SENATE BUDGET AND APPROPRIATIONS COMMITTEE

STATEMENT TO

SENATE, No. 1683

with Senate committee amendments

STATE OF NEW JERSEY

DATED: NOVEMBER 18, 1996

      The Senate Budget and Appropriations Committee reports favorably Senate Bill No. 1683, with committee amendments.

      Senate Bill No. 1683, as amended, increases the local share of the State and local taxes on tourism related receipts levied in municipalities that have formed a tourism improvement and development district. The local share of the taxes is a funding source for the advertising, promotion, improvement and support of tourism projects and for the issuance of bonds for the acquisition, construction, maintenance and operation of a convention center or tourism project and the payment of interest and principal on those bonds.

      Currently, certain contiguous municipalities may form a tourism improvement and development authority. In these municipalities an 8% tax is levied on certain tourism related retail receipts collected in a tourism improvement and development district. The tax is levied on hotel rentals, restaurant food and drink sales, and admissions charges in the district. The tax is shared by the State and the tourism authority, 6% going to the State and 2% going to the tourism authority. Currently, this tax is only levied in support of the projects of the Greater Wildwood Tourism Development Authority.

      This bill makes the 8% tax a more cooperative revenue sharing effort between the State and the tourism improvement and development district by sharing the tax revenues more equally. While the total rate of tax will remain at 8%, the local share of the levy supporting tourism projects will increase, going from 6% State and 2% authority to 4% State and 4% authority.

      This bill also provides an interim division of the 8% tax. For a period, the funds will be divided 3% to the State and 5% to the authority. This period will last until the 1% “extra” share to the authority yields funds to the authority equal to the additional amount that the authority would have received if the authority had received 4% of the funds for the entire period it was receiving 2% of the funds.

COMMITTEE AMENDMENTS

      The amendments provide that revenues from any increase in the local share of the levy shall be used solely for the costs of capital construction or for the issuance of bonds for the acquisition, construction, maintenance and operation of a capital construction project and the payment of interest and principal on such bonds.

FISCAL IMPACT

      The bill allows an increase to a 5 percent municipal rate for the tax on tourism related receipts levied in municipalities that have formed a tourism improvement and development district until the levy yields funds equal to the additional amount that the authority would have received if the authority had received a 4 percent levy for the entire period it was receiving a 2 percent levy under current law. Based on calendar year funds transfer information supplied by the Greater Wildwood Tourism Development Authority, the amount of the increase in municipal levy and corresponding decrease in sales tax revenue to the State general fund at a 5 percent rate is expected to be $3.9 million annually, for a total municipal levy of $6.5 million annually.

      The period over which this rate would be imposed depends on the lapse of time from the original imposition of the 2 percent levy, which began in August of 1993, until the higher rate could be implemented. If the higher rate could be implemented by July 1, 1997, the duration of the 5 percent rate would be approximately 7.5 years.

      Thereafter, the maximum rate would be 4 percent, expected to increase the municipal levy and correspondingly decrease State sales tax revenue by $2.6 million annually, for a total municipal levy of $5.2 million for each full fiscal year in which it is in effect.