Boston already has the third highest hotel taxes in the country, but a lack of funding for the Boston Convention and Exhibition Center (BCEC) could vault us to the not-so-coveted first place position.
Pioneer has discussed how the BCEC has fallen short of its projections and has pointed out the foolishness of “cosigning the note” on the proposed billion dollar expansion, but it’s important to take a look at the numbers. The convention center expansion legislation pledges unlimited revenue from the statewide hotel occupancy tax to pay for project financing shortfalls. In case funds are insufficient to pay interest on the project financing bonds, Boston’s local option hotel taxes would more than double from 6% to 14% (making the total hotel tax 22.45%). If those revenues aren’t enough, statewide hotel taxes are committed to pay the difference. That’s what state senators called cosigning the note. If that happens, the effects would cripple the state’s tourism industry.
First, consider all the tourism locales currently funded by the statewide hotel tax. They include information centers along the Merrimack River, the Zeiterion Theater in New Bedford, the Russian Community Association, the Fredrick Douglass house and plethora of other tourist attractions across the state. Minority Leader Bruce Tarr explained that these would lose their funding should the BCEC need the statewide occupancy tax revenues.
But remember, the entire point of the BCEC is to drive economic growth through tourism. Stealing money from tourism in the Berkshires or Cape Cope defeats the entire rationale for a convention center.
Not to mention the taxes that would burden all Boston-bound travelers. In 2012, Boston ranked as the third worst state for travel taxes according to the Global Business Travel Association. Not only does the state levy a 5.7% tax on every hotel room, Boston tacks on an additional 6%, and funding the Massachusetts Convention Center Authority piles on another 2.75% charge. In other words, every hotel stay comes with a 14.45% tax. And we already have the third most expensive hotel rooms in the country, just behind New York and Honolulu.
But that’s not all – don’t forget the taxes on car rentals, meals, and sightseeing (which were enacted in 1997 to fund the BCEC). No wonder we ranked so high!
Only Chicago and New York surpass us, with a 16.08% and 15.15% cumulative travel tax, respectively (see Forbes article to explain the calculations). However, if the BCEC needs extra funding and the Boston hotel tax more than doubles to 14% (adding another 8% to the current 14.45% cumulative rooms tax), our travel tax rate of 13.9% jumps to 17.9%. So sure, we might have a state-of-the-art, double-the-size convention center with thousands of new hotel rooms, but its only visitors will be tumbleweeds.
There’s a fine line between attracting more visitors through new infrastructure and pushing them away because of overly burdensome taxes needed to fund new projects.
Finally, please don’t forget that if by some political miracle this bill doesn’t pass, all those travel taxes that have been paying off the original convention center could be freed up come 2034. Suddenly millions of dollars could go to fixing roads, bridges and schools. Or even better, we could cut those taxes and encourage more tourism by competing with Orlando’s tiny 9.77% travel tax, remembering that USA Today named them the number one convention center city.
Even if we never need the statewide hotel occupancy revenue and the 14% Boston hotel tax, we should still take note of how our enormous travel taxes might be the problem, not the solution. Maybe instead of building a giant facility and taxing the tourists, we should encourage them to fill our current hotels and convention centers by making it less expensive to do so.