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- Type of Impact: Increase in municipal revenues. Agencies Affected
- Office of Legislative Services Estimate Fiscal Impact
- Local Revenue
- BILL DESCRIPTION
- FISCAL ANALYSIS EXECUTIVE BRANCH None received. OFFICE OF LEGISLATIVE SERVICES
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LEGISLATIVE FISCAL ESTIMATE ASSEMBLY, No. 4556 STATE OF NEW JERSEY 217th LEGISLATURE DATED: FEBRUARY 10, 2017 SUMMARY
The Office of Legislative Services (OLS) estimates that the enactment of Assembly Bill No. 4556 will result in an increase in municipal revenues for the City of Atlantic City. This increase, about $8.62 million annually, was calculated using recent information on collection of currently imposed hotel surcharges to extrapolate the number of hotel room rentals to which the new surcharge would apply. The bill requires Atlantic City to use the hotel surcharge revenues to fund public safety services. Atlantic City appropriated $60 million in Calendar Year 2016 to its Department of Public Safety to support the police and fire departments, emergency services, and municipal fire safety enforcement. BILL DESCRIPTION Assembly Bill No. 4556 of 2017 imposes a daily $2 per room surcharge on hotel occupancies in municipalities that levy a retail sales tax pursuant to P.L.1947, c.71 (C.40:48-8.15 et seq.), i.e., the City of Atlantic City. The bill requires that all the proceeds from these surcharges are to be used to fund public safety services in each city. The surcharges imposed by the bill would be in addition to the daily fees levied on hotel occupancies pursuant to P.L.1991, c.376 (C.40:48-8.45 et seq.) and section 6 of P.L.2003, c.116 (C.5:12-145.8). The bill requires the Division of Taxation in the Department of the Treasury to collect the hotel surcharge revenues and remit them to the city monthly. FISCAL ANALYSIS EXECUTIVE BRANCH None received. OFFICE OF LEGISLATIVE SERVICES The OLS estimates that the new hotel surcharge proposed by Assembly Bill No. 4556 will generate annual revenues of about $8.616 million for the City of Atlantic City. Annual revenue collections will be driven by the number of hotel room rentals in Atlantic City. As noted above, the bill requires Atlantic City to appropriate these revenues to fund public safety services. Atlantic City’s adopted budget for Calendar Year 2016 appropriated $60 million to the city’s Department of Public Safety to support the Police Department, Fire Department, Emergency Services, and enforcement of the “Uniform Fire Safety Act,” P.L.1983, c.383 (C.52:27D-192 et seq.). To the extent that the new surcharge revenues support appropriations for public safety services, Atlantic City may direct other municipal revenues, such as property taxes and State Aid, for other general purposes or ameliorate the effect of potential budget reduction on the public safety functions. This estimate was calculated using information reported in the November 2016 “Summary of Casino and Atlantic City Taxes and Fees” prepared by the Division of Gaming Enforcement in the Department of Law and Public Safety. Hotel room rentals in Atlantic City are currently subject to two fees: a “casino hotel fee” and a “tourism promotion fee.” The casino hotel fee is imposed at a rate of $3 per day on each room in a casino hotel facility that is occupied by a guest. The Division of Gaming Enforcement report indicates that the hotel room fee generated $11.856 million in revenues in 2015. To determine the number of casino hotel room rentals, the total amount of casino hotel room fees ($11.856 million) was divided by the casino hotel fee rate ($3), for a total of 3.952 million room rentals. To estimate the amount of public safety surcharge revenues generated by casino hotel room rentals, the total number of room rentals (3.952 million) was multiplied by the amount of the new surcharge ($2) for a total of $7.904 million in revenues. The tourism promotion fee is imposed on each occupied room in a hotel at a rate of $1 per day, except for occupied rooms in hotels that provide casino gaming, where the rate is $2 per day. According to the Division of Gaming Enforcement, the tourism promotion fee generated $8.296 million in revenues in 2015. As noted above, there were 3.952 million casino hotel room rentals in 2015. These rentals would have generated $7.904 million in tourism promotion fees. By subtracting these revenues from the total amount of revenue raised by the tourism promotion fee, the OLS estimates that non-casino hotel rentals generated $356,000 in tourism promotion fees. Because the tourism promotion fee for non-casino hotel room rentals is $1 per day, the amount of revenue raised is equal to the number of room rentals. To estimate the amount of public safety surcharge revenues to be generated by non-casino hotel room rentals, the total number of non-casino room rentals (356,000) was multiplied by the amount of the new surcharge ($2) for a total of $712,000 in revenues. The estimated amount of annual revenues is the total amount of surcharges imposed on casino and non-casino hotel room revenues ($7,904,000 + $712,000 = $8.616 million.) The OLS notes that its estimates assume no annual change in the number of daily room rentals, but since this is not a static number, revenue will fluctuate annually.
This legislative fiscal estimate has been produced by the Office of Legislative Services due to the failure of the Executive Branch to respond to our request for a fiscal note. This fiscal estimate has been prepared pursuant to P.L.1980, c.67 (C.52:13B-6 et seq.).
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