New Tax, Same Story as Charlotte Targets RACs

CHARLOTTE, N.C. --- The Charlotte City Council voted April 10 to send a 3% tax hike on car rental transactions to the North Carolina legislative session for approval.

The tax, which would jump to a total levy of 14% if approved, is part of a proposed financial plan to pay for new museums, theaters and a convention center expansion.

In July 2005, the city council voted to for a 4% tax increase with the same proposal in mind. But after Wachovia Corp. agreed to contribute additional funding for the project, the tax was re-evaluated. Some council members claim that the initial tax approval was merely testing the potential for that particular revenue stream.

"It was an investigation of the process and the potential funding the first time around," says council member Nancy Carter. "This is a ratification of what we want to present to our delegation."

The project cost has more than doubled in price, from $350 million last summer to between $700 million and $800 million now. Wachovia, which stands to benefit significantly from the project, had agreed to create $280 million in taxable property if the city could garner enough funding on its end. The banking giant, however, has increased that figure to $350 million. The result is $57 million in property taxes if the proposal is approved in the short legislative session beginning in May.

Consequently, Carter says, the city was able to push for a lesser tax on the car rental industry – 3% rather than 4%.

Last July, the Charlotte Observer reported that Wachovia would only build $100 million worth of new buildings if the city didn’t drive the arts project. Though some council members had reservations about the car-rental tax proposal, they initially voted for the tax hike simply to keep the package alive.

"That’s one of the factors, yes," Carter told Auto Rental News last summer, admitting that the Wachovia project was incentive to get the tax through. "We’re increasing the tax base."

More recently, she says that the city is counting on the new facilities - and the new NASCAR Hall of Fame – to increase tourism to the point where "everyone benefits."

But banking on that could be risky.

In 2003, Charlotte was the 45th largest rental market. And the cultural facilities plan, if approved, would not be completed and ready for visitors until late 2009 or early 2010, according to Robert Bush, senior vice president of planning for the Arts & Sciences Council.

So, who the tax would affect in the interim remains to be seen. Or, as council member Don Lochman said in an interview late last summer, "Half of that tax is exacted on Charlotte residents, not people visiting the city. There’s a propensity for that (tax) to fall on people of lesser means."

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