Every month, Portsmouth and the Seacoast seem to wind up on a list of top travel destinations. You’ve probably seen the lists and articles plastered across social media: “12 Reasons Why Portsmouth NH is the Most Underrated American City,” published earlier this month on matadornetwork.com, is the latest. They’re generally the same — a mention of Strawbery Banke, Hampton Beach, The Friendly Toast, and a handful of other tourist highlights.
They seem to be working. Tourist “season” is now a year-round event in Portsmouth, and though Hampton Beach quiets in the winter, its summer season is busier than ever. All those visitors bring millions of dollars into the local economy and generate $283.2 million in meals and rooms tax revenue for the state.
But tourism comes at a price, according to local lawmakers. More visitors mean more wear and tear on city streets, more infrastructure repairs, and more calls to emergency responders. And local communities get back only a small percentage of the meals and rooms tax revenue to help cover those costs.
A bill currently before legislators would start the lengthy process of reassessing how the state distributes meals and rooms tax revenue to communities, a change that many say is overdue.
Two Seacoast legislators sponsored bills this session related to getting more revenue from tourism in the region. Sen. Nancy Stiles (R-Hampton) sponsored SB 213, which would establish a committee to study the meals and rooms tax formula, and Sen. Martha Fuller Clark (D-Portsmouth) introduced a bill to allow communities to add a fee of up to $1 per night to hotel bills. The two bills were combined; the committee proposed in Stiles’ bill would also look at hotel room surcharges.
“Tourism has a big effect on Portsmouth and it would be nice if we could assist taxpayers in a way by recouping some money through this fee,” Portsmouth Mayor Robert Lister says.
Revenue and costs
The meals and rooms tax rate is currently set at 9 percent. Anyone who rents a room or buys a meal at a restaurant pays the tax. Businesses collect the money directly. They keep 3 percent of whatever they collect for administrative costs and send the rest to the state Department of Revenue Administration.
From there, 60 percent of the total goes to the state, with portions of the money going toward school building aid, the Department of Resources and Economic Development, and administrative costs; the rest is allocated to the general fund. The remaining 40 percent is sent back to communities based on population. In the current fiscal year, the state has sent $63.8 million in revenue from the meals and rooms tax to communities.
The Department of Revenue Administration tracks the amount it collects from meals and rooms taxes at the county level rather than the municipal level. In 2014, the state collected approximately $283 million in meals and rooms tax revenue, with Rockingham County contributing about $87 million, or 30.8 percent of the total — the most of any county in the state. Strafford County contributed $16 million, about 5.7 percent of the revenue.
Providing data by county distorts how much individual communities contribute in revenue, Hampton selectman Phil Bean says. Once more precise data is available, Bean says, lawmakers should find a way to distribute revenue more equitably. He’s not referring only to the meals and rooms tax; in Hampton, the toll booths and state liquor stores along Interstate 95 generate some $200 million each year for the state, Bean says, and though the town provides first-responder services for those location, it doesn’t see any of that revenue.
“That’s not very equitable for taxpayers,” he says.
Changing the formula
That’s why Stiles wants to see the formula change. It’s a cause she’s been championing for almost a decade. Across the state, 106 communities have fewer than five businesses that contribute to the tax; 28 of those only have one business that contributes. Meanwhile, 17 communities in the state have 100 or more businesses that contribute to the tax, according to Stiles
“There’s no consistency in the ratio of a community’s businesses and population and the revenue the community receives,” Stiles says.
Take Hampton. There, 353 businesses contribute to the tax. In the 2015 fiscal year, the town received $722,150 in meals and rooms tax disbursements from the state. According to Stiles, one of those businesses (which she said she could not identify by name) contributes more in meals and rooms tax revenue to the state than the entire town gets back.
“Tourism is the number two industry in the state. And, with no sales tax or income tax, tourism (revenue) is huge.” — B.J. “Doc” Noel of the Hampton Area Chamber of Commerce
It costs Hampton $1.8 million for extra municipal services in the summer, including increased police and fire department staffing, according to Stiles.
“(Hampton) isn’t even asking for a true exchange,” Stiles says. “I’ve heard from senators throughout the state who say the same thing is happening (to their communities) during leaf-peeping time, during skiing time, during different times of the year.”
On any summer day, there can be close to 100,000 people at Hampton Beach, according to B.J. “Doc” Noel, president of the Hampton Area Chamber of Commerce. And they spend an enormous amount of money.
“Tourism is the number two industry in the state,” Noel says. “And, with no sales tax or income tax, tourism (revenue) is huge.”
Passing the buck
In Portsmouth, Mayor Robert Lister says adding a $1 fee on hotel rooms would go a long way toward helping the city pay for first responders, road maintenance, and other costs associated with tourist traffic. The city’s population is just over 21,000 residents, but, according to Lister, once tourist season begins, there could be 70,000 to 100,000 people in the city at any time.
Even without the $1 fee, Lister wants to see the meals and rooms tax formula change. Rather than base revenue distribution on population, it might be fairer to base it on the number of restaurants in a city, he says. In Rockingham County, in 2014, restaurants and food service accounted for 70 percent of the county’s $87 million in meals and rooms tax revenue.
Dan Innis, owner of The Hotel Portsmouth, doesn’t like the fee idea. Hotels in the city already pay property taxes, which help cover the cost of city services. If the city wants to recoup more costs, hotel guests shouldn’t pick up the bill, Innis says.
“It’s another tax. This year, it’s a dollar; in two years, it’s $2, and in three years, it’s $5,” he says. “We feel good about it because it’s someone from out of town paying it, but that doesn’t make it right,” he says.
A modest increase in the meals and rooms tax would be better, according to Innis, with the additional revenue earmarked for communities and not the state. Changing the distribution formula is another solution, but Innis believes it’s unlikely.
“A lot of towns benefit from the current form, and I wouldn’t blame them for not wanting to give that up,” he says.
Local lawmakers stress that the region’s tourism economy is, overall, a boon. But, in a state with few overall sources of tax revenue, communities are looking for new ways to bring in revenue.
“We’re all trying to get creative in order to generate more revenue,” Lister says. “State revenue is going down all the time, and more and more of the burden is falling to the taxpayer. So we’re all trying to generate more revenue to offset some of those costs.”
Innis believes communities should look at tourism’s economic benefits rather than focusing on the costs.
“We’re seeing it as a burden, when really, it’s an opportunity,” he says.
Meals and rooms tax distributions for FY 2015
Here’s what a selection of Seacoast communities have received in meals and rooms tax dis