Carney signs bills allowing hotel tax in Sussex, Rehoboth

Three percent tax to raise estimated $1.3M in county, $900K in city
July 19, 2019

On July 17, Gov. John Carney signed two bills without ceremony – one that amends the Rehoboth Beach charter, allowing the city to collect a tax of no more than 3 percent on hotels and motels, and a second bill that allows Sussex County Council to enact a similar tax on hotels in unincorporated areas of the county.

County Administrator Todd Lawson said under provisions of the legislation enabling the county to impose a tax, the funds must be used for beach replenishment, dredging, economic development, tourism programs, recreational activities, and water-quality and flood-control projects.

County Finance Director Gina Jennings said 40 percent of hotels and motels in the county would be subject to the county tax, raising an estimated $1.3 million annually. The new tax would be in addition to the 8 percent state lodging tax hotels and motels already pay.

If enacted through an ordinance, Lawson said, county council would have the final decision on what the revenues would be used for.

Lawson said he and Jennings are meeting with Delaware Division of Revenue, and Kent County and New Castle County officials to get more information on how the tax is collected. Delaware’s other two counties already have adopted a 3 percent tax. Under specific legislation for Kent County, all revenue goes directly to DE Turf, a sports complex near Frederica.

Lawson said staff would return to council at a future meeting and present a framework for a possible ordinance that would require public hearings.

Sussex Councilman John Rieley asked about collecting tax from other lodgings such as Airbnbs. “The state does not include short-term rentals, but I think you will see more attention paid to that,” Lawson said. “The question is how to collect the tax.”

Meanwhile, in Rehoboth Beach, Mayor Paul Kuhns said Rehoboth Beach commissioners may discuss adding the 3 percent tax during a workshop meeting Monday, Aug. 5, and he hopes a vote to approve the tax would be on the Friday, Aug. 16 agenda. The tax would be placed on hotels, motels and tourist homes that offer eight or more rooms for rent, and he said he expects money raised would be used to pay for amenities needed for the beach town and for the many tourists who visit. 

Kuhns said hotel owners were originally concerned that many tourists would stay outside the Rehoboth Beach city limits in order to avoid the 3 percent tax. But now that the county plans to impose its own 3 percent tax, he said, it's a moot point.

“Now there's a level playing field that has been set up,” Kuhns said.


Other legislation

Included in the Bond Bill is a carryover of $6.8 million to fund new courthouses in all three counties, including a new Sussex County Family Court. Lawson said land for the courthouse at South Race Street and East Market Street in Georgetown is adjacent to land owned by the county.

He said the legislation creates a review committee to look at a proposal for a private company to build the courthouse and lease it to the state. “The state has not done this before,” Lawson said.

HB 216, the Grant-in-Aid Bill, provides an increase of $1.3 million in statewide funding for paramedics. Lawson said it's unclear exactly how much of an increase Sussex County will be allocated because the bill provides for funding based on the county's previous year's approved budget and not actual expenses as in the past.


Melissa Steele contributed to this article.