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Campgrounds, realtors oppose proposed lodging tax

Legislation would impose 8 percent levy on short-term rentals
April 29, 2017

Story Location:
32087 Holly Lake Road
Millsboro, DE 19966
United States

A bill that would tax short-term vacation rentals under Delaware’s 8 percent Lodging Tax is facing strong opposition from the Cape Region businesses who would be most affected.

“It just can’t happen,” said Kenny Hopkins, Holly Lake Campground owner. “From Bethany to Rehoboth, it’s something that’s just going to hurt all of Eastern Sussex.”

Hopkins said he learned about the bill April 24, when an email from a camping trade organization presented him with a legislative update. He said camping is an economical way for families to enjoy the beach, and adding an 8-percent tax would discourage those families from coming.

Hopkins said he’s spoken with his campground-owning brethren, and they’re all against the legislation.

“Every single campground owner I’ve spoken with,” he said to emphasize his point. “My phone has been ringing off the hook.”

Rep. Deborah Hudson, R-Fairthorne, and Sen. Gary Simpson, R-Milford, introduced legislation April 13 that would apply the tax to short-term vacation rental units. Under House Bill 130, short-term is defined as a rental term of 120 days or less. Campground, bed and breakfast locations, and internet based lodging options, such Airbnb and VRBO, would all fall under the definition.

The lodging tax, which dates to 2000, is already assessed on hotel and motel rental units in Delaware. A press release announcing HB130 said the Legislature’s Controller General’s Office estimates including short-term rentals under the tax would bring in $8 million to $11 million in annual revenue.

Bruce Plummer, Delaware Association of Realtors chair and a Rehoboth-based Coldwell Banker broker, was slightly more measured in his reaction, but the message was just the same.

The realtors association is against the bill, he said.

“We realize the state has a budget shortfall, and we’re sympathetic to the idea that the state has to find ways to increase revenue, but our position is the state needs to grow the economy,” he said.

Plummer said visitors to the state’s beaches expect a tax when staying at hotels and motels, but those prices per night are less than house rentals per week. He said short-term house rentals can run from $3,000 a week to $8,000 a week, or more, during the height of the season. When an 8 percent tax is added to amounts like that, it could discourage tourists, he said.

“This is big business, and we would encourage something with the least negative impact on the economy,” he said. Property owners will pass the tax straight to the renters, he said. “I don’t know of a single landlord we deal with that wouldn’t.”

The bill has bipartisan support, but only two Democrats –  Reps. Helene Keeley, D-Wilmington South, and John Kowalko, D-Newark – have signed on.

Speaker of the House Rep. Pete Schwartzkopf, D-Rehoboth, said, plainly, he didn’t like the bill because it solely targets the beach area. There might be two days a year, during race days, when the short-term rental market is booming north of Milford, he said.

According to the most recent reports, the state is facing a $390 million shortfall for the upcoming fiscal year, which starts July 1. Schwartzkopf said he recognizes the state’s budget issues, but legislators targeting one part of the state – because that’s where they think the money is – is not the way to approach policy making.

Schwartzkopf said its interesting Senate Minority Leader Simpson and House Minority Whip Hudson are sponsors of the bill, and he said he looked forward to the support of the Republican leaders when other tax-raising measures are introduced in the future.

The legislation calls for the proceeds of the 8 percent tax to continue to be earmarked in the following manner: 5 percent to the State General Fund, and 1 percent each to the Department of Natural Resources and Environmental Control’s Beach Preservation Program, the established convention and visitors bureaus in each county and the Delaware Tourism Office.

As of April 27, the bill has been assigned to the House Revenue & Finance Committee.

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