible the vote could be postponed to allow for more study and/or public input.
The extra 3 percent for Gulf Shores is projected to generate around $7 million in 2022.
Gulf Shores raised the bed tax 2 percent in 2018 citing similar traffic concerns and plans to earmark the extra money for transportation improvements.
City documents state $25.7 million was spent on the mostly road projects even though only $11.2 million was generated by the new tax since 2018.
Local real estate broker Angie Swiger was at the meeting and asked Council to provide a line item concerning that $14.5 million difference.
Later, in a letter to City Council, she stated that she would like to see the issue tabled until Gulf Shores rental companies can prepare for the increase in the bed tax they collect.
“One business owner expressed the hardship and timing of simply collecting the tax in the meeting yesterday, an issue that had not even been considered by the council. There is obviously still much to learn,’’ she wrote.
“I do believe that the council owes the public an opportunity for discussion and a more detailed analysis of the increase to show they’ve done their homework,’’ she added.
“A week’s notice before a vote on a tax increase that literally affects every citizen and can potentially cost our community millions of dollars is not appropriate.”
The lodging tax increase documents also state that the additional funds generated would pay for critical transportation needs and improvements to park and recreation and city schools.
Orange Beach also added 2 percent to its lodging tax in 2018, pledging to use the funds for transportation improvements and possibly the Wolf Bay Bridge. The bridge effort has stalled. Orange Beach officials said they are not considering raising the lodging tax.
Currently both Gulf Shores and Orange Beach charge 7 percent, the state collects 4 percent and the Baldwin County Lodging Tax District (CVB) 2 percent for the 13 percent total.
Administrator Steve Griffin said a 16 percent bed tax would be less than what is being charged in Birmingham and comparable to other Alabama cities north of here (Mobile charges 14 percent).
Gulf Shores real estate broker Rick Kieffer said in a letter to City Council that raising the bed tax will make Gulf Shores uncompetitive with Florida vacation destinations.
“When people think of going on vacation, it is not a choice between Birmingham or Gulf Shores. It is a choice between Gulf Shores and Pensacola Beach, Panama City Beach or Destin,’’ he wrote. “Florida is whom we are competing with, not other places in Alabama.’’
According the Escambia County, Florida, Tourism Development Tax office, the tax over there is 7.5% for the State Sales Tax and 5% for Escambia County’s Convention & Visitor’s Bureau.
Kieffer said increasing the bed tax will decrease occupancy and result in lower taxes for the city and also lower vacation rental property values.
“I don’t disagree that the City has a long wish list and transportation is at the top of the list, but with the state increasing gas tax by 10 cents and Congress soon to pass a $1.2 Trillion dollar infrastructure bill I would think you could find the money from state and federal sources vs. fleecing the tourists and putting all of our livelihoods at risk,’’ Kieffer stated.
“These new revenues along with revenues from existing sources are projected to fully fund the estimated $12.7 million debt service needed to implement the identified 10-year capital improvement plan,” Gulf Shores’ documents state.
During that time, the city expects to spend about $76.74 million on projects with $38.74 million coming from federal and state grants and $38 million from the city’s general fund.
Swiger said she would like to know exactly which capital improvements the increased tax will fund.
“Are we expected to have future shortfalls between the additional income and the actual expense of those improvements (as we have since 2018)? If so, how much money from the general fund will be needed to cover those future deficits?’’ she asked. “This is not an issue that can be glossed over in a 20 minute presentation.’’
Councilman Steve Jones, in response to Kieffer’s letter, said there was a perception that any kind of lodging tax would make Pleasure Island less competitive with other destinations when the Alabama Gulf Coast Convention and Visitors Bureau was created in 1992, the year he moved to Gulf Shores.
“I was wrong. Each subsequent lodging tax increase has brought the same concern with no perceptible negative results,’’ he wrote. “The difference will likely be negligible.
“During 2021 I watched hospitality vendors in this market increase (jack) their rates by 10 to 50 percent and was astonished that it did nothing to diminish the demand for our market. Customers were in my opinion outright gouged and came anyway.’’
“Managers cancelled existing reservations and replaced them with reservations from customers willing to pay more. Let’s not forget the cleaning, laundry, and other fees that management companies tack on pass to the customer or the required trip insurance fees that many charge as well,’’ he added.
“That is far more harmful to this market than a nominal 3 percent lodging tax increase and should be of greater concern than funding much needed projects that will improve the customer experience.’’
Jones added that there are many other factors that affect tourists’ perception and experience in Gulf Shores.
“My question to you is, has your company increased rental rates over the last few years and if so, by how much? I respect your position and your opinions and ask you to consider ours.’’
According to city documents, the extra lodging tax will go toward projects that include:
• City matching funds for the RESTORE grant funded Waterway East Boulevard expansion to create a new connection from Highway 59 south of airport to Cotton Creek Drive
• City matching funds for the RESTORE grant funded Canal Road reroute south of the Gulf Pines/Meyer Park neighborhood
• City matching funds for the BUILD/ATRIP grant funded Highway 59 capacity improvements including a new third southbound lane from Coastal Gateway Boulevard south to Fort Morgan Road
• City matching funds for the BUILD grant funded new pedestrian bridge spanning the Intracoastal Waterway with a land near LuLu’s and on the south near Tacky Jacks
• Additional County Road 6 improvements from its intersection with Highway 59 past the Gulf Shores Sportsplex entrance
• A new two lane north-south road connecting Coastal Gateway Boulevard to County Road 6 east
•Waterway West Boulevard improvements from Highway 59 to its intersection with County Road 6 west near the Plash Island bridge
• Beach Walking District improvements that will provide new sidewalks, lighting, drainage, street trees and parking in the beach shopping and restaurant areas
• New Justice Center to replace the 38-year-old police department building and city jail to address severe space deficiencies and provide a secure, modernized facility to support police, municipal court and emergency management operations
• New fire training tower and teaching facility
• Remodeling and fortification of the former Oyster Bay volunteer fire station on County Road 6.
• New Fire Station to enhance fire and emergency response for residents in the northeast quadrant of the community and Jack Edwards Airport.
• New Coastal Gateway Community Park to enhance quality of life amenities available for residents north of the Intracoastal Waterway.
• New open space, parkland and beach access land acquisitions.
• New school facilities to support continued student enrollment growth and provide collaborative learning environments at existing and future school campuses as identified in Gulf Shores City School’s “The Next Wave” master plan
Pictured: If passed, GS will use part of the additional three percent bed tax to pay its share of the BUILD grant funded new pedestrian bridge over the Intracoastal Waterway west of Hwy. 59.