Council Endorses Raising Flagler’s Tourism Tax to 5% to Pay For Beach Repairs

The Tourist Development Council, an advisory board to the Flagler County Commission, this afternoon voted unanimously to recommend increasing the county’s 4 percent sales surtax to 5 percent. The tax is in addition to the existing 7 percent sales tax, and is applied to hotel, motel, short-term rental and other vacation-related charges. It is overwhelmingly paid by visitors to the county.

If the county commission ratifies the increase at a March 6 hearing—with a super-majority of four of its five members—the increase could start appearing on bills on June 1. The county last increased its tourism tax, from 3 to 4 percent, in 2010.

The new rate would enable increasing revenue for beach repairs to $2.25 million over the next three years, the equivalent of 10 times the annual revenue that currently flows to that fund.

The county’s tourism department has long sought the increase but faced resistance until now. The difference this time: the county needs more money to pay for restoration of dunes and beaches in the aftermath of Hurricane Matthew, as state and federal dollars are falling well short of local needs. State law defines how revenue from the tourist tax may be spent. In Flagler, that revenue is split between three funds—marketing the county elsewhere, capital improvements that enhance the county’s tourist draw (such as the Flagler Beach pier or sports fields), and beach protection.

The 4 percent tourist tax currently generates roughly $2 million a year. An additional penny would generate an additional $500,000.

 Historically, the beach fund has drawn the smallest proportion of revenue. It’s currently at 11.25 percent, or $225,000 a year. That’s not nearly enough money to underwrite the sort of beach restoration costs the county is facing—upwards of $60 million. Federal and state dollars will assume a portion of that, but the county may be left with having to pay for half, if not more. That money is just not there at the moment.

Monday afternoon, the Tourist Development Council—a collection of local elected officials from Palm Coast, Flagler Beach and the county, along with private-sector members representing the tourism industry—met in a joint session with the Flagler County Commission to hear a proposal by Matt Dunn, the tourism director, on how the 5 percent tourism tax would be re-allocated. Bottom line: revenue to the beach restoration fund would be significantly increased over the next three years, and would subsequently remain at least double what it is today, though other funds would also see more revenue.

Currently, the county’s marketing share of the tourism tax is the highest, at 66.25 percent. Capital improvements get just 22.5 percent.

Dun is proposing to increase the beach-restoration proportion of the fund to 40 percent next year, lower that to 30 percent the following year, and in the third year, lower it and keep it at 20 percent. In actual revenue, that’ll bring in $1 million the first year, $750,000 the second year, and $500,000 every year thereafter.

To make that possible, Dunn proposed eliminating the capital improvement fund the first year and restoring it the second year, at 10 percent of tourism tax revenue (or $250,000), then raising it to 20 percent the third year, same as the beach restoration fund, at $500,000 a year. Currently, the capital improvement fund has a more than $2.5 million reserve, according to Dunn.

The big winner in all this is still the promotions fund—the fund Dunn himself controls most, and out of which he draws his $82,000-a-year salary. Currently, the promotions fund gets about $1.3 million from the tourist tax revenue. Even though the proportion of the revenue it gets from the tax would decrease slightly, the actual revenue the fund would get from a tax increase would still push the promotions budget to $1.5 million, and keep it there year after year. That’s despite $1.7 million carried over into that fund from last year’s budget.

In other words, thanks to the beach restoration emergency compelling a 5^th penny, Dunn is finally getting the tax increase he’s wanted for several years to add revenue to his promotions budget. Why that increase was necessary, given the steadily increasing revenue from the tourist tax in the past four years (revenue has increased at an average of 7.5 percent each of those four years) was left unclear: neither county commissioners nor TDC members questioned it this afternoon.

That’s the plan the TDC unanimously approved this afternoon.

Milissa Holland, the Palm Coast mayor and a TDC member, said the county should consider broadening the definitions of how the county’s bed tax may be spent in the future, and how much it could raise. And she said in the near future she’d be “looking to ask this council and board at one point to revisit the policy for municipalities to apply for additional funds with the 50 [percent] match,” with regards to the capital improvement fund. “I know at one time $150,000 seems like a lot,” she said, referring to the size of the grants cities were entitled to, within certain limits, “but today’s dollars, they don’t go very far.”

That said, there were clear concerns about the fact that, even at $1 million in revenue for the next year in the beach restoration fund, that’s still only a dent in the enormous bill the county faces, particularly since what reserves had been in the beach fund have been depleted. But there wasn’t much clarity on that count, either.

“We may actually need about $4 million more in match depending on what is done up and down and what funding sources come through or not,” Craig Coffey, the county administrator, said. “We still don’t have a clear cut idea what we’re getting with FEMA,” the Federal Emergency Management Administration. Same uncertainty with the U.S. Army Corps of Engineers money ostensibly slated for Flagler Beach’s beach renourishment project. “So we are going to make some decisions probably in the next 30 days about this issue, and we could easily wind up needing $4 million of match, so you may wind up taking this as an approach and then actually bonding or borrowing money against some of those future revenues.”

Coffey said the proportional percentages can be revisited in the future, but he cautioned against using current reserves in existing fuds such as promotions and capital improvements for beach restoration.

Remarkably, aside from a couple of questions from Commissioners Donald O’Brien and Charlie Ericksen, commissioners were largely silent in the 40-minute meeting. They then hurriedly adjourned, leaving the TDC to formalize its recommendation.

The county commission’s silence left Holland, herself a former commissioner, startled enough to make a point of it during the TDC portion of the meeting. “I’m a little disappointed I didn’t hear more from your colleagues on what their stance is” on their position regarding the tax increase proposal, Holland told County Commissioner Nate McLaughlin, who chairs the TDC. “Just due to the fact that we’re making a recommendation ad there was very little dialogue that took place, so that was unfortunate. I’d hoped for something different.”

The TDC portion of the meeting included more discussion between Holland, Flagler Beach Mayor Linda Provencher and McLaughlin about the tourism funds the cities may tap (or not), an issue of particular concern to the cities, Flagler Beach especially: that city has felt the county has been disproportionately spending dollars out of TDC funds on county beaches, at the expense of Flagler Beach’s needs.