OKLAHOMA CITY — Critics lined up Tuesday to oppose elements of a revenue package to pay for teacher pay raises, among other things.
Particularly strong critics were found in the tourism and oil and gas industries, both targeted for tax hikes under the proposal.
In a historic vote late Monday, the Oklahoma House mustered the super majority of votes to pass House Bill 1010xx, a massive tax hike package to pay for raises for teachers, school support staff and state employees.
According to House staff, it would generate $457 million for appropriations in fiscal year 2019.
The bill moves to the Senate, where it can be considered Wednesday.
The package includes increasing the gross production oilfield tax to 5 percent from 2 percent and adding a $5 charge per night on hotel and motel rooms in establishments with three or more rooms.
Other elements include adding 3 cents to a gallon of gas and 6 cents to diesel and $1 on cigarettes.
Tourism and chamber officials said they are concerned the new fee could hurt efforts to recruit conferences to Tulsa and Oklahoma City. It is expected to generate nearly $44 million in appropriations for fiscal year 2019.
The $5 fee on rooms would make Tulsa and Oklahoma City have some of the highest lodging tax rates in the country, said Fred Morgan, president and CEO of the State Chamber.
Attracting conventions is a very competitive business with a slim profit margin, said Mike Jackson, State Chamber executive vice president of government and political affairs.
He said Oklahoma is one of 28 states that allow local entities to also pass a local tax on lodging.
“If you think about it from what is currently going to be added to hotels, it is the local sales tax, the state sales tax, the local lodging tax and now the new state lodging tax of $5,” Jackson said. “We would be hitting them four times for that one room.”
The proposed $5 fee comes at an interesting time for the city of Tulsa. VisitTulsa Regional Tourism, an arm of the Tulsa Regional Chamber, has been working with the city of Tulsa to implement a 3 percent Tourism-based Improvement District. The assessment would apply to hotels with 75 rooms or more and is expected to raise $3.5 million a year to be used solely for promoting the city.
Michella Hartman, acting president of the Metro Tulsa Hotel & Lodging Association, said that if the $5 fee were added on top of the 3 percent TID, Tulsa’s hotel lodging tax rate would be higher than its peer cities.
“We are already hearing from groups that are saying if this passes we are not going to be able to look at Tulsa anymore as a market for our conventions or groups,” she said.
But in making their case for the 3 percent TID, MTHLA and Chamber officials have argued it would be a pass-through tax paid primarily by out-of-town visitors and would not place local hotels at a competitive disadvantage.
In a recent interview with the Tulsa World, James Cunningham, president of MTHLA, dismissed concerns expressed by some hoteliers that the TID would hurt their businesses by increasing the room rate.
“In 25 years, I have not not sold a room because of taxes,” he said.
Ray Hoyt, president of Visit Tulsa Regional Tourism, made the same point. “I have been here eight years,” Hoyt told the Tulsa World last week. “We have never lost a piece of business (downtown) on rates.”
Hoyt issued a statement Tuesday saying Visit- Tulsa was concerned “that doubling the state’s hotel lodging tax rate would impact our competitive position relative to other states.”
Hartman argued that there is a key difference between the proposed 3 percent TID and the $5 fee. The TID, she said, would go back to the tourism industry and ultimately benefit the city as a whole through increased economic activity and tax collections.
“Whereas that ($5 fee) is going to have the opposite effect, and doesn’t have any benefit to our industry,” she said.
Mike Neal, president and CEO of the Tulsa Regional Chamber, said in a prepared statement that adequately funding public education has long been a priority for the organization.
The Chamber board has yet to take a position on HB 1010xx or the proposed $5 hotel/motel fee, Neal said.
“Although different constituencies within our membership have concerns about some of the revenue sources approved by the House, we strongly support the ultimate goal of the proposal,” Neal said. “The Chamber is currently working with legislators on the best possible solution to move our state forward.”
Tulsa Mayor G.T. Bynum, meanwhile, said he is in favor of the revenue package, including the $5 hotel fee.
The mayor said the revenue package is not an ideal solution, but that he respects the rare compromise reached by lawmakers to fund education.
“There is no greater economic threat to Oklahoma than chronic underfunding of education,” Bynum said. “And if this is the only way our legislators see possible to address that threat, then I will have their backs. I do not oppose it.”
The Greater Oklahoma City Chamber of Commerce contracts with the city of Oklahoma City to run the convention and visitors’ bureau.
If Oklahoma cities can’t attract conventions, it will affect a variety of things, such as sales taxes for food and spending for entertainment, transportation and retail sales, said Roy Williams, Greater Oklahoma City Chamber of Commerce president and CEO.
An additional state tax will hurt the ability of local municipalities to raise rates in the future, effectively taking away local resources, he said.
He also said the proposal wasn’t well thought out, adding that those affected were not given a lot of notice it was in the works.
Meanwhile, some members of the oil and gas industry say hiking the gross production tax to 5 percent will hurt the industry and cost jobs. It is expected to generate slightly more than $158 million for appropriations in fiscal year 2019.
In an earlier plan, some in the industry supported a hike to 4 percent from 2 percent because it was coupled with other revenue-raising measures, such as an additional tax on wind.
“This is a very volatile industry,” said Berry Mullennix, Oklahoma Independent Petroleum Association chairman and CEO of Panther Energy in Tulsa. “The two things we know for certain is prices will go up and go down. The state should not be relying on the oil and gas industry every time it needs more money. They need to diversify.”
Meanwhile, the package faces an uncertain future in the Senate, which had hoped to pass its own package for raises.
Senate Majority Floor Leader Greg Treat, R-Oklahoma City, noted that the package passed by the House was not borne out of a compromise between the House and Senate.
He said the hotel and motel tax is a new element to a revenue raising package.
Senate Minority Leader John Sparks, D-Norman, also said the hotel lodging fee could be troublesome, adding that it had not been widely debated nor the direct impacts investigated.