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Sleeping on the bed tax



Published: Sun, April 8, 2012 @ 12:00 a.m.

By Todd Franko (Contact)


The Mahoning County commissioners are sleeping on the debate over whether to increase the county bed tax by 2 percent, or about $500,000 per year, to raise economic-development funds for the Western Reserve Port Authority.

Sleeping on this is about the most prudent decision a local government entity has made in years — especially when staring into such taxpayer riches and not having to go before voters with the request.

And hopefully when they awake from sleeping on this issue, their next decision will be to walk away from this foolish and poorly conceived idea.

We asked last week in a Sunday editorial for the hotel owners to show proof that the tax increase would hurt business. That’s a fair point. I believe many of the concerns of the hotel owners, but not all, including that it would hurt business.

I’m part of the billion-dollar market that is youth-sports travel. We stay in hotels month after month, seven months a year; our group includes parents who do the same for dance, baseball, volleyball, etc. When we do talk about hotel stays, it’s mainly on the best ways to have parent parties and tailgates.

But when talk does turn to hotel prices, it is always about the room rate. I can say with certainty that a parent has never picked a hotel based on the tax rates in five years, after 20-plus cities and states, hundreds of family stays and thousands of dollars.

In fact, the biggest gripe about hotels is not the taxes or the room rates, but the mandatory stays the hotels and the event hosts agree on so as to prevent families from choice. That — not the fees and taxes — is the biggest gripe from our segment of their industry.

But I digress ...

With the bed-tax debate, where the burden of proof also is needed (and I would say more so) is with the economic-development industry, i.e. proof it’s really having an impact.

The message boarders on Vindy.com are having a field day with the port authority’s list of accomplishments being headed by the move of B.J. Alan fireworks from Mahoning County to Trumbull County. Moving $5 from my left pocket to my right pocket hardly makes my life more fruitful. And if my left pocket could talk, it probably would have preferred to hold on to the $5.

I did a bit of research on the paper trail of that move, and best I could tell, that move happened with port folks politely at the table but hardly leading the way.

That’s where the need for proof comes in. Actually, we sought such proof two years ago.

Go to Vindy.com and search “Denen economic” and find the story from Aug. 8, 2010. That was our simple effort to answer this: “We have a lot of agencies and millions of dollars spent in the Valley in the name of economic development. Are we getting the best bang for our buck?”

Read the story, and tell me if you get more comfortable — or less — in creating an additional $500,000 in taxes in the name of economic development.

The consistent message from the agencies that would talk to us is that no accurate records are kept on true job gains — despite the numbers they all throw out in press releases and annual statements.

One state office official even said that their 2009 claim of 2,143 jobs created included projected future jobs that might be created. Really?

The best testament to the trouble with proof is the amount of unanswered calls and requests incurred in that story process. When the story finally was published, officials came out of the woodwork decrying the story — including some who would not make themselves available as the story was being developed.

When you finish that story, then search “Franko Clebone” and read that March 2009 story. That is about the regional eco-nomic-development office of former Gov. Ted Strickland that was vital to our area’s economic development. Amid the governor regime change last year, that office was eliminated. Ironically — Mahoning and Trumbull counties had record sales-tax years without the office.

Those from that flock instantly could argue, “Well, 2011 was good because of our work in 2010 and 2009 — before we were eliminated.” That would hold more stock if the present bed-tax arguments would have included “... and we need to buffer the loss from that office’s elimination.”

Instead, the office is a lost memory like trolley cars, blimp factories and indoor racetracks.

We already spend millions of taxpayer dollars annually in the Valley on salaries and related expenses for government and nonprofit agency posts in the name of economic development. They exist amid myriad alphabet soup titles such as the chamber, YDEC, MVEDC, CIC, Team NEO, CASTLO, TCPCED, LTR, SBA, etc. ....

These groups employ specialists who head, front, advise, consult and lobby for elected officials in townships, cities, counties, legislatures, senates and congresses — who in turn cost millions of local taxpayer dollars.

I hope that when commissioners revisit the bed-tax issue, they’ve slept enough on all of the taxes already spent on economic development and resist the pressure thrust on them by the Valley’s political muscle.

Approving this would be only political, not profitable.

Todd Franko is editor of The Vindicator. He likes emails about stories and our newspaper. Email him at tfranko@vindy.com. He blogs, too, on vindy.com.


Comments

1toddfranko(99 comments)posted 2 years, 4 months ago

FROM THE HOTEL ASSOC:

Todd,

I appreciate your editorial “Sleeping on the Bed Tax”. I wanted to provide some more information for you about how a high bed tax rate hurts hotel business. The contract business from companies are the most sensitive to high tax rates, then the conventions, and then leisure travelers like parents with youth sports groups.

Companies that contract for multiple room nights over the course of a year will take their business to a nearby hotel in another city or county for a lower tax rate (This is the primary group in the Toledo example below) and conventions will choose or even boycott cities with unreasonable tax rates (please see the NY City example below).

Many leisure travelers may not look at the tax rate when they book a hotel room, but many of them notice it when they check out and a high rate reduces the chance of them coming back. Please let me know if you would like me to send you more information on this issue.

Toledo
In 2007 Lucas County, Ohio increased lodging taxes by 2 percentage points taking Toledo’s total hotel tax at checkout to 16.75% (one of the highest in the nation). According to data provided by Smith Travel Research, since the Lucas County hotel tax increase 731 hotel rooms have closed in Lucas County and 445 hotel rooms have opened in Perrysburg (Wood County) only minutes from downtown Toledo where the total hotel tax at checkout is only 9.5%.

New York City
In 1991 New York City increased its total hotel tax at checkout to 21.25%. Outraged meeting planners boycotted New York City and businesses looked elsewhere for rooms. Over the next several years New York City had to reduce its lodging tax in order to get business to return. According to a white paper produced by the Hotel Association of New York City, in 2007 with a reduced tax rate of 14.54% New York is bringing in over double the amount of hotel tax dollars ($986 million in hotel tax receipts) as they did when the rates were at their highest in 1991.

Sincerely,
Matthew L. MacLaren, Esq.
Executive Director
Ohio Hotel & Lodging Association

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2toddfranko(99 comments)posted 2 years, 4 months ago

FROM A CITIZEN:
Todd,
Your article on the proposed bed tax was interesting, but there are two points that everyone seems to be leaving out:

1. Logic - If people in the Mahoning Valley want money spent on economic development, why shouldn't they spend their own money to fund this? Why should visitors from Buffalo, Altoona and Omaha be taxed when they will receive absolutely none of the benefits? This makes as much sense as an increased sales tax on shoppers from Trumbull, Columbiana, Mercer and Lawrence counties that goes strictly to subsidize bus service for Mahoning county residents. (Oh, I'm sorry - you were in favor of that one).

2. History - Back in 1776, the people of this country fought a war against Great Britain, the the main rallying cry being "No taxation without representation". So what is now being proposed here?
Do the visitors from Buffalo get to vote for Mahoning county commissioners? Of course not.
Do the visitors from Altoona get to vote on whether there should be a bed tax? Of course not.
Do the visitors from Omaha get to vote on how any bed tax is spent? Of course not.

Maybe it is time for another revolution.

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3toddfranko(99 comments)posted 2 years, 4 months ago

FROM A CITIZEN:

Dear Mr. Franko:

I read your piece with interest. However, you seem to overlook the reason why your choice is limited when you go on these trips. The hotel in exchange for the business is offering a group discount. Therefore, the bed tax is being collected, but since the room is discounted, the bed taxes are being paid by the hotels themselves. The higher the bed tax the harder it is for a hotel to stay profitable.

Case in point, the Holiday Metro Plex in Trumbull, which recently reopened and reported by your paper as having its water turned off, closed shortly after Trumbull County raised their bed tax to one of the highest in the state.

I do appreciate you bringing attention to the issue. Being a member of a family, who owns and manages a motel in the area for over 50 years, it just strikes me wrong to take advantage of travelers. If the political structure of an area favors exploiting visitors, they would tend to look the other way or in fact favor the exploitation of other groups. I would like to think of Youngstown as a place that welcomes visitors. After all, it is our home town.

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4toddfranko(99 comments)posted 2 years, 4 months ago

A READER:

Mr. Franko -
Your editorial viewpoint on the bed tax agreed with my own, so natch', I thought that's was great. You briefly touched on the role of convention bureaus and event organizers in jacking up room prices. Mom and Pop travelers seldom know about this, and respond only to the final room price. Either way, in this area, hiking that price to support a public entity of little value is still a dumb idea.

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5toddfranko(99 comments)posted 2 years, 4 months ago

FROM A CASTLO person:

Todd,
Although the CASTLO Community Improvement Corporation has received a few federal and state grants over its 34 year history, it has never received one thin dime of local taxpayer monies. Nearly 100% of the organization’s income is received from leasing building space at the CASTLO Industrial Park. Also, as a 501 (c ) 4 organization, CASTLO pays local property taxes and in fact has paid approximately $30,000 annually (nearly $1,000,000 since 1978) to the Mahoning County Treasurer to support various government entities including the Struthers City School District. Further, throughout its history an average of at least 100 people per year have been employed at the CASTLO Industrial Park contributing 2% of their wages to the city of Struthers in the form of municipal income taxes. Assuming 100 employees earning $40,000 on average per year this calculates to about $80,000 annually. Please note this correction. Thanks.

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6toddfranko(99 comments)posted 2 years, 4 months ago

FROM READER:

Happy Easter!

You are correct about the commissioners needing to stand up to the political muscle of the valley.

My take on this is "economic development" bed tax is that it a project originally pushed by Ryan's office. They went and hired Rose Ann Deleon. Little has been created by it. Ryan wants to save face by spending more money. Otherwise they may need to let her go and the whole thing will be chalked up as a failure.

I am sure that this is the pessimists' point of view. But the optimists' point of view cost's everyone alot of money they don't have right now. If we could just print the money and take from the value of other people's money, the optimists' view would work.

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7truth101(20 comments)posted 2 years, 4 months ago

Thank you, Todd. Your editorial was outstanding. You fairly and accurately defined both sides of the issue. Once again, we can all see yet another example of why politicians (and their cronies) should never be involved with business growth nor progressive innovation.

The problem is not with the Port Authority staff - rather with their board. The staff is experienced and can provide needed services. They simply need to have an intelligent board for oversight, guidance, and a budget/planning process.

Thanks again for your clarity.

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