Canton and Maggie Valley consider additional occupancy tax

Canton, North Carolina
TAX TALK: State legislation may allow Canton and Maggie Valley to add a 2% occupancy tax on accommodations. Photo courtesy of the town of Canton.

For about a decade, several municipalities in Haywood County have discussed raising additional revenue through an extra tax on tourism. That long-standing conversation might finally be coming to a head following the early May passage of House Bill 412 in the N.C. House of Representatives.

Introduced by Rep. Mark Pless, a Republican representative for Haywood, Madison and Yancey counties, the bill would enable Canton and Maggie Valley to levy a 2% occupancy tax on accommodations like hotels, motels and Airbnbs, which would then be managed by new town-specific tourism development authorities. The proposed tax by these municipalities would be added to the 4% occupancy tax already levied by Haywood County and managed by the Haywood County TDA.

The legislation is co-sponsored by Rep. Mike Clampitt, a Republican representative for Haywood, Jackson and Swain counties, and Pless says that Sen. Kevin Corbin, a Republican senator for the region, is willing to back the bill in the Senate. (Corbin’s office did not respond to repeated requests for comment.)

If the bill passes and is signed into law, the additional occupancy taxes for Canton and Maggie Valley would stay in those towns for tourism promotion and tourism-related expenditures instead of being spread across the county. While Buncombe County may be wrestling with how to manage its own TDA and the impacts of tourism, leaders in those small towns say the extra revenue would be a much-needed financial boost.

“The tourism conversation is evolving in Haywood County,” says Zeb Smathers, the mayor of Canton. “We’re not a side trip anymore — we’re a destination.”

On the wishlist

The version of HB412 that passed with bipartisan support on May 11 would require two-thirds of occupancy tax revenue to go toward tourism promotion in Canton and Maggie Valley, with the remaining third assigned to tourism-related expenditures that attract visitors. That breakdown is the same as that of Haywood County’s occupancy tax.

Smathers says he’d like to see some of those revenues put toward the promotion of hiking in Chestnut Mountain Nature Park, mountain biking in Berm Park and recreational uses of the Pigeon River, including tubing and kayaking. The 450-acre Chestnut Mountain property — located a mile outside Canton town limits but owned by the town since 2020 — has particular potential to be “a major economic driving force” of tourism, he adds, similar to DuPont State Recreational Forest in Transylvania County.

Canton’s “relatively small tax base” limits how much the city can spend from its existing funds to attract tourism, Smathers says. The city’s total budget for fiscal year 2021-22 is just over $11 million, with about $1.17 million allocated to recreation. (By comparison, the annual general fund budget for Asheville exceeds $145 million, with over $13.36 million devoted to parks and recreation.)

In an emailed statement, Canton interim Town Manager Nick Scheuer explained that “the addition of a 2% occupancy tax [would allow] us to capitalize on existing tourism and bring significant improvements to quality-of-life and recreation amenities.” He cited Chestnut Mountain, Sorrells Street Park and “downtown aesthetic improvements,” such as grants for facade improvements for downtown businesses, as possible expenditures for occupancy tax revenue.

And Mike Eveland, the mayor of Maggie Valley, says the municipal occupancy tax revenues would benefit both tourism and town residents. While specific projects are yet to be determined pending the bill’s passage, he flags recreational assets such as trails as among the biggest opportunities.

“We have several different projects that I think will start to develop in the next three to five years that Maggie [Valley] would want to be involved in that would help both Maggie and Haywood in general,” Eveland says.

Previous funds from the HCTDA have supported the town with the improvement of parks, the addition of several greenways and installing walking paths along Jonathan Creek “that have been huge benefits to the town” and tourists, Eveland adds. “We need to find those projects that are going to benefit the tourist side, because that’s where the money comes from, and the public in general.”

County context

Tourism in Haywood County has grown steadily since the establishment of the HCTDA about 30 years ago, says Lynn Collins, the authority’s executive director. County occupancy tax revenues have nearly doubled over the past decade, from about $894,000 in fiscal year 2011-12 to $1.53 million in fiscal 2020-21.

Some members of the HCTDA board, however, believe that creating an additional occupancy tax for Canton and Maggie Valley alone isn’t the best way to keep that growth strong going forward. In a May 21 email to Haywood County Manager David Francis, HCTDA Chair Lyndon J. Lowe and Vice Chair Chris Corbin called the proposed legislation “flawed” and instead asked for the power to levy an additional 2% tax across the entire county.

“Since it is municipal, the tax can only be collected within the city limits, thus decreasing by 50% to 70% the potential income this tax will generate versus a county approach,” Lowe and Corbin wrote. They also suggest that the terms of the legislation would require the municipalities to spend unnecessary money advertising tourism markets “already saturated” by HCTDA spending.

“It has been confusing why the municipalities wanted to go around the [Haywood County] commissioners and the HCTDA,” Lowe and Corbin concluded. “We want to be proactive in doing our best to keep this municipal legislation from becoming an embarrassment for either town, elected official or town manager, as that does not benefit anyone in the county.”

Neither Lowe nor Corbin responded to multiple requests for additional comment. But Eveland, a current member and former finance chair of the HCTDA board, said the organization was viewing the proposed occupancy taxes “in a positive way, looking at this as an opportunity,” in a June 8 interview with Xpress. While he called the legislation “unexpected, the way it kind of came up,” he said that wasn’t necessarily a negative.

Smathers told Xpress on June 23 that he was aware of Lowe and Corbin’s email but had not read it. When asked to comment, he said, “I am aware the email was sent to them voicing some concerns.”

He continued, “There’s some difference in opinion. Rep. Pless, this is what he brought to us. I understand the county’s concerns.”

And Pless noted on June 3 that the HCTDA turned down an earlier bill that would have enacted an additional 2% county occupancy tax. “[Lowe and Corbin] have suddenly decided they’re the know-all expertise on this whole issue, and they are the ones who refused it,” he said.

Different strokes

If the legislation passes and Canton and Maggie Valley create TDAs, their two-thirds marketing/one-third tourism-related expenditures breakdown of occupancy tax revenue would be different from how Buncombe County divvies up the money. By state law, 75% of the county’s occupancy tax revenue must be allocated to tourism advertising, with 25% to tourism-related capital expenditures.

The Buncombe County Board of Commissioners has been in discussion about tweaking those respective allocations to two-thirds and one-third — levels in line with those of many TDAs across the state. “I do support changing the hotel tax to invest less funding in advertising and more in community priorities and infrastructure,” wrote board Chair Brownie Newman, a Democrat, in a statement to Xpress. “If it were up to me, I would like to see an allocation where 50% of the funds are invested in marketing and 50% is invested in community priorities.”

However, Newman explained, Buncombe would be unlikely to get such a breakdown passed by the General Assembly due to the strong lobbying opposition of the N.C. Restaurant and Lodging Association. “With that in mind, going from 25% to 33.3% for community priorities is a step in the right direction, and I hope it will happen,” Newman continued. “But it’s not what we would do if it were simply a decision the county commission could make on our own.”

The Buncombe County Tourism Development Authority expects to collect over $27 million in occupancy tax revenue for fiscal year 2021-22. Under the current 75%/25% split, about $6.79 million would go to tourism-related capital expenditures; the two-thirds/one-third split would up that amount to $9.05 million, an increase of about $2.26 million.

“Explore Asheville is prepared to implement a FY22 budget based on the two-thirds/one-third allocation should legislation be introduced and passed,” wrote Vic Isley, president and CEO of the Explore Asheville Convention and Visitors Bureau, in response to a request for comment on the county’s proposed split.

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