This statement was made by County Commissioner Molly Henderson at the County Commissioners' meeting on the evening of May 31, 2006 at the East Donegal Township Municipal Office. Mrs. Henderson's proposal is to reduce the radius of the "Market Area" which pays the "Hotel Tax".
May 31, 2006
There is an issue I wish to raise for future consideration concerning the County"s Hotel Room Rental Tax which is sometimes called the Bed Tax. I am not requesting that the Board of Commissioners discuss the Bed Tax today, but rather that we put it on the agenda for discussion on June 14.
The Bed Tax is a 3.9% tax upon rental of Hotel rooms within the "Market Area" as defined by a County Ordinance passed in 1999. By State law, the Market Area is determined by the County Commissioners and can be as small as the City and as large as the entire County.
80% of the revenues of the Bed Tax go to the Lancaster County Convention Center Authority and 20% to the Pennsylvania Dutch Convention and Visitors' Bureau. This is equivalent to a 3.12% tax for the Convention Authority and a 0.78% tax for the Visitors' Bureau.
In addition to the 3.9% Bed Tax authorized by the State Convention Center Law, the County also imposes a 1.1% County Hotel Excise Tax which is sometimes called the Excise Tax. Unlike the Bed Tax, the Excise Tax automatically covers the whole County and all the proceeds are paid to the Visitors' Bureau.
The State Convention Center Authority Law says that the County shall not "reduce the rate of tax imposed for convention center purposes until all bonds" of the Convention Authority are paid. The State Convention Center Law does not, however, limit changes to the Market Area to which the rate of tax is applied.
Seven years ago, the County Commissioners passed an Ordinance saying that "the entire area within the County of Lancaster will derive a material benefit from the existence of the Convention Center within the County." Under the State Convention Center Law, the Commissioners, in 1999, could have chosen to make the Market Area equal to a 15 mile radius around the Convention Center, which under the law would have precluded a hotel owner challenge. However, the Commissioners chose to create the Market Area based upon the Commissioners' decision as to which areas outside the City received a benefit from the convention center - under the Convention Center Act this choice allowed hoteliers to petition for a change. Various Court challenges ensued, and the Court ultimately upheld the decision of the County Commissioners the whole County was covered.
I believe, given the vast changes which have occurred during the past seven years, that it is time for the County Commissioners to reconsider whether or not the entire County is the appropriate Market Area for the Bed Tax. Certainly we need to take into account the findings of the PKF Consulting study as to changes in the hotel and convention center market during the last seven years.
Last year, the Commissioners separated the Bed Tax (3.9%) and the Excise tax (1.1%). If the Board of County Commissioners would ultimately determine, after reviewing the facts, that the County Hotel Tax does not provide a material benefit to much of the County this would not affect the Excise Tax which can be a maximum of 3% under State law.
I ask that the Bed Tax and the Excise Tax be put on the agenda for discussion at the June 14 Commissioners' meeting.