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East Ridge hotel tax questioned

By: Adam Crisp
(Contact)

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Mike Steele

East Ridge hotel owners are concerned that a proposed increase in the city’s hotel-motel tax might impede their ability to be profitable in what they call a slowing tourism economy.

On Tuesday night, city hoteliers and members of the East Ridge Merchants Association met with city leaders to discuss the proposed 2 percent tax increase. Right now, hotel and motel operators in East Ridge pay 2 percent city tax and a 4 percent county tax.

The meeting, held at the Holiday Inn Express, brought out East Ridge Mayor Mike Steele, all four city councilmen, the city clerk and interim city manager and police chief Eddie Phillips.

“We’ve had to raise property taxes 21 cents ... but we are still borrowing $250,000 from our surplus fund,” Mr. Steele said. “Twenty-one cents didn’t get us there, so we are still searching for funds.”

He said the extra hotel-motel tax will help shore up that deficit and pay for projects that will help the local tourism economy. He said that in the next year East Ridge will take on the maintenance of Exit 1 from Interstate 75, adding lighting, signs and flags.

East Ridge will pay $130,000 to a public relations firm to market the city and perhaps attract more visitors, and the city will invest roughly $1 million in lighting at the Camp Jordan athletic complex, Mr. Steele said.

All those projects stand to benefit the local tourism industry and could fill hotel rooms, he said.

But hotel operator Neil Patel, who owns both the Holiday Inn Express and the Econo Lodge motel, said occupancy has fallen over the last four years and any extra tax would reduce East Ridge hoteliers’ ability to compete with hotels in Chattanooga or those in the county.

Mr. Patel said that as of July, industry figures showed occupancy was 36.2 percent. In 2006, he said, East Ridge hotel operators saw a 51 percent occupancy rate, and a 50 percent occupancy rate in 2007.

East Ridge hotel owners compromised on the current 2 percent tax in 2005 when the City Council tried to implement a 5 percent tax, Mr. Patel said.

“We agreed to the 2 percent back then ... because we thought that money was going to Camp Jordan,” Mr. Patel said. “If that money is going to Camp Jordan, it should be allocated there.”

Camp Jordan hosts several large regional, state and national soccer, softball and baseball championships every year that attract hotel guests. Some of the hotel operators at Tuesday’s meeting said that even when Camp Jordan is at its peak of activity, they still have empty rooms.

Mr. Steele said the purpose of Tuesday’s informal meeting was to get information. But because the meeting was not a called meeting and was not advertised as such, city leaders were prohibited by Tennessee law from taking any vote. Mr. Steele also instructed City Council members only to ask questions but make no statements about how they felt about the issue.

The tax question was tabled at the council’s August meeting. The issue will be discussed again at the council’s Sept. 11 scheduled meeting.

“We need people in our hotel rooms and eating in our restaurants,” Mr. Steele said. “The only way we can stop going to property owners with tax increases is to increase our revenue. To increase our revenue, we must find new ways to bring industry here.”

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