Sales tax bill outlines accountability measures, exceptions

jojacobs@vagazette.com

The Greater Williamsburg Chamber & Tourism Alliance will have a multi-million dollar money bag to manage should a proposed sales tax bill go into effect. The bill outlines several oversight measures intended to ensure good use of taxpayer money, as well as some exemptions to the tax.

Introduced by Sen. Thomas K. “Tommy” Norment, R-James City County, Senate Bill 942 would increase the sales tax by 1 percent in Williamsburg, York and James City counties to generate funds for tourism marketing for the Historic Triangle. The current sales tax rate is 6 percent.

Fifty percent of the revenue would be allocated to the Greater Williamsburg Chamber & Tourism Alliance, which would manage the money. The funds would be spent on marketing efforts to attract overnight tourists to the area. The remaining 50 percent of the sales tax increase would be allocated to Williamsburg, James City or York based on where the sales tax was collected.

It’s up to the localities how that money would be spent, with expenditures ranging from public safety to education. The 1-percent tax increase is anticipated to generate $24.5 million in fiscal year 2019, according to the bill’s updated fiscal impact statement.

The alliance would create a 10-member tourism council to oversee the marketing fund, which would include three elected officials — one each from Williamsburg, James City and York — alongside representatives of several tourism entities such as Colonial Williamsburg and Busch Gardens, according to the bill.

“All the localities are represented,” Sen. Monty Mason (D-Williamsburg) said. He added the council would bring more voices to the table, such as the Williamsburg Restaurant Association, that weren’t on the Williamsburg Area Destination Marketing Committee.

“My general understanding is that this is an attempt to broaden the base of input on how marketing Greater Williamsburg is carried out,” York County Administrator Neil Morgan said.

The council’s makeup is similar to the membership of the Williamsburg Area Destination Marketing Committee, which was created in 2004 to market the area to overnight tourists. The committee, which is part of the alliance, is funded by revenue generated by the $2 transient occupancy tax. That tax would be eliminated to put the sales tax bill into effect.

The $2 transient occupancy tax generated $3.2 million for the committee in 2017, according to its financial statement.

“We believe this is an improvement,” said Jeff Ryer, an aide to Norment. “It’s a more comprehensive way of marketing the region as a whole.”

Should the bill be enacted, the Historic Triangle Marketing Fund would be created in the state treasury. The Virginia Tourism Authority CEO would sign written requests for funds, which would be disbursed by the state treasurer, according to the bill passed by the General Assembly last month.

The Virginia Tourism Authority, which is the same organization as the Virginia Tourism Corporation, is a state agency that markets Virginia as a destination for travel and film production.

The bill awaits a signature from Gov. Ralph Northam, who hasn’t taken action on the bill as of Tuesday afternoon.

The new tourism council would establish a marketing office to administer a marketing program. At the head of the marketing office will be a “professional with extensive experience in marketing or advertising and in the tourism industry,” the bill reads.

When asked about the accountability of the proposal, alliance president and CEO Karen Riordan declined to comment.

“If the bill is signed by the governor, I would expect to sit down with the patron and other state government leaders to better understand what policies and procedures must be followed to meet expected accountability of the funds,” Riordan wrote in an email.

In addition to a seat on the council, localities would receive an annual report on the council’s activities.

The council would report on short-term and long-term strategic plans and how those plans would be put into place to the top administrative officials in Williamsburg, James City and York annually. Marketing projects, tourism metrics and fund usage are to be among the topics discussed in such a report, according to the bill.

But while the report would seek to quantify a return on investment, that could be a difficult thing to prove, Morgan said.

"Metrics are wanted, but that’s inherently difficult,” he said.

The problem is, people play tourist while on other business in the Historic Triangle. A couple attending a wedding in Williamsburg or dropping a student off at the College of William and Mary may spend a few nights in a local hotel and visit Historic Jamestowne without necessarily being lured by tourism marketing dollars.

“I understand that the general idea is to create information on the project. Reports provide a way to have a baseline of information and results,” Morgan said.

The report would be due no later than Dec. 1, and the chairmen of the House Committees on Finance and Appropriations and the Senate Committee on Finance would get copies, too. Norment is a co-chair of the Senate Finance Committee.

Should the bill be signed by the governor, Williamsburg City Council would be required to repeal ordinances adopted as part of its Tourism Development Fund, which raised several taxes with an eye toward tourism development, to allow the bill to take effect.

The provisions of the act would expire if any of the Historic Triangle localities adopted new food and beverage, admissions or transient occupancy taxes. If enacted, the provisions of the act would expire Jan. 1, 2026. Revenue generated by the sales tax bill couldn’t be used to reduce localities’ current tourism funding, according to the bill.

In 2017, Williamsburg gave Colonial Williamsburg $1.3 million and $800,000 to the alliance for marketing purposes, while James City provided the alliance $605,000 and gave $100,000 to the Jamestown-Yorktown Foundation, among other allocations.

If the bill is signed into law, the authority of the city, James City and York to levy the $2 transient occupancy tax would be revoked. Neither county would take any action that would affect whether the bill takes effect, Ryer said.

“The county does not need to take any action to make the tax bill effective. Once the bill takes effect, the county’s ability to impose the $2 tax goes away whether or not it remains in the county code,” James City County Attorney Adam Kinsman wrote in an email.

James City Supervisor Jim Icenhour said he was unclear on accountability of the fund, calling it one of the areas he hopes county staff can clear up for him at the board’s work session on March 27. The Board of Supervisors has instructed staff to gather additional information on the bill for its study.

“That’s one of the questions I have,” Icenhour said. “That’s something to talk about."

Exemptions

The sales tax bill also lays out several purchases that would be exempt from the tax increase.

Food for human consumption, which includes both groceries and restaurant meals, is subject to the tax, Ryer said.

Seeds and plants used to produce food for human consumption are not subject to the tax. Gasoline also wouldn’t be subject to the tax, according to the bill.

A previous version of the bill exempted food for human consumption.

The sales tax bill has attracted criticism from local and state lawmakers, in part due to concerns local residents would shoulder the burden of an increased tax rate.

“I certainly recognize tourism's importance as an economic driver, but it is unfair for local residents to pay a tax to prop up a select industry,” Del. Brenda Pogge (R-Norge) wrote in a constituents newsletter March 2.

Pogge, along with Del. Mike Mullin (D-Newport News) voted against the bill when it passed the House of Delegates Feb. 28. Norment and Mason voted in favor of the bill when it passed in the Senate Feb. 13.

An increased sales tax would be a reasonable way to generate funds for tourism marketing and additional revenue for the county and would be preferable to an increased real estate tax, York Board of Supervisors Chairwoman Sheila Noll said, adding that some constituents have expressed the same opinion to her.

York’s real estate tax is 79.5 cents per $100 of assessed value. Williamsburg’s real estate tax is 57 cents per $100 of assessed value, and James City’s real estate tax is 84 cents per $100 of assessed value.

While residents would have to pay the increased sales tax should the bill be put into effect, the area’s high number of tourists would bear a larger share of the increase, Riordan said.

“We’ll pay, but we’ll have about 3 million visitors who will pay that too,” Riordan said March 2.

Williamsburg, James City and York had an estimated total population of about 160,000 people in 2016, according to census data.

Jacobs can be reached by phone at 757-298-6007.

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