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AL - Gulf Shores considers raising bed tax an additional three percent

Gulf Shores considers raising bed tax an additional three percent. Expected $7million per year windfall will be used for roads, schools

Gulf Shores City Council discussed raising the lodging tax on vacation rentals in the city by 3 percent, taking the total condo, beach house, camping, hotels and individual houses rented short term to 16 percent, during its council work session on Nov. 15.

The increase would make the city’s portion of the tax 10 percent. Council could vote the increase into law as soon as its Nov. 22 regular session, but it is also possible the vote could be postponed to allow for more study and/or public input.

The extra 3 percent for Gulf Shores is projected to generate around $7 million in 2022.

Gulf Shores raised the bed tax 2 percent in 2018 citing similar traffic concerns and plans to earmark the extra money for transportation improvements.
City documents state $25.7 million was spent on the mostly road projects even though only $11.2 million was generated by the new tax since 2018.
Local real estate broker Angie Swiger was at the meeting and asked Council to provide a line item concerning that $14.5 million difference.
Later, in a letter to City Council, she stated that she would like to see the issue tabled until Gulf Shores rental companies can prepare for the increase in the bed tax they collect.

“One business owner expressed the hardship and timing of simply collecting the tax in the meeting yesterday, an issue that had not even been considered by the council. There is obviously still much to learn,’’ she wrote.

“I do believe that the council owes the public an opportunity for discussion and a more detailed analysis of the increase to show they’ve done their homework,’’ she added.

“A week’s notice before a vote on a tax increase that literally affects every citizen and can potentially cost our community millions of dollars is not appropriate.”

The lodging tax increase documents also state that the additional funds generated would pay for critical transportation needs and improvements to park and recreation and city schools.

Orange Beach also added 2 percent to its lodging tax in 2018, pledging to use the funds for transportation improvements and possibly the Wolf Bay Bridge. The bridge effort has stalled. Orange Beach officials said they are not considering raising the lodging tax.

Currently both Gulf Shores and Orange Beach charge 7 percent, the state collects 4 percent and the Baldwin County Lodging Tax District (CVB) 2 percent for the 13 percent total.

Administrator Steve Griffin said a 16 percent bed tax would be less than what is being charged in Birmingham and comparable to other Alabama cities north of here (Mobile charges 14 percent).

Gulf Shores real estate broker Rick Kieffer said in a letter to City Council that raising the bed tax will make Gulf Shores uncompetitive with Florida vacation destinations.

“When people think of going on vacation, it is not a choice between Birmingham or Gulf Shores. It is a choice between Gulf Shores and Pensacola Beach, Panama City Beach or Destin,’’ he wrote. “Florida is whom we are competing with, not other places in Alabama.’’
According the Escambia County, Florida, Tourism Development Tax office, the tax over there is 7.5% for the State Sales Tax and 5% for Escambia County’s Convention & Visitor’s Bureau.

Kieffer said increasing the bed tax will decrease occupancy and result in lower taxes for the city and also lower vacation rental property values.
“I don’t disagree that the City has a long wish list and transportation is at the top of the list, but with the state increasing gas tax by 10 cents and Congress soon to pass a $1.2 Trillion dollar infrastructure bill I would think you could find the money from state and federal sources vs. fleecing the tourists and putting all of our livelihoods at risk,’’ Kieffer stated.

“These new revenues along with revenues from existing sources are projected to fully fund the estimated $12.7 million debt service needed to implement the identified 10-year capital improvement plan,” Gulf Shores’ documents state.

During that time, the city expects to spend about $76.74 million on projects with $38.74 million coming from federal and state grants and $38 million from the city’s general fund.

Swiger said she would like to know exactly which capital improvements the increased tax will fund.

“Are we expected to have future shortfalls between the additional income and the actual expense of those improvements (as we have since 2018)? If so, how much money from the general fund will be needed to cover those future deficits?’’ she asked. “This is not an issue that can be glossed over in a 20 minute presentation.’’

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