New Philadelphia Bed Tax Concerns

At the last New Philadelphia Council meeting, January 28, 2013, the request for a bed tax raised its head again.  This time it did so in the form of Ordinance 2-2013, the title of which you will love, AN ORDINANCE AMENDING THE TAX CODE FOR TRANSIENT GUESTS WITHIN THE CITY OF NEW PHILADELPHIA, OHIO, TO ENACT A LODGING TAX FOR HOTELS, MOTELS, AND OTHER ESTABLISHMENTS FOR TRANSIENT GUESTS WITHIN THE CITY OF NEW PHILADELPHIA.

Wow! 

That the ordinance was created came as no surprise.  It was originally brought up by Ms. Dee Grossman on July 30, 2012 and referred to Sandy Cox, Chairman of the Finance Committee.  Cox, after researching various options connected with Grossman’s original proposal, with consent of the Finance Committee, asked Law Director Fete to prepare an ordinance for presentation to City Council.  Ordinance 2-2013 presented by Fete on January 28^th to City Council.

At the present time there is a three-percent bed tax imposed in Tuscarawas County by the County Commissioners.  Approximately $200,000 is collected by the county from New Philadelphia .  New Philadelphia receives ten-percent, $20,000, while the Tuscarawas County Convention and Visitors Bureau (TCCVB), Ms. Dee Grossman, Executive Director, receives the remaining $180,000 for her operation.  Her total operating budget, funded by the county, approximates $390,000.

If the City of New Philadelphia collects the proposed three-percent bed tax, a number of things occur.  The City’s income increases by $180,000 (revenue from the bed tax, $200,000 less $20,000 now being paid by the county).  The Convention Bureau does not loose its income as the County’s three-percent bed tax remains in effect.  The tax on motel rooms increasess from three- to six-percent.

The greatest concern of Ordinance 2-2013 is how the money collected by the bed tax is to be spent.  The most active advocate for the bed tax, and how it is to be spent, is Grossman.  Her interest, expressed in a letter to City council dated January 28, 2013, suggests procedures that, if implemented, would place the authority for spending the bed tax revenue collections in the hands of the TCCVB.  Grossman’s desire is that the tax be divided, 40% ($80,000) to the TCCVB, with the remaining 60% to go to the City of New Philadelphia to be used as it sees fit. 

 The TCCVB plan is to use the funds for museums, jogging paths, parks, improvements to the Tuscarawas River shoreline, marking crosswalks near motels, operation of special events, community events, and other activities determined by the TCCVB.  The proposed Ordinance 2-2013 has similar goals. 

Under the plan proposed by TCCVB plan the money will be allocated by a county appointed grant committee.  This is a concern as the TCCVB is a County operation with no connection to, or responsibility to, the City of New Philadelphia.  There is no guarantee that money collected from the New Philadelphia bed tax will be spent in New Philadelphia.

Under the proposed ordinance, control of spending of money brought in from the bed tax by the City of New Philadelphia would be limited to the same general restrictions as those mandated to the TCCVB with a singular difference.  Spending under the ordinance would be exempt from normal procedures such as public hearings.  The ordinance states that the bed tax receipts may be used for “any other lawful purpose as approved by the administration of the city of New Philadelphia or the city council.”  This statement, if approved, gives the Mayor the power to spend monies, in any amount, without approval of city council and, likewise, allows the City Council spend monies without agreement by the mayor.  Such a situation is to the determent of the financial stability of the City.

While there are numerous other concerns with Ordinance 2-2013, a major concern is the taking over of New Philadelphia city responsibilities by a non-New Philadelphia political entity.  The TCCVB has no connection with New Philadelphia other than it occupies office space in a building located in the city.  It is charted by the State of Ohio.  Its mandate includes the entire county, not only New Philadelphia.  So the question arises should New Philadelphia tax money be used for improvements in Strausburg, support of the Cheese Festival in Sugarcreek, or improvements and maintenance ot the Dennison Railroad Museum?

The TCCVB argument that it would use the money for painting crosswalks in motel areas, improve the city parks, and the like, are city responsibilities and should not be delegated to others, especially those from non-city political entities.  The liability implications, which could arise from such activities, could lead to lawsuits with which the city might not be able to cope

If the City of New Philadelphia is to legislate a three-percent bed tax in New Philadelphia, the tax money should stay in New Philadelphia.  According to the opinion of Mr. Fete, the New Philadelphia Law Director, there is no reason why the entire three-percent bed tax cannot be retained by New Philadelphia and used as it sees fit.  It is not necessary that any money from the tax be given to the TCCVB.  An additional $200,000 addition to the city’s income would help to alleviate the possibility of financial default by the city in a worsening economy.  But to commit to giving city tax money to an organization which has no responsibility, nor allegiance, nor connection to the city, makes no sense.