City may participate in hotel tax class action suit

Courtyard-Rye-Marriott

The Westchester Board of Legislators voted unanimously last week to remain party to a class action lawsuit against a host of online travel companies that was initiated by Nassau County in 2011. Rye is one of four cities in Westchester that have a hotel occupancy tax. Rye has one hotel, the 145-room Courtyard Marriott on Midland Avenue, pictured. Photo courtesy marriott.com

By LIZ BUTTON
Rye City has been designated as one of many plaintiffs in a class action lawsuit over hotel taxes filed against intermediary online travel companies like Expedia, Orbitz and Priceline.

The suit alleges that the booking websites pay taxes on the discounted, cheaper rate at which they purchase rooms in bulk rather than the higher rates they charge customers. Initially spearheaded by Nassau County in 2011, the suit was declared a class action in April by the state Supreme Court.

Westchester County collected $5.3 million in hotel tax revenue in 2012 on its 3 percent hotel occupancy tax. Yet, it is unclear how much the county believes it has lost out in tax revenue.

On Sept. 23, the county Board of Legislators voted 16 to 0 to remain part of the class action lawsuit after a recommendation by Westchester County Executive Rob Astorino, a Republican. Oct. 11 is the deadline to opt out of the suit for plaintiffs, which includes all counties, cities and towns who enact hotel taxes.

Four municipalities in West­chester levy their own 3 percent hotel occupancy tax on top of the county’s 3 percent tax: the cities of New Rochelle, Rye and White Plains, and the Village of Rye Brook.

The tax is based on the number of rooms per hotel.

Because the lawsuit is being run by Nassau County, Westchester and its taxpayers would not be responsible for litigation fees and, according to county Deputy Communications Director Donna Greene, since there are no added litigation fees, county officials figure the county “might as well join in the suit.”

Nearby Putnam County does not have a hotel tax. Rockland County, which instituted a hotel tax in April 2012, has opted out of the suit.

A website for the class action suit states that, for all plaintiffs, if the court rules the litigation fees be taken from the recovered sum, they will be taken proportionately from each
plaintiff’s recovery.

The lawsuit comes at a time when booking a hotel room on the Internet or through a smartphone app has become an industry norm.

Dan Conte, president of the Westchester Hotel Association, said managers like him ultimately “don’t benefit, win or lose” pending the outcome of the lawsuit.

However, Conte acknowledged the use of intermediaries like Expedia has become an industry norm.

“A lot of the lawsuit is looking ahead because online bookings will only continue to increase,” Conte said. “If you look back even five years ago, online booking was probably 20 or 30 percent less than now.”

Rye City Attorney Kristen Wilson said since receiving a notice from the court a few weeks ago, the city has not taken any action yet. Wilson said she has discussed the suit with City Manager Scott Pickup and plans to inform the Rye City Council presently.

“It is an interesting argument monetarily for the city to go ahead,” Wilson said.

Rye’s Finance Department plans to reach out to the 145-room Courtyard Rye Marriott hotel on Midland Avenue, the lone hotel in Rye, to see what percentage of bookings are made with online travel companies, Wilson said.

Doing so will help the city get a sense of how much it might stand to gain in recouped tax revenue if a settlement was reached. The city expects to collect more than $150,000 in 2013 from hotel taxes, according to its 2013 budget.

According to New Rochelle City Manager Chuck Strome, the City of New Rochelle is not “actively part of the lawsuit.” New Rochelle has two hotels: the 124-room Residence Inn and the Radisson downtown.

“If we’re supposed to be collecting money that we’re not receiving, someone shortchanged us,” Strome said.

New Rochelle makes $250,000 annually from the city’s current 3 percent tax, which is put toward “general funds for governmental expenditures,” according to the city manager.

Westchester County’s 3 percent tax on hotel occupants was first mirrored by Rye in 2006, when it became the first city in the county to get such a tax signed into law by the state. White Plains, New Rochelle and Rye Brook soon followed.

“In New York State, we discovered a number of years ago that counties around the state and some cities had dual taxes, but not in Westchester,” said Democratic state Assem­blyman Steve Otis, a former Rye City mayor. “What we did in Rye is we asked for permission to have a hotel occupancy tax, which mirrors the
county tax.”

After receiving approval from the state, Otis implemented the tax in 2006 and viewed it as a welcome alternative to raising the additional revenue from property taxes.

“It is a very minor property tax revenue, but, generally the people that are paying the tax are visitors,” said Otis said.

“In the case of Rye Brook, they gain $670,000 in revenue annually from their hotel tax. That’s $670,000 that they don’t have impose on the property taxpayers,” he said, referring to revenue collected from the Rye Town Hilton.

Other Westchester cities like Harrison are continuing to pursue state authorization to implement their own hotel taxes, with Harrison recently seeing legislation make it through the state Assembly. Harrison is now seeking approval from the state Senate and Gov.
Andrew Cuomo.

Contact: liz@hometwn.com,
phil@hometwn.com

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About Liz Button

Liz Button is a staff reporter for Hometown Media Group’s The Rye Sound Shore Review. Previously, she covered Bedford and Mount Kisco for The Daily Voice, an Internet-based, hyperlocal publication. She’s also written for Patch in her hometown of Trumbull, Conn., as a freelance reporter and fill-in editor. Preceding her time there, she worked in publishing in New York City. She is a 2008 graduate of Bowdoin College with a degree in English. Reach Liz at 914-653-1000 x20 or liz@hometwn.com; follow her on Twitter @ryesoundshore.