City leaders have made a move they hope will provide a jolt to Williamsburg’s tourism industry.
City Council voted 3-1 on Thursday to create the tourism development fund that will be used to finance tourism projects in Williamsburg.
Council voted to raise meals taxes from 5 percent to 6.5 percent and room taxes from 5 percent to 7 percent, the first increase of either tax since 1999.
Council members said they will raise room taxes from 7 percent to 8 percent in a future meeting after a public hearing.
Council also levied a new 3.5 percent admissions tax. Williamsburg and Poquoson had been the only cities in the Hampton Roads region that did not charge an admissions tax.
In addition to a 5 percent room tax, hotels and motels have been charging a $2 per-night room fee. The increase in room tax will eliminate the $2 per-night charge which patrons have paid since 2006.
Money from the $2 charge goes to the Williamsburg Area Destination Marketing Committee, a tourism promoter for the region. The committee will continue to get 2 percent from the collected room tax, and if that 2 percent is less than the $2 per night charge, the city will make up the difference.
At council’s annual budget retreat in January, city manager Marvin Collins framed the tourism development fund as a chance to make a “generational change” in the city’s tourism offerings. With the taxes approved Thursday, he estimated the fund could collect more than $3.4 million in its first year.
Councilman Doug Pons, who is also president of the Williamsburg Hotel and Motel Association and voted in favor of the tax increases, said Williamsburg has to generate more demand for its rooms.
“This has been a very long process,” Pons said. “Taxes are not easy. None of us mean to diminish the impact that taxes have.”
Mayor Paul Freiling, who works at Colonial Williamsburg which will be affected by all three taxes, recused himself from Thursday’s discussion and vote. Benny Zhang voted no.
Councilwoman Barbara Ramsey said the tax changes should help bolster what is the city’s most important industry.
“Tourism is what keeps Williamsburg going,” she said. “It’s our economic engine.”
That engine, largely supported by Colonial Williamsburg, has sputtered in recent years. The largest tourism driver for the city for decades, Colonial Williamsburg has seen its number of visitors drop substantially.
Once bringing in more than 1 million visitors a year in the late 1970s and early 1980s, the number of visitors has plateaued at around 600,000 over the last decade, according to Colonial Williamsburg annual reports.
“Tourism and hospitality are the city’s primary economic engine and job-creator. This tax risks driving away the business that we as a region work so hard to sustain, and in doing so will undercut its own revenue,” wrote Joe Straw, the organization’s public relations manager, in an email. “For Colonial Williamsburg in particular, a significant tax increase on our guests is of critical concern as we deal with serious financial challenges.”
Ken Davis, the assistant general manager at Movie Tavern, stressed prior to the vote that a new admissions tax and higher meals tax could prompt patrons to choose James City County’s Regal New Town Stadium over his establishment.
He hopes council members are sincere about going to the state legislature to float the idea of raising taxes in James City and York counties for tourism’s sake.
“I hope they are serious about going to state legislature,” he said. “I really hope that was a serious comment, and I hope it works.”
State law says the maximum counties can charge in meals taxes is 4 percent. James City and York counties both charge a room tax of 5 percent and do not charge an admissions tax.
Williamsburg Vice Mayor Scott Foster said the city needs to invest in its tourism infrastructure sooner rather than later.
“I’m not ready to wait another 20 years to make that type of investment,” he said, referencing previous city leaders who foresaw the city’s tourism struggles.
A June presentation from city staff showed the fund could pay for tourism projects ranging from public parks to recreation facilities.
There is no set list of projects yet — only suggestions — and Freiling has said previously that the fund could help spur private investment in projects that the city could help finance.
A five-person committee appointed by City Council will vet projects to be paid for with development fund money. In coming months, Council will choose three people from tourism-related industries and appoint two other members at-large.
In voting against the fund and tax increases, Zhang cited uncertainty about how the funds would be used. He’d like to see a long-term spending plan.
“We don’t know the mission of it,” he said. “I’m a little skeptical about how this moving forward may work.”
The city will start collecting taxes under their new rates in July 2018. Pons said delaying implementation gives city representatives time to speak with counterparts in James City and York counties about plans to improve tourism and visitation.
“It allows for a lot of things to happen,” Pons said. “We can continue the conversation about a regional approach to raising funds in a different manner, whatever that may be. This body stands ready to have that conversation.”