When Buncombe County’s Tourism Development Authority decides which projects to fund using visitors’ dollars next week, a powerful organization will be watching closely.
The North Carolina Restaurant and Lodging Association warned in a letter last week to the Charlotte City Council that spending occupancy tax dollars on affordable housing could lead to a legal challenge.
The hospitality trade association specifically cited efforts in Buncombe County to fund affordable housing projects through the Legacy Investment From Tourism (LIFT) Fund, which was created by a 2022 law and will fund its first round of projects this year. The TDA is expected to decide which projects to fund at its April 24 meeting.
“Although there have been public statements this language is up to interpretation, if local elected officials decide to use it to fund affordable housing and other non-tourism related expenditures, that interpretation will be done by the courts,” NCRLA President and CEO Lynn Minges said in the letter, a copy of which was obtained by BPR.
Minges also pointed to a recent state appeals court decision against coastal Currituck County, where officials were found to have improperly spent $40 million in occupancy tax revenue on police, fire, EMS and other public safety services instead of on “tourism-related expenditures.” The county is seeking to appeal the decision.
“Currituck County was disregarding their authorizing statutes and using occupancy tax funds for police and other emergency services,” Minges said in the letter. “The courts have now clearly decided that was not its intended purpose and was a misuse of funds.”
The NCRLA sent its sternly worded letter to Charlotte officials because leaders there have recently suggested that tourism tax dollars could be used to fund local transportation projects, pointing to Asheville as an example.
In Buncombe County, the recent debate has focused less on transportation and more on affordable housing, with some local leaders arguing that such projects should also be eligible for LIFT funding given that many who work in the hospitality industry have been pushed out of the county due to the soaring cost of living.
Occupancy taxes are paid by visitors every time they stay in commercial lodging such as a hotel or short-term rental. In Buncombe County, the rate is 6%.
The county collected $37.5 million in occupancy tax revenue during the 2021-2022 fiscal year, the third-highest total in the state. By law, the Buncombe County TDA must spend two-thirds of that money on advertising to attract more tourists to the area. The other one-third can be spent on community capital projects.
Funding for those projects is divided equally into two buckets: One is the long-running Tourism Product Development Fund, while the other is the newly-created LIFT Fund.
Two affordable housing projects under consideration
At its meeting next week, the TDA will decide how to allocate $9.5 million in LIFT funding. Among the 14 projects under consideration are two that include affordable housing components: the Buncombe County Government’s Ferry Road Community and Mountain Housing Opportunities’ Star Point Affordable Apartments.
A third project including affordable housing, the YMCA of Western North Carolina’s Project Aspire, had applied for funding but recently pulled out of consideration, according to the TDA.
The 2022 law establishing the Buncombe County TDA’s LIFT fund states: “To be a qualified project, a project must be expected to (i) increase patronage of lodging facilities, meeting facilities, and convention facilities by attracting tourists, business travelers, or both and (ii) benefit the community at large in Buncombe County.”
Buncombe County asked for $6 million for the sweeping Ferry Road proposal, which has a total budget of $210 million. The project includes housing, conservation and public recreation components.
Mountain Housing Opportunities, a private non-profit community development organization, requested $1.5 million from the TDA for the Star Point project, which has a total budget of about $16 million.
If the TDA approves funding for either project, it would mark the first time that Buncombe County allocated occupancy tax dollars to affordable housing.
In a statement Monday, Buncombe County spokesperson Lillian Govus said the county looks forward to hearing the recommendations of the TDA panel tasked with selecting which projects to fund.
“We were grateful for the opportunity to apply, and we look forward to hearing the committee’s recommendation regarding this project that has the capacity to benefit people who live, work, and play in Buncombe County,” Govus said.
The Buncombe County TDA was unavailable to comment as of press time Monday evening. Mountain Housing Opportunities did not respond to a request for comment.
In her letter to Charlotte officials, Minges noted that the 2022 legislation that established the LIFT fund “did have local hospitality industry support” but argued that “the way the language is now being manipulated and misinterpreted by local leadership in Asheville” does not.
“You may think that tourists are the only ones paying for this tax, but that is a limited view of the tax,” she said in the letter. “Hoteliers must consider each additional tax when they look at the total for their room night. Travelers are looking at their totals and make budgetary decision[s] based on these totals. When you put on these taxes it impacts what can be charged for a room night. This then impacts the business and all of the employees who work at that establishment.”
Minges did not respond to a request for an interview about the letter and Buncombe County’s use of tourism funds.
