Rehoboth lodging tax legislation moves forward

Charter change would allow city to charge hotels, motels up to 3 percent
May 10, 2019

Story Location:
229 Rehoboth Avenue
Rehoboth Beach  Delaware  19971
United States

It appears Rehoboth Beach officials will get their lodging tax after all.

Sen. Ernie Lopez, R-Lewes, introduced a bill May 8 that would amend the city’s charter to give the city the power to implement a lodging tax of up to 3 percent. The bill is co-sponsored by Speaker of the House Rep. Pete Schwartzkopf, D-Rehoboth.

Lopez said it’s an issue that’s been much discussed, and over the past two months all the parties involved have had a number of conversations.

Mayor Paul Kuhns said, “This is something that we have been speaking about locally for over a year.”  In an May 9 email, he said, “Implementing a local accommodations tax is something that many municipalities have been suggesting in order to provide for much needed funds to supplement their budgets.”

The introduction of the bill is the latest step in implementing the lodging tax.

In September, city commissioners voted unanimously in favor of a charter change allowing the city to impose a tax on hotels, motels and tourist home rentals.

Then for months Rehoboth officials discussed the budget for 2019/2020, which began April 1, with a 3 percent lodging tax included. Had it been implemented by July 1, it was estimated by the city a 3 percent lodging tax would bring in roughly $890,000 in revenue.

Days before the city was scheduled to vote on its budget, the Rehoboth Beach-Dewey Beach Chamber of Commerce and a group of hotel owners opposed to the lodging tax in Rehoboth.

In a letter to the editor that ran in the Cape Gazette March 15, the day the city was set to approve the budget, chamber President Carol Everhart listed why the chamber opposed the tax. Among the reasons she included were that a lodging tax for Rehoboth would put the hotels and motels within city limits at a disadvantage against those on Route 1; that it was unfair because short-term rentals don’t pay the state tax, have less enforcement and require more city services; and that it was detrimental timing because guests have already made reservations.

In an email May 9, Everhart said the chamber’s position has not changed.

Chad Moore, of The Bellmoor Inn and Spa, said he was disappointed with the mayor and commissioners. He said it feels like the city is specifically targeting the hotel community. At least, said Moore, the hotel owners were able to convince the city to wait until next year to implement the tax.

Lopez said he and Schwartzkopf put the brakes on the introduction earlier this year because it was important the city and hotel owners discussed the legislation.

Schwartzkopf said he wanted better communication between the city and the hotels. They’ve had those discussions, and it’s the city’s decision to move forward, he said.

Lopez said he didn’t expect there to be any issues with the legislation moving through the General Assembly.

The state already collects a lodging tax of 8 percent on hotels and motels – 5 percent goes to the state’s general fund; 1 percent goes to beach replenishment; 1 percent goes to the State Tourism Office and the remaining 1 percent is split among county tourism offices. None of the revenue goes to city coffers.

This new tax would not affect people who rent houses in Rehoboth, who already pay an accommodations tax of 6 percent that goes to the city. House renters do not pay the state tax.

Rehoboth is one of a few Sussex County municipalities looking to increase revenue with a lodging tax. A bill allowing Seaford was introduced in March, and is now waiting for the govenor’s signature after passing unanimously through both the House and the Senate. A bill allowing Georgetown was introduced last month, passed through the Senate unanimously and is now awaiting a hearing in the House Administration Committee.

SB86 has been assigned to the Senate Elections, Government and Community Affairs Committee. The legislative session ends Sunday, June 30.