Legislation introduced in the state House Tuesday would block counties from using occupancy taxes to fund public safety and other core services.
The bill comes in response to a legal dispute between Currituck County and the hotel industry. The state Supreme Court ruled last month in favor of Currituck in a lawsuit challenging the county's use of occupancy taxes to fund public safety services.
According to court documents, Currituck leaders believe the public safety "expenditures are tourism-related because Currituck County’s population doubles during peak season and the county incurs substantial year-round costs to provide adequate public safety services during that period."
In a majority ruling authored by Justice Anita Earls, the Supreme Court ruled that "the commissioners exercised reasoned and good faith judgment in determining that adequate public safety spending would help attract tourists to the area."
But Rep. Julia Howard, R-Davie and the bill's sponsor, says that wasn't the intent of the occupancy tax when it was created in the '90s. Her bill would clarify that tax revenue from hotel stays and vacation rentals must be used for tourism programs such as marketing, effectively changing the impact of the Supreme Court ruling.
"It seems that a couple of counties have started to want to use the occupancy tax for the general expenses in their county," Howard said. "This change simply protects the intent of the occupancy tax and ensures fairness to the hospitality industry, while maintaining some degree of flexibility by preserving a local government's ability to use these funds for other purposes."
If the bill becomes law, counties like Currituck would need permission from the legislature to use the revenue for non-tourism expenses. Several counties already have that authority, and the bill wouldn't change those existing exemptions.
Howard says the tax was created at the request of the lodging industry, and "there is nothing that would stop them asking the legislature to repeal the tax if the counties are going to misuse the dollars. It's worked extremely well for 30 years."
The bill passed the House Finance Committee Tuesday without any objections. Rep. Deb Butler, D-New Hanover, voiced support for the proposal.
"I share your philosophy about it, that (the tax revenue) should be for extremely limited circumstances, perhaps in the case of emergency only, because these funds have done well for 30 years and are sacred," Butler said.
