City Council, public still pondering Tourism Development Fund

Contact Reporterwwright@vagazette.com

At its meeting Thursday, City Council will face the question it deferred action on at meetings in June and July meetings: Whether to vote on a proposed tourism development fund and a series of tax changes meant to finance it.

Council heard about the fund at their budget retreat in January from city manager Marvin Collins. He framed the fund as a chance to make a "generational change" in the city's tourism market.

To create the fund, council would increase both the meal and room taxes from 5 percent to 7 percent and also may levy a 3.5 percent admissions tax. City manager Marvin Collins estimates the fund could raise $3.5 million dollars in its first year.

Councilman Benny Zhang said community members should get more time to wrap their heads around the fund and its uses.

"I'm still looking for stakeholder buy in," he said. "One of the projects we've talked about is an aquatics center. If William and Mary is going to benefit, I'd like to see where they fit in this."

In a July 13 email, obtained by the Gazette via a Freedom of Information Act request, councilwoman Barbara Ramsey explained to Lynn Allison, owner of The Corner Pocket in James City County, that the new fund would be used to address projects that previous city councils did not address because of a lack of money.

"A project on the TDF list is one that's been on the CIP (capital improvement plan) list for years but keeps getting pushed back because it's primarily tourist related and we haven't prioritized it," she said.

The capital improvement plan list includes projects such as adding another field at Kiwanis Park, which has been on city leaders' radar since 1998.

"We don't really need a fourth lighted field at Kiwanis to meet local demand, but it would be very helpful in continuing to draw and increase the draw with the softball/baseball tournaments that have been extremely popular here," wrote Freiling in an email to Steve Harris, a Williamsburg lawyer.

Effect on businesses

At 7 percent, Williamsburg would charge a higher meal tax than every city in Hampton Roads except Hampton. The state charges a sales tax of 6 percent. In total, the tax on meals in Williamsburg would become 13 percent.

Mickey Chohany, co-owner of Second Street American Bistro, said raising the city's taxes will mean visitors spend more of their money in York or James City counties, because they have a lower meals tax rate.

Chohany provided information to City Council that claimed the proposed meals tax rate of 13 percent would be the highest among tourist destinations not only in the region, but in the country.

"We cannot afford to lose our competitive advantage, especially with those other cities on the Eastern seaboard," he said in an Aug. 7 City Council work session.

Ken Davis, an assistant general manager at Movie Tavern, made a point that he has reiterated in past weeks: a new admissions tax and an increase in the city's meal tax will push business to a direct competitor in James City County.

"It's going to take my competitiveness away from me," he said.

Chris Canavos, co-owner of the Capitol Pancake House, is in support of the fund and its tax increases. In his mind, any tax money tied to increasing tourism is good for the city and its restaurants.

"We have product that's matured," he said in an Aug. 3 meeting of restauranteurs and hoteliers at Sal's by Victor. "We've got an eroding economic base."

Zhang said the people he's hearing from are still unhappy with the speed with which the city is moving on the proposed fund.

"It seems there still are concerns with the process, especially with business owners thinking it's going too fast," he said. "And then there are others who think it's going too slow, so there's that."

Gina DeAngelis, who has lived in Williamsburg since 1998, wrote to Freiling in an email that she thinks charging more for the city's strongest tourism attraction would be a mistake.

"(Colonial Williamsburg) is fighting to keep its doors open, laying off dozens of people every few months, struggling for every dollar from tourism that's being drawn away to other businesses and 'projects' like the invisible ones you haven't proposed yet — and you want to increase the cost of visitors' coming to CW," she wrote.

Councilman Doug Pons, the president of the Williamsburg Hotel and Motel Association, said Williamsburg has to generate more demand for its rooms.

Williamsburg isn't the only place with issues — the entire region is struggling to fill its rooms, he said.

"Even when you look at James City County, York County, the number of room nights rented are declining," he said.

City resident Larry Langston urged council to consider all of its options before proceeding.

"My wife, Susan, and I have had the privilege of living in this beautiful city for over ten years and we are very grateful for all the services it provides. We have also been blessed with dedicated city councils which have helped successfully manage our resources and improve our quality of life," he wrote to council on June 27. "We truly want to support these efforts with increased property taxes, if necessary, but only after all of the economic development programs have been fully pursued. We just do not understand how imposing additional taxes on tourists and local citizens will attract them and which may also hurt local business."

In a June meeting, Collins said city staff decided that raising property taxes wasn't appropriate for financing the tourism development fund.

The city's real property tax of 57 cents per $100 of assessed value is lower than neighboring localities. York County's is 75 cents, and James City County's is 84 cents.

Williamsburg's property tax was as high as 72 cents in 1979, and it bottomed out at 50 cents in 1989. Heading into the 2013 fiscal year, the city raised its real property tax rate from 54 cents to 57 cents, where it sits today.

"The reason we have not been looking at the real estate tax is because that may well be needed for increased operational expenses," Freiling wrote in the email to Steve Harris. "Next year we will have a new middle school come on line that will add significant budgetary pressure. A fourth high school may not be too far down the road. This year we had no increase in health insurance costs; we are not expecting that to continue."

Moving forward

John Whitley, a city resident, said council shouldn't think twice about establishing the fund if they think it's the best move for the city moving forward.

"Don't let past leaders determine how you vote," he said. "Have the courage to act."

Vice mayor Scott Foster said he realizes that any choice council makes on the fund will bring the ire of some.

"I am committed to making Williamsburg a better place. No matter how much public engagement occurs, some will not agree with the decisions I make in keeping that commitment," he said. "I am reassured by the fact that once the TDF and the remainder of Council's change-making efforts come to fruition, the entire Williamsburg community will be better for it."

Collins has said in past weeks that without the fund, the city's leaders will have to raise property taxes. He'd rather see an increase real property tax for core services, like providing a new fire and police station in coming years.

"Tourists bring both revenue to the city and increased operating costs for the city," Collins wrote in June 27 email to Langston. "Without investment and improved commercial revenues, the city will need to begin a shift to a greater property tax and nearly half the city population does not pay property taxes as they live on tax-exempt land (College, CW, and city-owned housing)."

Ramsey detailed the city's dire need of tourism funds in an email to Allison, of the Corner Pocket.

"We're paying for a downtown vibrancy study but have no money to implement any of their suggestions," she wrote. "If we try to garner those funds from budget, suggestions might be out of date even before we get the money."

Collins said council has the option of accepting the meal and room taxes, but taking more time to address the admissions tax and instead phase in the admissions tax in 2019.

Both Freiling and Zhang have expressed support for a sunset clause, which would allow council to shutter the fund in a given number of years if it isn't performing as expected.

"I'm in support of that," Zhang said. "It's an appropriate idea for something like this."

Wright can be reached by phone at 757-345-2343.

Want to go?

City council may decide to on the tourism development fund at its next meeting. There will be an opportunity for public comment at the meeting.

When: 2 p.m., Aug. 10

Where: Stryker Center, 412 N Boundary St

About the proposed tourism development fund

The goal of the fund would be to bring more tourism infrastructure into the city, in an attempt to compete in the hotly contested tourism market.

To create the fund, council would increase both the meal and room taxes from 5 percent to 7 percent and also may levy a 3.5 percent admissions tax. City manager Marvin Collins estimates the fund could raise $3.5 million dollars in its first year.

In addition to a 5 percent room tax, the city hotels and motels now add a $2 per-night room charge. If the City Council raises its room tax, it 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.

Under the proposed ordinance, the committee would continue to get 2 percent from the room tax. If that 2 percent is less than the $2 per night charge, the city would make up the difference.

A five-person group appointed by City Council would vet projects to be paid for with development fund money. Three members would come from tourism-related fields and the other members would be selected at large by council.

There is no set list of projects yet — only suggestions — and mayor Paul Freiling said the fund could help spur private investment in projects that the city could also help finance.

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