For years, local leaders and residents of Asheville and Buncombe County have debated whether revenue from tourism can be spent on services that benefit the community at large, especially affordable housing.
Now, a bill progressing through the General Assembly offers a definitive answer: No.
Senate Bill 484 overwhelmingly passed the state House earlier this month and is now sitting in a state Senate committee. If enacted, the measure would place sweeping limits on the ways local governments can spend occupancy tax dollars.
In Buncombe County, visitors pay a 6% tax every time they stay at commercial lodging like hotels, motels and vacation rentals.
“Here in Asheville, of course, my firm belief is that we need to support the hospitality industry by helping to staff it, and doing that by helping to create housing that is affordable to hospitality staff,” state Sen. Julie Mayfield (D) told BPR in an interview. “But this legislation slams the door on that pretty hard.”
Mayfield played a leading role in the successful 2022 effort to increase the share of Buncombe County occupancy tax revenue dedicated to local venues and projects rather than tourism advertising.
’A debate about local control’
At the heart of the current debate is the definition of “tourism-related expenditures.”
Chris McLaughlin, a professor at the UNC School of Government who specializes in local tax and finance issues, said that historically, it’s been up to local governments to interpret the meaning of the phrase.
Most have construed "tourism-related expenditures" as directly related to a specific tourism event or attraction, such as a music festival or event venue, McLaughlin said.
But in recent years, coastal Currituck County has taken a more expansive view of the term — a decision that has had reverberations across the state, including in western North Carolina.
“What some local governments are now considering — and in particular, Currituck County — is using occupancy tax funds to fund what we call traditional government services, because the strain on those services, in their eyes, is generated by tourism,” McLaughlin said.
In 2019, a local civic association and a group of property owners sued Currituck County for spending some of its occupancy tax revenue on public safety services like law enforcement, fire and emergency response, lifeguards and road maintenance.
After seven years of legal wrangling, the North Carolina Supreme Court sided with Currituck County in a decision last month. The House then responded swiftly with legislation that would apply statewide. It would exclude broad categories of spending from “tourism-related expenditures,” unless “explicitly authorized by local act.”
The text of the legislation says that local governments are barred from spending occupancy tax dollars on solid waste collection, municipal water services, public safety, education, affordable housing and first responder services.
“If this bill becomes law, it would dramatically restrict possible uses for occupancy taxes because we're taking off the table all of those traditional government services,” McLaughlin said.
He added that the debate over occupancy taxes “is really a debate about local control, as we're seeing in a variety of areas of taxation.”
“It's just interesting to see where the support for the different arguments lies, because I think most residents would probably be very supportive of a broad interpretation of what is ‘tourism-related’ because it gives their local elected leaders more flexibility to use these funds and to respond to local needs — many of which, in their eyes, are driven by tourism,” McLaughlin said.
A ‘one-size-fits-none’ solution?
The legislation passed the state House in early June on a 109-to-3 vote. Among the three lawmakers opposed to the measure, two represent Buncombe County. They are Democratic state Reps. Lindsey Prather (who represents the 115th District in central Buncombe) and Brian Turner (who represents the 116th in northwest Buncombe).
In interviews, both said they believe that they believe the Buncombe County Tourism Development Authority (TDA), local elected officials and business leaders have worked well over the years to find an approach that suits the needs of Asheville and Buncombe County.
Prather said communities do need some sort of state-level guidance, “so they're not just out there having to guess and risking getting sued or challenged.” But she argued that the current legislation goes too far, “making it more difficult for Buncombe to have a tourism economy that works for Buncombe.”
“Every county in North Carolina is different,” Prather said. “Every county's relationship with tourism in North Carolina is different. Some communities are working really, really hard to try to bring tourists in. Some communities feel like they're a little overwhelmed and don't need as much of those funds. And so, I really think that we need to be allowing these decisions to be made at a more local level.”
Turner said there’s a “real need” for some high-tourism counties in the mountains and along the coast to be able to use occupancy tax dollars in a less restrictive way.
“If you look at Currituck County, if you look at the Outer Banks up there, you're looking at like a two-lane road, a tremendous amount of traffic, pedestrians,” Turner said. “Being able to use some of these funds to supplement police and fire and EMS seems like a reasonable use for that community. And for us to now abolish it essentially statewide seems like a one-size-fits-none kind of solution.”
State Rep. Eric Ager, a Democrat who represents the 114th District, voted in favor of the measure. Ager, whose district includes southeast Buncombe County, said in an interview that he is open to increasing the number of things that occupancy tax dollars can be spent on, and that he believes services like police and fire response could be considered “legitimate” tourism-related expenses.
But at the same time, Ager said, broadening the definition too much could spark a backlash from the lodging industry, which was instrumental in establishing occupancy taxes in the first place.
“My concern is that if it gets opened up too wide at the moment and you can sort of spend it on whatever the county wants to spend it on, then you run into the problem of, you know, the hoteliers are probably going to start to lobby to take it away,” Ager said. “And I think that money does so many valuable things for our community that we don't want it to go away.”
Ager said he believes that if the measure becomes law, it “won’t impact” Buncombe County because the TDA has already been refraining from spending occupancy tax revenue on the categories that would be prohibited.
Measure’s future is uncertain
On the Senate side, Buncombe is represented by Mayfield and state Sen. Warren Daniel (R-46). Daniel did not respond to a request for comment on the legislation.
Mayfield said “it will be much more difficult” for Buncombe to seek to broaden its definition of “tourism-related expenditures” if the state legislation is passed.
“To me, this is a conversation that the tourism industry needs to have, writ large,” Mayfield said. “We need to revisit, in my mind, with the hoteliers, with the hospitality industry, with the travel and tourism organizations, how these dollars are spent and how they can best support the communities in which tourism is happening.”
Some smaller communities, she noted, have voiced concern to her that they would “lose their very precious occupancy tax dollars for advertising” if the definition is broadened.
But Mayfield said the calculus facing counties like Buncombe is different. The TDA is forecasting $34.5 million in net occupancy tax revenue for the 2027 fiscal year. According to an analysis by Magellan Strategy Group, during the 2021-2022 fiscal year, Buncombe had the third-highest occupancy tax revenue in the state.
“There does come a point in my mind when the revenue is so large that it makes sense to transition some of those dollars that are currently used for advertising to other uses that still support the hospitality industry very directly,” she said.
The legislation continues to sit in the state Senate, where it faces an uncertain future. Legislators are in the final stages of negotiating a state budget, which could end up including measures such as the occupancy tax bill — or it could get punted for further consideration.
The city, county and TDA all were notably cautious when asked for comment on the pending legislation.
City of Asheville spokesperson Kim Miller said in an email that city staff are “monitoring it for any potential impacts.”
A spokesperson for the TDA sounded a similar note.
“Explore Asheville and the Buncombe County Tourism Development Authority are aware that SB484 passed the House by a large majority,” the spokesperson said in an email. “We are tracking its progress through the Senate of the North Carolina General Assembly.”
Buncombe County spokesperson Kassi Day said county staff are keeping an eye on the bill as well.
“We don’t have any comments to offer on pending legislation; Buncombe County will always follow the letter of the law,” Day said in an email.
