Newark City Council narrowly voted against increasing the city’s maximum lodging tax at its Feb. 9 meeting.
The measure needed three quarters of Council or six votes in favor but only received five.
City Council directed staff to explore new revenue streams last year, according to assistant city manager Jeffrey Martindale.
The city manager’s proposal was to increase the maximum lodging tax from 3 to 5%, which would require approval from the General Assembly.
Councilmember Jason Lawhorn voted against the change but said he understands Council and city staff are on a mission to find new revenue without tax increases for residents.
“So I am struggling there, and it's only a few years later we want to increase,” Lawhorn said. “And I just worry about the trend that it sets and three or four more years later, we'll be back to raise it to 7% or 8%. So I think 3% is fair.”
Councilmember Corinth Ford was one of the five votes in favor of the measure.
“Council is majority; Council is behind us,” Ford said. “We absolutely need to find new revenue streams. That is our priority one for this year. I wholeheartedly support this.”
Councilmember Jay Bancroft also voted in favor, concurring with Ford.
“We've talked about this a number of times,” Bancroft said. “Hopefully, [Mayor Travis McDermott] will give it a quick review again about it. Certainly seemed like something we should pursue to prepare us for any budget shortfalls that we might need to deal with.”
Lawhorn said he’s worried the city could get carried away with raising lodging taxes and hurt the revenue stream by discouraging the hospitality industry.
The local hospitality industry was among those pushing to reject the increase. Council heard a letter written by Delaware Hotel and Lodging Association Chairman Michael Hayes. In it, he wrote anything that would reduce tourism could weaken Newark’s economy.
“We are concerned that this proposal would place Newark at a competitive disadvantage with an existing 8% state lodging tax,” Hayes wrote. “A 5% local tax would result in a combined rate of 13% – the highest in Delaware.”
That’s on par with Miami Beach, Fla., another commenter pointed out.
Councilmembers Lawhorn and Marge Hadden were the two dissenting votes that kept the increase from being sent to state lawmakers for approval, leaving the measure short of the three quarters majority needed to pass.
