October 22, 2021

Hotels in city oppose ‘bed tax’ measure

Cortland County Seal

A 3% hotel occupancy tax that the city of Cortland has been trying to pass for years took one step closer to reality during the recently-concluded session of the New York Legislature.

A bill that would raise the city’s so-called “bed tax” passed both the Assembly and Senate and will go to the governor’s desk for signature.

Cortland County already imposes a 5% occupancy tax on hotels. The city tax would increase that occupancy tax level to 8% for hotels within the city limits. It is intended to fund infrastructure projects and tourism promotion.

“This legislation will allow the City of Cortland to collect a ‘bed tax’ on hotel and motel room rentals that will be reinvested into the community to support Cortland’s growth,” Assemblywoman Barbara Lifton (D-Ithaca) said in a statement. “This might include water and sewer infrastructure repairs, new bicycle and pedestrian pathways, beautification initiatives, and events that promote the city and the region as a destination.”

According to a May 2 letter from city Director of Administration and Finance Mack Cook to Sen. James L. Seward, “The specific purpose is to develop a revenue stream to fund debt revenue, for the rehabilitation of the Clinton Ave./I-81 Intersection Gateway Project, creation of the SUNY Cortland-Downtown-Yaman Park Interconnect route, and the revitalization of the Downtown Core.”

Cook, in the same letter, estimated the tax would generate an annual revenue of $165,000.

However, hotels actively oppose the bill, said Theresa Wilson, general manager of the Clarion Inn in Cortland and the Holiday Inn Express. Wilson said the tax will drive people to stay elsewhere, where the occupancy tax rate is lower.

“It’s going to create a disadvantage for us with other counties,” she said. The tax, taken together with the 5% county tax and the 8% state sales tax, adds up to 16% percent in tax on city hotel rooms, she said.

As a result, she anticipates the tax will decrease business to city hotels, which, in turn, will decrease the amount collected by the occupancy tax, she said.

“I don’t think it will have a positive effect,” said Meghan Lawton, executive director of the Cortland County Convention and Visitors Bureau.

A combined 8% rate would make the occupancy tax for city hotels higher than that of any contiguous county, Lawton said. Onondaga and Tompkins counties both share Cortland County’s current 5% occupancy tax rate.

Lawton also anticipates a drop in hotel business, particularly from longer-term and group tourists who tend to plan their stays in advance. She thinks business from these groups will be pushed out of the area because of the bill.

“We’re not against the improvements,” she said. “The thing we’re against is that it’s going to drive us right out of the tourism market.”

Cook, however, said Cortland has lower hotel rates compared to rates in areas to the north and south and the additional tax will not have a significant effect on this disparity.

Cook also cited data in a paper published in Cornell Hotel and Restaurant Administration Quarterly, which if applied to Cortland, would account for a 1.14% decrease in rooms rented if the tax becomes law. But the revenue loss from that slight decrease, the equivalent of one bed a day, is “far outweighed by the $39 million the City is investing in the area where the hotels are sited,” Cook wrote.

Moreover, the coming improvements to that area will make the area more desirable for tourism, and thus bring in more tourists over time, he added.

Lawton said the Cortland County Convention and Visitors Bureau has joined with the local Innkeepers Association to oppose the bill. They requested lobbying help from the New York State Hospitality and Tourism Association and I Love New York, as well as other tourism agencies and tourist-oriented businesses for support. Lawton said they hope to persuade the governor not to sign the bill.

The new tax, if signed by the governor, would go in effect next year.

The city unsuccessfully tried to pass a 3% occupancy tax hike in 2014 and 2017.