Alabama beach city ponders lodging tax increase, riling vacation rental agencies

Versie Dortch

Gulf Shores city officials are poised to vote soon on a 3% increase in the city’s lodging tax rate that is applied to the room costs at hotels and vacation rentals.

But city officials, during a Monday work session, got an earful from some rental operators who believe the city could be placing itself at a competitive disadvantage. The 3% increase would raise the city’s overall room rate to 16%, which would make it higher than most cities along the Gulf Coast that are experiencing a similar surge in tourism over the past decade.

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The 3% increase will “raise the bar, expand transportation capacity, bolster public safety and enhance overall quality of life” in Gulf Shores, according to City Administrator Steve Griffin. It’s expected to generate close to $7 million in 2022 and would be used with other revenue sources to fund a $190 million, 10-year capital improvement plan.

“Things are getting more and more crowded,” Mayor Robert Craft said. “Sitting here and listening to the citizens of Gulf Shores … everyone is frustrated with the traffic and an inability to get back and forth over W.C. Holmes Memorial) bridge. Everything is congested. We recognize as a council that is our responsibility to fix.”

Representatives with Kaiser Realty argued that the city should reconsider the increase. They said it would be occurred less than four years after city officials hiked the city’s portion of the overall lodging tax rate by 2%, which added revenue to support a previous round of transportation-related projects.

“We have restaurants in this market unable to offer the service they would love to offer because they are dealing with higher expenses and labor shortages,” said Glen Kaiser, founding partner of the family-owned firm. “The guests are not experiencing what we want them to experience to attract them back to this market. They are experiencing increased costs at home. It’s not a good time to add this expense to their vacation and have them consider coming down here.”

Gulf Shores & Orange Beach Tourism, in an email to on Tuesday, confirmed that city officials plan to further discuss the tax increase with area businesses on November 29. A vote is not scheduled to occur until at least December 13, according to a tourism representative.

10-year plan

Gulf Shores has a $76.7 million committed toward transportation projects set aside in a 10-year capital plan ($38.7 million in federal and state grants and $38 million funded by the city).

Also included in the plan are additional city and school facility improvement projects.

Highlights include:

  • A third southbound lane to Alabama State Route 59 that stretches from Coastal Gateway Boulevard north of the Alabama Gulf Coast Zoo to Fort Morgan Road. The lane expansion would include W.C. Holmes Memorial Bridge, which is the main bridge that carries Route 59 traffic into the city.
  • Rerouting Canal Road south of the Gulf Pines/Meyer Park neighborhood.
  • A new two-lane, north-south road connecting Coastal Gateway Boulevard to County Road 6 East.
  • A new pedestrian bridge spanning the Intracoastal Waterway connecting Waterway North near Lulu’s with Waterway South near Tacky Jack’s.
  • New sidewalks, lighting, drainage, streetlights, and parking in the Beach Walking District where shopping and restaurants exist.
  • Expanding Waterway East Boulevard to create a new connection from Alabama 59 south of the Gulf Shores International Airport, Jack Edwards Field to Cotton Creek Drive.
  • A new Justice Center to replace the 38-year-old police department building and city jail. The new modernized facility would be built to support police, municipal court and emergency management operations.
  • New school facilities at Gulf Shores City Schools that are identified by the school system’s “The Next Wave” master plan.
  • A new fire station serving the fast-growing northeast quadrant of the city and the airport.
  • A new fire training tower and teaching facility.
  • Full-time city ambulance crew to supplement the existing Medstar private service.
  • Full-time city drainage maintenance and improvements division.
  • Full-time dedicated traffic enforcement patrol.
  • New parkland and beach access land acquisitions that include, among other things, anew Coastal Community Gateway Park.

Said Councilman Philip Harris, “This is a healthy list but it’s a needed list so we can provide a lot of services to the north part of the city and so we can keep up with the growth and the quality of life we have.”

Booming beaches, big needs

Gulf Shores Mayor Robert Craft speaks during a media event on Wednesday, November 10, 2021, at the Gulf Shores International Airport, Jack Edwards Field. A new name and brand for the airport in Gulf Shores, Ala., was unveiled on the same day that city and airport officials welcomed a new $6.1 million, 95-foot-tall air traffic control tower. (John Sharp/[email protected]).

The request for another lodging tax increase comes as Alabama’s beaches are experiencing continued tourism booms.

The beach area, according to state tourism figures, welcomed 800,000 more visitors over the past four years. And every year since the 2010 BP oil spill has produced record-breaking numbers in sales and visitors as vacationers flock to hotels and beachfront condos for Spring Break, summer vacations or during extended winter season stays.

Gulf Shores is also seeing a boom in new residents. The U.S. Census data shows the city’s 54% growth rate as the highest among cities with more than 10,000 residents over the past decade.

Harris said the city is issuing 250 to 300 more single-family building permits each year, with much of the new growth spiking in the northern sections of the city.

The combination of the two is creating more traffic, and more headaches for local officials. But it’s also creating a demand for more services reliant on an additional revenue.

“I don’t know how we provide them for our community without an additional revenue source,” said Harris.

Craft said the lodging tax, approved by the council, is the best way to go. He said he does not believe a referendum requesting a property or sales tax increase would get the support from the community.

“We cannot put everything on the citizens,” said Craft. “We have to have more lodging tax to do this.”

Kaiser, though, wondered if some of the city could scale back some of the 10-year list.

“I enjoy the things you have done,” he said to the council, recognizing the city’s utilization of the 2018 lodging tax to support the Beach Boulevard improvement project, among other things.

“It’s beautiful,” he said. “But I’m not certain that some of it may need to be trimmed back some.”

Other residents urged the city to focus on traffic-related issues only. Tony Dilaberto, whose property was purchased by the state for a future bridge project that remains in flux, said the city should focus on finding better ways to get traffic onto and off Pleasure Island.

“We need 59 (widened) and that bridge done,” said Dilaberto, referring to a proposed for an Intracoastal Waterway Bridge connecting the Foley Beach Express to Canal Road in Gulf Shores. That project is temporarily on hold while the Alabama Department of Transportation allows Orange Beach Mayor Tony Kennon time to negotiate a deal with the private owners of the existing toll bridge near the Wharf entertainment complex over the possibility of adding more capacity.

The Beach Express Bridge is privately owned and operated and is the only existing bridge into Pleasure Island aside from W.C. Holmes.

“We need to get on and off this island quickly enough before we add attractions,” said Dilaberto, a retired Gulf Shores firefighter. “That bridge was supposed to be paid for, the (U.S. Army Corps of Engineers) permits are done. They’ve taken my home. I just know the potential for that bridge to get people on and off this island. Before we invite anyone else, we ought to be able to get them on and off this island.”

Comparable rates

The potential increase in Gulf Shores’ lodging tax would give the city, by far, the largest lodging tax in the coastal region. It would increase the city’s portion of the tax from 7% to 10%. The state of Alabama, in all but 16 counties in the northern part of the state, assesses a 4% lodging tax. A 5% state lodging tax is assessed in the “Alabama Mountain Lakes Area” that includes counties like Madison, Limestone, Marshall, Morgan, and Cullman.

Baldwin County also assesses an additional 2% lodging tax in the coastal area to help fund Gulf Shores & Orange Beach Tourism.

Orange Beach, which also last increased its lodging tax in 2018, assesses a 13% overall rate on hotels and vacation rentals. The city gets 7%, with the state and county receiving the balance. City Administrator Ken Grimes said there are no plans for Orange Beach city officials to consider another increase.

In nearby Foley, overall lodging tax is 11%, with 7% going to the city. It was last increased in 2013, to provide revenues to support the borrowing backed by the city to attract sports tourism to the city by building 15 competition soccer fields, a championship field and a sports event center. There have been no additional discussions on the lodging tax since then.

A review of lodging tax rates along the Gulf Coast shows lower rates in nearby Florida cities: Pensacola Beach is at 12.5%, Navarre 12%, Destin 12%, and Panama City Beach 13%.

The city of Gulf Shores also highlighted other cities in Alabama where larger rates exist topped by Homewood with a 21% rate, Birmingham with a 17.5% rate with an additional $3 room fee per day, Mountain Brook at 17%, and Montgomery at 15% with a $2.25 room fee per day. Mobile’s rate is 14%.

Leonard Kaiser, also a founding partner of Kaiser Realty, said the city should not compare with cities well outside coastal market.

“Birmingham is not our market,” he said. “Our market is 12%.”

Glen Kaiser said the proposed increase on a smaller rental house that leases for $5,000 a week will increase a vacationer’s bill by approximately $150.

“We as the business owner that generated our guest to the market was unable to increase revenue by one penny,” he said. “We were not able to raise rent or offer more income to manage the property or to generate a penny to us. Yet, we added $150 to the guest.”

Despite the concerns, political observers believe the lodging tax is the least controversial of tax rates for government officials to increase because they are generally assessed on non-residents.

“As the intended purpose of these funds is to finance infrastructure and transportation needs that are associated with tourism, then assessing these fees on the tourist population is an appropriate strategy to pursue,” said Jaclyn Bunch, a professor in the Department of Political Science and Criminal Justice at the University of South Alabama. “Politically, this also has the added benefit of addressing an improvement need for local citizenry without having locals bear all the costs.”

This story was updated at 2:14 p.m. on November 16, 2021, to include additional information on when the city of Gulf Shores plans to vote on the tax increase.

This story was corrected at 7:39 a.m. on November 18, 2021, to adjust the city of Foley’s lodging tax, which is overall 11%.

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