Editorial: Lodging bill introduces a slippery slope

Published: 4/18/2019 12:05:32 AM

New Hampshire is not a home rule state. Its cities and towns, particularly when it comes to raising the revenue needed to fund government, have only the power the governor and Legislature grant them.

Though communities may charge assorted fees, that authority consists primarily of the right to levy a tax on property. Recently, the House voted to change that with House Bill 641, legislation that would allow communities to tack a $2 per night occupancy surcharge on the lodging component of the state’s rooms and meals tax.

Given the burden that ever-escalating local property taxes inflict, it’s easy to understand why communities are seeking other forms of revenue. But the Senate and governor should carefully consider the precedent that permitting local taxation would set. What might it lead to? Given the great disparity in property wealth and per-capita incomes among the state’s cities and towns, would a local rather than a state tax be fair?

The lodging tax bill, unsurprisingly, was sponsored by representatives from so-called tourist towns like Hampton and Portsmouth, where much of the revenue from the rooms and meals tax is raised. The tax brought in $314 million in 2017.

To balance the state’s budget, the Legislature has filched all it can from cities and towns over the years. It stopped contributing to the retirement costs of municipal employees, virtually eliminated school building aid, reduced revenue sharing and shrank the percentage of the take from the rooms and meals tax that’s shared with towns from 40 percent to 28 percent. The loss meant higher local property taxes for all communities.

There is a superficial logic behind the request to impose a local lodging surcharge. The lion’s share of the revenue from the tax comes from communities with lots of resorts, restaurants and hotels, places like Portsmouth and Lebanon. The state returns a portion of the tax to communities, but the formula long used is based not on where the money was raised but population. Tourist towns have unsuccessfully fought to change the formula.

As Portsmouth’s city manager argued recently, 312 local businesses contributed more than $27 million to the state in rooms and meals tax payments but the city of 21,500 received just $1.1 million back from the state. Meanwhile a community of similar size with relatively few hotels and restaurants received $1.2 million. That’s unfair, so the argument goes, because tourist towns have to spend heavily on police protection and other services to accommodate hoards of visitors, an expense borne by local taxpayers.

The bill’s sponsors, however, look at only one side of the ledger. Property values in places attractive to tourists are far higher than elsewhere and assessments of hotels are based in part on occupancy rates and revenues. That’s why Portsmouth’s 2017 tax rate was $15.38 per $1,000 valuation while the rate was $28.24 in Concord, $37.32 in Keene, and $39.19 in Berlin, which has virtually no local lodging industry.

The lodging bill reminds us of the still unresolved school funding battle over so-called donor towns that briefly paid more in statewide education property taxes than they got back. In the end, such debates serve only to obscure the fundamental inequities of our tax system.

And where would the fees stop? Should Concord, which as the capital has more tax-exempt property than any other city, be allowed to offset some of its expenses by charging lawmakers for parking? Should Allenstown, half of whose land area consists of Bear Brook State Park, be permitting to add a buck or two to the park’s admission fee?

House Bill 641 should not become law.

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