FY25 rate would jump from 5% to 10% on lodging charges
By Randy Arrington
LURAY, April 15 — On Monday night, the Page County Board of Supervisors held a quick public hearing on the county’s six proposed property tax rates for FY25. No speakers stepped up to the podium because there were no proposed changes to the tax rates. A subsequent hearing on the county’s proposed $91M budget for the next spending cycle drew only two speakers, both requesting funds for additional water testing in the South Fork of the Shenandoah River.
However, nine of 13 speakers at the meeting’s conclusion represented the lodging industry and they spoke out adamantly against a proposed 100-percent increase in the county’s Transient Occupancy Tax. Following their comments, one-by-one supervisors stated with equal passion why they thought the 10-percent TOT rate — one of the highest in Virginia — was justified.
“We provide a lot of services for the residents of the county and we have to find ways to fund those services,” stated District 3 supervisor Ryan Cubbage. “I can’t see cutting those services to save tourists $10 or $15.”
The major tax increase being considered by supervisors for the next fiscal year is raising TOT rates from 5 percent to 10 percent. The TOT fee is tacked onto the lodging charges of motels, hotels, rental cabins, Airbnbs, campgrounds and all other short-term rentals. The 10-percent rate would be the highest in the region and one of the highest in the state.
“The timing is bad…business is down,” said local cabin owner Derek Goebel, who also stated that only two of Virginia’s 95 counties have TOT rates over 10 percent and only 16 have rates higher than 5 percent. “Business will go elsewhere.”
With dozens of special use permits being approved by the county’s three towns and the county allowing it by-right, short-term rentals have grown dramatically in recent years, decreasing the housing inventory for long-term renters and driving up overall prices for first-time home buyers. The higher volume of short-term rentals has also driven up competition within the local lodging market.
“You’ve got a saturated market…that’s why rates are dropping to compete,” District 5 supervisor Jeff Vaughan said on Monday night. The longtime supervisor added that the board was not picking on one group — as lodging owners insisted — but rather looking out for the necessary services of the county as a whole. “When you call 911, you want someone to be there.”
Several speakers noted that their lodging business had dropped by as much as 30 percent or more in the last couple of years. However, none of those speakers clarified whether that drop-off in business was compared to pre-COVID levels, or to the pandemic period when local lodging occupancy soared to all-time highs.
J.D. Cave spoke first on behalf of cabin owners, noting that the supervisors had never consulted the county’s Tourism Council — dominated by cabin owners — about raising the TOT rate. He cited a state code that required such a consultation; however, the Tourism Council can only make recommendations (much like the planning commission) and does not hold any real authority.
“That puts you in a difficult position,” Cave said in, what appeared to be, a veiled legal threat to the board. “The Tourism Council passed a resolution unanimously opposing any increase in the lodging tax… Do not pass a lodging tax increase.”
Some lodging owners questioned the county’s need to increase any tax rates given the fact that the county’s reserve funds have grown 314 percent in the past seven years — from $5.7 million in 2016 to nearly $23.6 million in 2023. Based on the current budget, state law requires the county to maintain a general reserve fund of about $7 to $8 million. However, it appears that in addition to putting the county on more solid financial footing county officials may be trying to prepare for a large expenditure… possibly participation in a regional jail proposal being worked out currently behind the scenes that could be announced in the coming months.
“You all say we should cut spending, and I agree there are some things to look at … but who, where, what…maybe we need some insight,” District 2 supervisor Allen Louderback said, noting rising costs and increasing needs of the county. “Many of these [short-term rental] owners … over 50 percent of them … don’t even live here. We’re already struggling trying to find ways to provide affordable housing. If you have suggestions, I hope you step forward.”
While some local rental ownership does lie out-of-state, other local owners spoke of how their rental was their livelihood and only source of income. Several of those local owners on Monday night stated that “we are the top of the food chain” and “we are the ones driving the local economy” and “you are biting the hand that feeds you.”
Supervisors have already made some tough decisions, like cutting three positions in the sheriff’s office. After some initial adjustments to the budget, county staff still faced a $1.3 million deficit between departmental requests and projected funding. An additional $1.6 million deficit exists between the school system’s requests and recommended local funding, which includes a $500,000 increase over the current $11.7 million in local operating funds for schools in FY24.
“We need to focus more on economic development,” District 4 supervisor Issac Smelser said, noting that a broader tax base would take pressure off individual taxpayers. “We need to direct that department…which has [economic development] in its name… to look harder into it.”
Of the total $1.8 million in projected TOT collections in the current budget cycle, just over $1 million must be spent on tourism-related activities (state law mandates this use for 60 percent of the first 5 percent in TOT collected, all other TOT monies may be directed to the county’s General Fund). The proposed rate increase is projected to generate a total of $3.6 million ($1.8 million in new TOT revenue), raising the amount projected to go into the General Fund from $720,000 this year to more than $2.5 million for FY25. The amount spent on tourism would remain the same. TOT rates across the Shenandoah Valley — from Winchester to Roanoke — range from 4 to 10 percent.
“We have lots of needs in this county,” Supervisor Cubbage said, “and I think it’s past time for the tourists to pay their share and take more of the burden off local residents. They come here and enjoy our resources…let them pay for it.”
Changes to the TOT rate are considered ordinance amendments, according to County Administrator Amity Moler, and therefore will be considered separately from the property tax rates and the overall FY25 budget. On April 1, the supervisors set a public hearing for the proposed hike to the TOT rate for Monday, May 6.
To view a detailed summary of the proposed budget,
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Factual error:
Short term rentals (STRs) are a “By Right” use in the county, not a “Special Use Permit” use as stated in paragraph 6. That is precisely what some Supervisors were trying to point out as a cause of their proliferation.
I’m not sure I buy the argument that the short term rentals are a net benefit to the County and residents. Our zoning rules favor developers much too strongly. Unless we make some corrections, and soon, we will go the way of every other overdeveloped and overtaxed county from here to DC.