ST. MICHAELS — On Wednesday evening, the Commissioners of St. Michaels discussed a new proposal to address a potential increase to the town’s accommodation tax, the tax charged to travelers when they rent lodging.
The topic raised controversy during the town election earlier this month.
Commission President David Breimhurst said the reason he added the subject to the agenda was due to concerns brought up during a Talbot County Tourism Board meeting that the town’s new commissioners, who will be sworn in next month, “are likely to approve an increase in the accommodation tax.”
Breimhurst said the new proposal would “level the playing field in a way that benefits all stakeholders.”
The accommodation tax is currently 4% and could potentially increase to 6%, a 50% increase. Based on the town’s current budget projections, the fiscal year 2025 budget real property tax revenue will raise about $1.68 million. Breimhurst said over a third of that revenue comes from commercial properties, and almost two-thirds comes from residential homeowners.
The current real estate tax rate is 47 cents per $100 of assessed value. The added accommodation tax revenue could be used to lower that rate to 35 cents per $100 for homeowners, lodging facilities and short-term rentals, while the remaining commercial properties would continue to pay the current rate.
According to Breimhurst, the $425,000 in added accommodation tax revenue would cover a $359,215 shortfall and leave $65,785. Breimhurst said the remaining money could be returned to the town’s reserves or used for some other purpose.
“This proposal, I believe, has something in it for all stakeholders and fairly addresses the issue of unequal taxation while supporting a healthy business climate,” Breimhurst said.
Commissioner Alfred Mercier raised questions about Breimhurst’s proposal. Mercier asked how they are supposed to move forward with this proposal with the restrictions on how the town is supposed to use revenue from the accommodation tax.
“We have to use it for promoting tourism,” he said.
Mercier also raised questions about the extent to which giving tax breaks to either residential properties or business owners would affect the town’s ultimate goals.
Breimhurst responded that the tax statute states that the money collected would be paid to the municipal corporation’s governing body to “alleviate costs associated with tourism.” He went on to explain the associated costs taxpayers take to maintain the town such as a tourist attraction, including brick sidewalks, extra police and maintenance of parks.
Mercier proposed using some of the revenue for marketing the town, purchasing banners, replacing street maps or creating transportation to take tourists through major landmarks of the town. Breimhurst said, however, that their current budget already accounts for maintaining the town’s infrastructure, and with the potential increase, they will have to figure out where to put that money.
Breimhurst said that no action would be taken at Wednesday’s meeting and that he just wanted to record a proposal he came up with so people can review it and consider uses for that increase.
During the recent commissioner election, accommodation tax split candidates, with Breimhurst opposed to raising it.
Breimhurst and Commissioner Joyce Harrod both lost their bids for reelection earlier this month. Three new commissioners, Jay Hudson, David Wojciechowski and Alexis Roiter, will be sworn in in the coming weeks.
Hudson and Roiter did not respond to a request for comment on the issue in time for publication of this article.
Wojciechowski said he was open to the consideration of the raise.
“It needs to be taken under consideration to understand the impact it may have on everyone concerned,” Wojciechowski said.
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