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DELAWARE - Sussex County mulling options for raising lodging tax

GEORGETOWN — Like accommodations in neighboring Kent County and Dover, rooms in hotels, motels and tourists homes may soon cost visitors to Sussex County more.

Last week, County Administrator Todd Lawson outlined enabling legislation passed in the recent General Assembly session that gave Sussex County Council the power to create and adopt a local 3 percent lodging tax.

This prerogative resembles at least a half dozen other bills passed by the legislature this year: One gives Kent County the ability to create a 3 percent tax, and six others give Dover, Rehoboth, Millville, Seaford, Georgetown and Delaware City similar power to layer on a citywide 3 percent tax of their own.

House Bill 228 authorizes Sussex County to impose a local lodging tax up to 3 percent of rent on rooms in a hotel, motel or tourist home in the unincorporated areas of the county. Gov. John Carney signed that bill on July 17.

An additional tax could generate more than $1 million earmarked for specified projects in Sussex County.
As specified in the bill, that money only may be used in Sussex County for the capital and operating costs of beach nourishment, waterway dredging, economic development, tourism programs, recreational activities, and water quality and flood control projects.

“This is enabling legislation so the county council will have to take action and pass our own ordinance which will establish our program’s parameters,” Mr. Lawson said in a presentation to council last week.

“In the weeks to come, we will start to develop a framework for the county’s program, which will eventually take the form of an ordinance. I will return to council at a future meeting to provide an update and get your feedback on the direction you would like to take related to this legislation.”

According to Sussex County Finance Director Gina Jennings, about two of every five hotels, motels and tourist homes in Sussex County would fall under unincorporated county jurisdiction.

“I’ve done some research pulling down business licenses from the Division of Revenue, pulling out hotels and motels and tourist homes that would qualify,” Ms. Jennings. “So, it looks like 40 percent of all hotels and motels in Sussex County would be in the unincorporated areas. If you take 40 percent of what they collect at the state for our 3 percent, we’re looking at about $1.3 million a year.”

HB 228 — the Sussex Lodging Tax — passed the state Senate 20-0 and House by 34-0, with several absentees. State Rep. Pete Schwartzkopf was the bill’s primary sponsor. Sen. Gerald Hocker was an additional sponsor.

“This fund will only be used for the categories that the General Assembly gave us the authority to fund, and it will be a decision made by this council on what projects will be funded,” Mr. Lawson said. “It could be that we take the entire amount of a project or it could be that we use these funds for matching. A lot of times there is state and federal projects that require local matches.”

An amount not to exceed 5 percent of the funds generated from the tax may be used to pay the costs of administering authorized projects.
This new lodging tax would be in addition to an 8 percent state public accommodations tax of rent for occupancy of rooms in hotels, motels or tourist homes in Delaware.

Of that 8 percent, 5 percent goes to the state’s general fund, with 1 percent designated to the state Department of Natural Resource and Environmental Control’s Beach Preservation Program, 1 percent to the Delaware Tourism Office and the other 1 percent designated in the proportion in which collected to the duly established convention and visitor’s bureau in each county.

Mr. Lawson said he and Ms. Jennings have begun preliminary discussions with colleagues in Kent and New Castle counties, as well as the Delaware Division of Revenue as it relates to the collection of the tax if the county decides to enact an ordinance.

County councilman Irwin “I.G.” Burton III asked if five designated categories in the legislation are lock-boxed, so that money raised from the tax would not, for example, go to something such as the county’s general fund.

“Correct,” Mr. Lawson said. “I think it is this council’s intent to have the funds separated. Ms. Jennings has confirmed with me that we would have the funds raised, be separated. Call it a lockbox but it will certainly be tracked just for what we bring in and use for these projects that the General Assembly has allowed us to spend. It will be up to this council’s discretion on what projects get first priority.”

See Delaware State News article . . .