Despite warnings that doing so might backfire, the Birmingham City Council voted Tuesday to increase the city’s lodging tax.
The ordinance, which drew fierce criticism from local hoteliers, adds a $3 per night, per room surcharge to the city’s lodging tax code. The revenue generated by that surcharge is to be allocated “exclusively for sports and entertainment recruitment and development, tourism and infrastructure improvements.”
That surcharge is in addition to the city’s current 17.5% lodging tax rate, which is above the national average of 13.4%.
The ordinance was proposed — and at times angrily defended — by Council President Pro Tempore William Parker, who said the increase would add $4 million in annual revenue. Parker argued that this extra money would make the city “more competitive” in recruiting sporting events, which would in turn increase the city’s tourism.
“If we are able to bring sporting events to Birmingham, that’s going to bring more people here,” Parker said. “We’re doing good now with UAB (football) and the Magic City Classic and the Birmingham Bowl, but we have to do better … We need the resources, bottom line, if we’re going to stay competitive and grow the city’s economy.”
Parker said that the ordinance mirrors one passed by Hoover last year, which attached a $2 per night, per room surcharge to its lodging tax. That increase was intended to address Hoover’s budget shortfall; Parker insisted that this was not the case with his proposal.
The ordinance does not specifically allocate where that will be spent; the council will have to approve any expenditures using the revenue.
But some hoteliers present at Tuesday’s meeting suggested that Parker’s projection was optimistic — and that instead of generating revenue, the surcharge would end up driving visitors away from Birmingham.
“There’s a potential negative impact on businesses in the city,” said Chris Townsley, the general manager of Birmingham’s Marriott Hotel. Townsley argued that the additional surcharge would effectively push Birmingham’s lodging tax to over 20%, which might dissuade convention and meeting planners from choosing the city.
“20% seems to be the magic number with meeting planners,” he said. “Stay below 20% and you don’t get much pushback.”
Townsley said that Birmingham hoteliers had suggested a compromise to Parker — a 1.5% increase to the lodging tax, which would bring the city’s rate to 19% — but that it had been ignored.
District 9 Councilor John Hilliard, a vehement supporter of the ordinance, told Townsley that hotels would “benefit from the surcharge.”
“You’re the winners in this,” he said. “At the end of the day, the hotel industry will benefit from this opportunity.”
District 5 Councilor Darrell O’Quinn, the ordinance’s most vocal opponent, said that the tax would make Birmingham compare unfavorably with surrounding municipalities with lower lodging taxes.
“We do not have the capacity to affect Hoover, Homewood or Vestavia’s lodging tax,” he said. “There is potential for $4 million of revenue …, but I would also say that there is a potential for a $4 million loss because we would be sending our business to adjacent municipalities.”
Parker, who grew visibly angrier as each opponent of the ordinance spoke, interrupted O’Quinn and told him the move was no riskier than the moratorium on self-storage facilities that had passed earlier in the meeting. At this, Council President Valerie Abbott, who was silent for most of the discussion, urged Parker to cool down. She would do so again later in the meeting when he began heatedly arguing with another hotelier opposing the ordinance.
District 8 Councilor Steven Hoyt, meanwhile, argued that the council should pass the ordinance because it had the authority to do so. “As a city, we’re very limited in terms of what we can do (by the state Legislature),” he said. “This is clearly in our control, and if we don’t exercise the little bit of power we do have, then soon we’re not going to have any power at all… The few things we have control of, we need to exercise.”
The council ultimately voted 5-3 to exercise that authority. Parker, Hoyt, Hilliard, Clinton Woods and Wardine Alexander voted yes; O’Quinn, Abbott and Hunter Williams voted no; Crystal Smitherman was absent.