Straight Talk

No Accountability?

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Patrick Taylor

Once, I thought I was the only elected official who believed it was time to reform the North Carolina room tax and tourist development authority system. Apparently, according to an April 5th article in the Asheville Citizens Times, by Sarah Honosky, that is not the case. I have talked with other mayors and legislators who share similar concerns.

The Tourist Development Authority (TDA) in Asheville is illustrative of concerns about tax dollar accountability and how tax dollars are spent. When reporters recently made inquiries about TDA expenditures, the Asheville TDA staff initially stated that they did not have to provide that information. 

What? No accountability for tax dollar expenditures?

Embarrassingly, after learning they had to provide that information, it was revealed that their TDA director was making around $450,000 in salary and benefits. Even after these accountability concerns were publicly aired, John Boyle in a February 26, 2024, Asheville Watchdog article revealed that $17,000 in tax dollars had been spent on a retirement party for a TDA staff member, among other questionable expenditures. 

A growing number of people think it is time for reform in the TDA system at the state level. Currently, there is an array of local legislation for almost all the counties and municipalities across the state. The periodic Magellan Reports illustrate the diverse ways room occupancy tax is collected and distributed in North Carolina. It is time for the state legislature to streamline the entire process and have consistent regulations on how much can be collected and how those tax dollars are spent. There needs to be a clear public process for spending and accounting of those funds. Every county and municipal government has to conduct a yearly audit and document all expenditures by general statutes. TDAs should be expected to follow similar procedures that are clearly open to public input and review. Or, at least TDAs should be required to annually publish their federal 990 tax filings in a local newspaper for citizen review.

One emerging criticism is that more revenue continues to be collected in a circular pattern of more and more promotion of tourism while some related critical needs generated from promotion are ignored or expected to be addressed from other revenue sources. 

For instance, most hospitality workers tend to fall on the lower end of the wage scale. There are huge pressures on these workers to make ends meet, especially when it comes to affordable housing. Why not direct some room occupancy tax revenue or even tourist-related sales taxes to a fund for workforce housing statewide?

Let me share my proposed reform on the TDA tax system, which would address at some level workforce housing shortfalls. The state should eliminate TDA room taxes and sales taxes on short-term rentals. Instead, replace these taxes with a short-term rental tax that could be earmarked to create a state workforce housing fund. 

Currently, most counties have a 7% sales tax rate with TDA taxes ranging from 3% to over 6%. Why not just have an across the board 10 or 12% tax on short-term rentals? Revenues from this short-term rental tax could easily be accounted for by the state, as short-term rental companies would collect it for the state as they currently do for sales and room occupancy taxes. It would be a clean and direct tax base for funding workforce housing initiatives, or a portion could be carved out for counties and towns for capital infrastructure projects.

My proposal would retain TDA taxes for hotels and motels, so tourist promotion programs would remain in place. The short-term rental phenomenon generated windfall income for TDA systems. It is time to reallocate this wind fall to address a critical issue: affordable housing. There is an emerging correlation between shortages of long-term rental units and skyrocketing rental costs. Since 2020, long-term rental costs have exploded by 78% in the Asheville area. In Highlands, affordable long-term rentals have all but disappeared.

I know there would be resistance to such reforms, specifically the tourism and hospitality lobbies might oppose such changes. The hospitality industry has enjoyed great latitude in how these revenues have been allocated. It is time for a broader community perspective concerning how short-term rental and TDA revenue are allocated.

Patrick Taylor is the Mayor of Highlands