The City Council has its own solution to New York's fiscal crisis: Don't tax New Yorkers. Tax tourists.
At least that is what Councilmember Lewis Fidler said Tuesday when he introduced a bill to increase the city's hotel tax by less than 1 percent. The bill has the support of Council Speaker Christine Quinn.
A less acceptable proposal, according to some council members, also was put before the council. It seeks to increase the city's property tax rate by 7 percent. Mayor Michael Bloomberg introduced the property tax legislation and argues the city must raise taxes and cut spending to close a yawning budget hole in fiscal year 2010 and a smaller one in this year's budget.
The mayor has not taken a position on the hotel bill, though he has opposed similar proposals in the past.
These bills are the first tangible signs of the fiscal crisis in the council chamber, and they follow an unusual bout of mid-year public hearings on agency spending cuts.
Taxing Hotels and Houses
Fidler's bill (Intro 879) would increase the city's hotel tax from 5 percent to 5.875 percent, adding another $2.62 on an average $300 a room rate. The increase could raise an estimated $80 million in new revenue, say city officials.
For the current budget year, which ends in July, the city is facing an approximately $300 million budget gap. That hole widens to about $4 billion for next year's budget if the city does not cut spending or raise taxes this year, according to the mayor's November budget proposal.
The hike in the hotel tax, say supporters, could help close that gap, without deterring tourists from visiting the Big Apple.
"If you were to spend a week in the city of New York and spend $2,100 on your hotel, are you really going to change those plans because someone just told you that it went to $2,120?" asked Fidler. "I don't think so. I don't think $20 is going to stop anyone from coming to the greatest city in the world."
Not everyone is so sure. The Hotel Association of New York City vigorously opposes the bill, arguing the increase would drive away business and result in a loss of $533 million in room costs and tourist spending.
"Any tax increase would be gravely detrimental to the city's economic health," said Joseph E. Spinnato, the president of the association, in a prepared statement. "This increase could bring us back to the dark days of the 1990s when convention planners -- outraged by the fact that city policymakers would take advantage of our visitors to fix a budget hole -- boycotted our area."
The association argues that the city's tax is already 14.54 percent, factoring in the $2 per night hotel occupancy tax and the $1.50 Javits Center surcharge.
Fidler says, however, the "insignificant" increase does not compare to the skyrocketing hotel taxes during the 1990s.
"In this difficult economic climate, the truth is, as unfortunate as it is, everyone is going to have to pitch in," said Quinn. "This includes the visitors to our city."
A City Council spokesperson said the city would not have to receive approval from Albany to raise the hotel tax. Nor would it have to seek Albany's approval if the council chose to pass the mayor's legislation (Intro 887) and increase property taxes. The current legislation does not specifically state a 7 percent increase, though that is what the mayor has proposed in his November budget proposal.
Quinn said she has not taken a position on the property tax bill yet. She added the council has the power to amend the property tax bill and so could revise the 7 percent figure.
If approved, a 7 percent increase would raise about $576 million in additional revenue.
Women and Minority Businesses Boosted
In addition to introducing the tax legislation, the council unanimously approved legislation (Intro 888) encouraging companies that receive industrial or commercial tax abatements to contract with businesses owned by minorities or women.
The bill requires a business that receives a tax break for a project worth more than $1.5 million to solicit bids from at least three women or minority owned businesses for each subcontracting opportunity. The businesses would also have to identify firms in the city's minority and women businesses directory who could do the work.
If a firm does not comply with the bill, it could lose its tax break.