Some rental agencies wary of tax, Kitty Hawk says
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Some rental management companies have expressed concerns about a proposed occupancy tax increase and that it would seem to benefit only one town, Kitty Hawk council members told Nags Head Mayor Bob Oakes Monday after he presented a $36 million plan for adding sand to the beach.
A key element of Nags Head’s plan to finance beach nourishment, the occupancy tax increase would shift the burden away from most property owners, but it would bring the rate to 6 percent. That would put total taxes at 13.75 percent for vacationers renting homes and hotel rooms.
Councilwoman Emilie Klutz said that “opinion was mixed” among rental managers she and other council members talked to about Nags Head’s plan. The prospect of raising the occupancy tax, she said, “is not something they were really excited about” because they already hear some complaints about the 12.75 percent in total taxes charged now.
The higher taxes, however, would be in line with rates now assessed in Currituck County.
Mayor Pro Tem Gary Perry said that Kitty Hawk’s opposition to Nags Head’s financing plan came after the discussions with rental property managers.
Last week, Perry told the Dare County Shoreline Management Commission that Kitty Hawk would oppose using the first five years of an additional 1 percent on the occupancy tax to finance $16 million of Nags Head’s $36 million project. Nags Head would need another $20 million from the Shoreline Management Fund, which now has about $22 million generated by an existing 1 percent of the occupancy tax. Perry said Kitty Hawk preferred distributing that money in proportion to the amount of occupancy taxes originating in each locality.
Under Nags Head’s 10-mile plan, maintenance every five years would be covered by a special assessment of oceanfront property owners, who would be petitioned to participate.
While acknowledging an immediate need in South Nags Head, where recent storms have left at least 70 homes in a state of serious disrepair or public nuisances, Kitty Hawk council members were concerned that the plan would be too much of a drain on the shoreline management fund. N.C. 12 is frequently threatened, and Kitty Hawk could face substantial costs if hit by a tropical storm, hurricane or severe northeaster.
Oakes has said that even after an additional 1 percent is used to pay off the $16 million revenue bond during the first five years, the fund would hold at least $60 million in 10 years. Nags Head is the only town with a project close to being permitted, he said, and it would serve as a test of beach nourishment’s viability on the northern Outer Banks, where it has never been attempted on such a large scale. In that sense, he said, it would benefit all of Dare County.
Oakes, who is president of Village Realty, has acknowledged that increasing the occupancy tax by 1 percent would mean 1 percent less that rental property owners could include in an annual rate increase. That, in turn, would also affect rental management companies’ commissions, which are not calculated to include taxes.
Dan Hardy, president of Joe Lamb Jr. and Associates, said Tuesday that the 1 percent local sales tax, which was repealed in 2006, was the fairest way to spread the burden for financing beach nourishment. But in the absence of a push to revive that tax, he said, the occupancy tax was a reasonable option.
“We are at a critical point, at least in my opinion, in the future of our economy,” Hardy said.
Hardy, whose company manages 111 properties in South Nags Head, said his primary concern would be if the additional 1 percent was put in place after the bulk of a season’s rental contracts had been given to customers. It would mean reworking them and explaining the increase.
Any occupancy tax increase would have to be approved by the General Assembly during its short session, which begins May 12 and is expected to run at least through August. The short session is reserved for non-controversial money matters.
Oakes said Tuesday that his goal is to know by October and to have a new tax in place in January of 2011, which would minimize contract complications.
“There is no sense in creating problems when we don’t have to,” Oakes said.
The verdict is still out on whether the occupancy tax increase would be considered non-controversial. Oakes was unable to answer that question when Klutz asked about the consequences of Kitty Hawk’s opposition to Nags Head’s plan as it is structured now.
Kill Devil Hills has come up with its own beach nourishment plan that would compete for money from the shoreline management fund. Last week, Mayor Ray Sturza said his Board of Commissioners would consider a resolution offered by Oakes in support of Nags Head’s plan.
Oakes presented the same resolution to the Kitty Hawk Town Council.
“We’ll deliberate on this and do what we can,” Mayor Clifton Perry said.
Oakes takes the plan to Southern Shores tonight and to Duck on Wednesday. Commissioner Renee Cahoon will make the presentation to the Manteo Board of Commissioners on Wednesday, Oakes said.
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Jackie says:
I’ve been in property management since 1981. At that time, there were no taxes at all. Of course, there was no AC, TVs, hot tubs, pools etc. Please don’t use the 1% increase as an excuse for a deal breaker about beach nourishment. A concern mentioned here and there does not mean that the majority of rental companies feel the 1% occupancy tax increase would adversely affect our business. Have the Outer Banks Association of Realtors do a REAL poll if necessary. The Outer Banks is still a reasonably priced vacation choice compared to northern and southern neighbors. However, if we don’t have beaches then we have a REAL problem. Nags Head’s problem today will be “yours” soon. Please look at this as a long term Outer Banks issue.
newjake says:
I don’t think the tax is the issue, and of course the beaches will still be there. They move all the time.
The issue seems to be that Nags Head wants SO much, and is unwilling (it seems) to kick in any $ —
-They want all the fund, and all of the increase.
-They may or may not ask for maybe some money, maybe.
Why not, as suggested, raise that 10.5 million through an assessment?
Why not just raise the town’s sales tax? They could push their local sales tax up a couple points right?
Why not use their own property as collateral for a bigger loan?
Why endanger all the other towns by depleting the fund?
Do they really have millions in the bank? Why isn’t that part of the discussion?
So many questions still.
GB says:
I strongly agree that the local Realtor association should poll its members and take a position on equitable homeowner taxation and the current proposal.
The proposed occupancy tax would be 13.75%. We already have 1% of the occupancy tax dedicated to erosion mitigation. If the community truly agrees that there is a need to raise additional funds, then spread the tax increase somewhere else—meals tax, sales tax, beach access fee, fishing tax, beach chair tax, or a toll at the bridge. I think these are all poor ideas, but if you are going to do it, then please at least tax a group who can speak up and is not already subject to a massive existing tax rate.
The increase in occupancy tax strikes me as taxation without representation. If the out-of -town owners of rental homes between the highways, on the west side, on relatively safe oceanfront lots, on Hatteras Island and in other parts of the county were truly aware of the proposed increase that will directly affect them and their guests, I feel that they would be opposed to this just as 4 out of 5 residents were the last time it came up.
Ray says:
Another penny sales tax would have the same effect on what cottage rentors pay as a penny increase on the occupancy tax. Point is, this is no time to be raising taxes on anyone.
Brian Grffith says:
Has anyone in Nags Head (or Dare County or Kill Devil Hills for that matter) asked for a detailed accounting of what the ROI will be for a $36 million beach nourishment project that, at best, will last maybe 4 or 5 years (probably more like 2 or 3) and might – MIGHT – reduce future storm impacts some unknown amount?
Also, if the concern is the area’s reputation, beach nourishment may actually be counterproductive since there’s a good chance more structures will sustain less damage after the next big storm. Is that worth $36 million?
And what happens when that $36 million worth of sand goes away? Sure, the Feds may pay to put back some of it, but that’s a very risky gamble…especially along the Outer Banks.
Ron Lane says:
What happens when a storm wipes out the new beach? Are you going to bump up the tax rate? There is no such thing as a temporary tax. Once it is established it hangs around. The beach will always be there. It is just getting rid of the structures in the way. Who owns them?
Wilbur Wright says:
Who owns those houses?
A slow weekend, my chainsaw, and Orville’s new frontend loader.
Brian says:
“The beach is your income.”
The beach is an income – for some.
In reality, the number of people who visit the banks is the majority of income.
The more people who lay out, swim, surf, skim, fish, kite, kayak, rent shtuff, eat dinner out, visit galleries, play Putt – Putt, shop at all the stores including Wal-Mart, look at birds, monuments, light houses, yadda, yadda, yadda…
Some of those people rent a handful of houses sitting directly in front of the ocean – most don’t, which is easily demonstrated by driving down the beach road and counting the number of houses with feet in the water, then comparing that to hotel rooms and homes off the beach.
If the beach is truly an income, then it makes sense to remove wet homes, install plenty of parking, build up the businesses directly across the beach road, etc….
The emotional appeal for sympathy and a penny from ocean side home owners simply does not fly when you add your request for a penny to everyone else that has their hand out.
Hard choices have to be made and part of those hard choices means hard luck for some and pennies for others.
Here’s a novel idea, skip emotional appeals coming from all directions. Figure out then present real numbers for income from the beach houses and other sources as some are already doing – not the hypothetical might-be scenarios. Compare those numbers with places that really use the beach and make it a source of income. Weigh the real costs of doing so and compare that with what the locality really wants to do for money then approach it the right way, from the bottom up and keep at if for however long it takes.
Does that mean some houses are going to go away in the interim? Sure does, but that’s happening already. In the end it may mean that all the houses go away or we all wind up dropping more than a penny for sand. Better that the final outcome can be tolerated at a cost that those who’ll be holding the bag can live with.
Butch Stone says:
The whole thing is
Don’t let the Outer Banks get a bad name
Most people don’t say they are going to OBX
But they are going to Nags Head
The reputation of the Outer Banks is in the hands of the people and some people are fighting a one penny tax to save the beach.
The beach has given so much more to the people here than a penny
Butch Stone says:
For people for or against the beach project, please take the time and listen to this video, all the way through. It’s on Town of Nags Head’s site.