Ocean City proposes occupancy tax for lodging

Guests would pay more to stay at Ocean City’s hotels, motels and rental properties booked through online services under a proposed 3 percent occupancy tax that is designed to generate more revenue for the town.

Voting 4-3, a sharply divided City Council introduced an ordinance Thursday for the occupancy tax. The measure will be up for a public hearing and final vote by Council on Dec. 5.

Initially, the ordinance was only supposed to include a 3 percent occupancy tax for homes and other guest properties rented through online booking services such as Airbnb and Vrbo.

Some Council members, though, maintained that the city should impose the tax across the board for the sake of fairness – so hotels and motels were added in an amended version of the ordinance, also by a 4-3 vote.

“I don’t want to see anybody pay more taxes than their competitor, but I want to make sure that they’re all paying the same,” Councilman Sean Barnes said.

Councilman Dave Winslow said it simply made more sense “to be consistent” with the occupancy tax by extending it to hotels and motels. The move would also generate even more revenue for the city, Winslow noted.

Councilman Keith Hartzell expressed concerns that the city would, in effect, be “picking winners and losers here” if it included only rentals through online booking services and excluded hotels and motels from the occupancy tax.

Winslow, Hartzell, Barnes and Councilman Tony Polcini voted to introduce the ordinance after hotels and motels were added in the amended version. Council President Pete Madden, Vice President Terry Crowley Jr. and Councilman Jody Levchuk voted no.

Madden and Crowley argued unsuccessfully that it would be better to start the occupancy tax just on rental properties booked through online services. They thought it would be wise for the city to take its time and speak with the hotels and motels before any decision was made on whether to include them for the tax.

    City Council votes 4-3 to introduce the ordinance after it was amended to include hotels and motels for the occupancy tax.
  

For the last two years, Ocean City officials have been kicking around the idea of imposing an occupancy tax on Airbnb and Vrbo rentals as a way to generate extra budget revenue for the town. The ordinance introduced Thursday finally formalizes the occupancy tax while also extending it to hotel and motel stays.

Former Councilman Bob Barr, who is now a Cape May County Commissioner, pointed out in 2023 that more than 100 towns in New Jersey charge an occupancy tax on vacation rentals booked through Airbnb and Vrbo. He said then that towns that aren’t charging an occupancy tax are losing out on a key source of revenue and are “falling by the wayside.”

“It’s basically found money,” Barr said during a 2023 Council discussion about the occupancy tax when he was still a member of the governing body.

If the proposed ordinance is given final approval on Dec. 5, the tax would go into effect on Jan. 1, 2025.

Guests staying at the city’s hotels, motels and rental properties booked through online services would pay the occupancy tax as part of their bill. The state would collect the tax, but all of the revenue would be given to the city.

The state already charges a 5 percent occupancy tax on hotel and motel stays, as well as the 6.625 percent state sales tax, according to the New Jersey Treasury Department website.

This is the first time Ocean City has proposed a local occupancy tax on hotels, motels and rentals booked through an online service, City Solicitor Dorothy McCrosson said in an interview after the Council meeting.

McCrosson said there are no estimates yet on the amount of revenue that the occupancy tax would generate for the city.

“We have no idea,” she said in the interview.

    The city is buying this house at 844 Central Ave., next to City Hall.
  

In other business at Thursday’s meeting, Council gave unanimous final approval to a $750,000 bond ordinance that will allow the city to buy an old home next to City Hall.

The three-story house at 844 Central Ave. is just steps from the corner of Ninth Street and Central in the downtown business district.

Once the city completes the purchase, the short-term plan is to use the house as municipal office space, but over the long haul it might be demolished to create more parking spaces next to City Hall, city officials said.

Online real estate records indicate that the house was built in 1898. The property has functioned for decades as both retail and residential space under a succession of owners.

City tax records show the building is currently owned by SaltWorks LLC, a custom framing business that occupies the first floor. McCrosson said the owner of SaltWorks approached the city with the idea of having the city buy it.

McCrosson noted that the owner pitched the idea of selling the house to the city after learning that the city had agreed in September to purchase two privately owned parking lots next to City Hall for $3.3 million.