Home Business Shuttered hotels costing NY $1.3 billion in tax receipts, report says

Shuttered hotels costing NY $1.3 billion in tax receipts, report says

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Severe limitations on travel and the virtual shutdown of the hotel industry during the coronavirus pandemic is wreaking havoc on the treasuries of state and local governments, a sobering new report reveals.

Tax revenues that hotels generate for New York’s state and local governments will crater by $1.3 billion this year, according to an analysis conducted by Oxford Economics for the American Hotel & Lodging Association.

The estimated drop in tax revenues for state and local governments nationwide: $16.8 billion, the report projects.

Among the other hardest hit states include California (-$1.9 billion), Florida (-$ 1.3 billion), Nevada (-$1.1 billion) and Texas (-$940 million).

New York’s hotels have been largely closed. Some hotels have housed recovering COVID-19 patients, emergency medical and hospital personnel and homeless individuals during the pandemic.

The tax receipts from hotels fund government services — such as schools, social services and public safety. The analysis included taxes on lodging and sales tax, corporate levies, personal income taxes, and gaming revenues and unemployment insurance.

The ominous figures from the hotel industry buttress a report by city Comptroller Scott Stringer projecting  the city’s budget hole could be as high as $11 billion because of the COVID lockdown, when factoring in reductions in tax receipts and likely cuts in state aid.

Meanwhile Mayor Bill de Blasio is seeking authority from Albany to allow the city to borrow $7 billion to keep the treasury afloat during the crisis — but lawmakers have thus far resisted — and instead are waiting to see if Congress approves a bailout package for state and local governments.

With uncertainty and the public health concerns surrounding COVID-19 lingering, hotel officials said it’ll take years for the industry to rebound.

“Getting our economy back on track starts with supporting the hotel industry and helping them regain their footing,” said Chip Rogers, president & CEO of the American Hotel & Lodging Association.

“Hotels positively impact every community across the country, creating jobs, investing in communities, and supporting billions of dollars in tax revenue that local governments use to fund education, infrastructure and so much more. However, with the impact to the travel sector nine times worse than during 9/11, hotels need support to keep our doors open and retain employees as we work toward recovery.

He continued, “We expect it will be years before demand returns to peak 2019 levels.”

The Gansevoort Hotel in Chelsea.
The Gansevoort Hotel in Chelsea.Photo by Alexi Rosenfeld/Getty Images

The city’s top hotel official confirmed the dire projections — and urged elected officials to provide cash-starved hotels a break on property taxes.

“The industry needs the City of New York to realize that revenues have dropped on average 75 percent and likely will end the year at a 60 percent decline. In order to ensure that we survive both a liquidity and solvency crisis, the City needs to allow for real property taxes to be deferred and the interest rate on defaulters lowered from the borderline usurious rate of 18 percent,” said-Vijay Dandapani, President & CEO, Hotel Association of New York City.

The city Hotel Association said the occupancy rate is just under 50 percent. But the numbers are likely worse because 45 percent of the hotels have not reported data, a spokesperson said.

Meanwhile cash-strapped landlords who are unable to collect rent from struggling commercial and residential tenants are also seeking property tax relief from the city. The city Rent Guidelines Board on Wednesday voted to freeze the rent on tenants and state law bars landlords from evicting non-paying tenants during the pandemic.

That leaves landlords holding the bag.

The Real Estate Board of NY and a coalition of business and property owners, civic leaders and community advocates have called on the mayor and City Council to: freeze property tax rates and assessments so that tax bills do not increase; reduce interest penalties from 18 percent to 3 percent and allow property owners to pay their taxes on monthly payment plans.

“As commercial and residential rent collections continue to decline, we need responsible policies that support property owners who continue to pay property taxes that support vital government services while grappling with mortgages, maintaining payroll and covering increased building maintenance expenses,” said James Whelan, president of RBNY.

“The challenges our City faces due to the coronavirus are stark but surmountable. We need thoughtful, data-driven policies, not ideological ones, that can lead our city towards a steady recovery.”

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