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Will a hotel tax increase turn visitors away from State College?

The hotels of Centre County, such as The Nittany Lion Inn on the Penn State campus, are paying the Central Pennsylvania Convention and Visitors Bureau about $1.8 million in taxes. Under a proposed raise, this would increase to more than $3 million.
The hotels of Centre County, such as The Nittany Lion Inn on the Penn State campus, are paying the Central Pennsylvania Convention and Visitors Bureau about $1.8 million in taxes. Under a proposed raise, this would increase to more than $3 million. Centre Daily Times, file

A county commissioner took the time during Monday’s Centre Region Council of Governments meeting to respond to some claims that a higher hotel tax in the county would be detrimental to the hotel industry.

Included with the meeting agenda was a letter and presentation from State College businessman Lance Shaner, chairman of Shaner Hotel Holdings LP, in which he outlined his concerns should the hotel tax increase. The company owns hotels in 12 states. Five are in State College.

Commissioner Michael Pipe, who spoke to the COG General Forum Monday, described a brief history of the tax, saying a hotel tax was initially set at 1 percent by the then-board of commissioners in 1997. The tax was raised again to 2.5 percent in 2002 with a ceiling of 3 percent.

However, he said, recent legislation has allowed that ceiling to increase from 3 to 5 percent. According to Gov. Tom Wolf’s website, Wolf signed Act 18 into effect in April, “standardizing the authorization of the local option hotel tax at up to 5 percent for jurisdictions that are below the 5 percent threshold.”

The proposed increase to the county tax is a 60 percent increase over what hotels currently pay the tourism bureau, Shaner said in his letter, taking total room taxes up to 10 percent and room occupancy tax up to 11 percent.

Shaner also said that the national hotel tax average comes to 6.17 percent, creating a competitive disadvantage to the local hotel industry compared to nearby states with lower taxes.

“The hotel business is extremely competitive and travelers look at the total cost of a room to make their buying decision,” he said. “They do not sort out the extra taxes they are being charged. They simply want to know what the total price is.”

The hotels of Centre County are paying the Central Pennsylvania Convention and Visitors Bureau about $1.8 million in taxes, he said. Under the proposed raise, this would increase to more than $3 million.

Through the work of the CVB, out-of-area spending in Centre County hit about $720 million in 2015, up from $500,000 in 2005, Pipe said.

According to a presentation provided by Pipe, the CVB spent about 51 percent of the hotel tax revenue in 2014-15 on salaries, benefits and office space, coming to about 41 percent of the CVB’s total revenue.

Pipe agreed that the national lodging tax rate came to 6.16 percent, and Pennsylvania averaged 6 percent, but he said that was only part of the story, pointing to areas where Centre County really would be competitive.

Take football travel. Centre Region properties fill up fast on home football weekends, so Pipe looked at those numbers. Compared to surrounding states, the Centre County-State College tax rate comes to 8.5 percent — a full 9 percent lower than the highest municipal tax rate of 17.5 percent at Columbus, Ohio.

“Not only does Ohio State beat us at football, but they beat us at the tax rate too,” he said with a laugh.

State College also sits about 5.5 percent lower than the largest surrounding universities, he said, including the University of Delaware (16 percent), Rutgers University (15 percent) and West Virginia University (12 percent).

Pipe said the decision to raise the hotel tax is not imminent, but he felt the municipal leaders deserved to have all the information to consider before such a decision is made.

“These hotels are in your municipalities,” he said. “If the Board of Commissioners were to increase (the hotel tax), we would do our due diligence to make sure they’re not going to negatively affect the businesses in your area.”

Jeremy Hartley: 814-231-4616, @JJHartleyNews

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