Appeals Court says Currituck County misspent occupancy tax funds

By on March 20, 2024

In unambiguous language, the North Carolina Court of Appeals on March 19 reversed a 2021 lower court ruling that the Currituck County Board of Commissioners can spend occupancy tax revenues at their discretion. In doing so, the court concurred with the plaintiffs who charged that the county was improperly spending occupancy tax money intended for beach nourishment and tourism purposes.

The county had blended occupancy tax revenues with the general fund placing “2/3 of the funds back to the County’s general fund for spending by the County in the Commissioners’ discretionary budgetary authority,” Judge Michael Stading wrote for the court.

Stading went on to state that “the County’s appropriations of the occupancy tax is being performed under a misapprehension of the applicable law.”

The unanimous decision by the Court of Appeals remands the case, Gerald Costanzo, et al. v Currituck County, to a lower court “for proceedings not inconsistent with this opinion.”

When contacted by the Voice, a spokesperson for Currituck County said there would be no comment on ruling “at this time,” but noted that the matter is on the agenda for a special March 22 meeting of the Currituck County Board of Commissioners. As of the deadline for this story, Voice efforts to seek comments from those on the plaintiffs’ side of the case were unsuccessful.

The lawsuit, filed in 2019, accused Currituck County of spending occupancy tax funds in a manner inconsistent with a 2004 law that is specific about what are considered tourism related expenditures. The newer law was an amendment to a 1987 law giving the county the authority to collect an occupancy tax.

The 2004 law amendment changed the 1987 law that had allowed the “maintenance of public facilities and buildings, garbage, reuse, and solid waste collection and disposal, police protection, and emergency services” as services that could be funded through occupancy tax revenues.

The new language specified how occupancy tax revenue could be spent, writing that beach nourishment, capital expenditures and marketing  were appropriate uses for the occupancy funds as they “are designed to increase the use of lodging facilities, meeting facilities, recreational facilities, and convention facilities in a county by attracting tourists or business travelers to the county.”

The case attracted the attention of North Carolina tourism organizations. There were Friend of the Court briefs from a number of North Carolina tourism organizations, including the NC Travel and Tourism Coalition, the NC Restaurant and Lodging Association, the NC Hospitality Alliance, and the NC Vacation Rental Managers Association. There were also 23 co-plaintiffs in addition to Costanzo as well as the Corolla Civic Association.

 



Comments

  • Ac

    I see the rich jerks on the beach have decided that the rest of the county can be fine with barely funded schools, police, etc

    Thanks rich jerks you guys really needed more tourism dollars! We’re really hurting for tourism out here!

    Give me a break

    Thursday, Mar 21 @ 8:19 am
  • outis

    I’m a little confused, maybe a lot confused. Does this decision only apply to Currituck County and how they were distributing the occupancy tax revenues? Or is it not going to have ripple effects throughout the state? On the one hand it looks like the tourism interests may have hijacked the lion’s share of the occupancy tax money in the 2004 change to the law, but is that actually what happened?
    The intent of the original occupancy tax legislation was, in part, to offset the cost of providing public services (trash pickup, police, ambulance, etc.) to the tourist population, so the resident population wasn’t paying for it all. Has this changed now? Is the bulk of the revenue now going to be used for attracting more tourists, and for beach nourishment?
    Or is this just about Currituck County moving the bulk of their occupancy tax money into their General Fund, instead of specifically into trash pickup, police, etc.? Does this come down to how each individual County has their specific occupancy tax legislation worded, or executed?

    Thursday, Mar 21 @ 8:31 am
  • Mark Jurkowitz | Outer Banks Voice

    This decision is specific to Currituck County and what the court ruled was that the county was spending occupancy tax money intended for tourism-related expenditures such as beach nourishment (according the 2024 law) and improperly spending it on other services.

    Thursday, Mar 21 @ 8:55 am
  • Dano

    The beach has always been a cash cow for the mainland. The mainland gets there fair share of real estate taxes from the beach. The occupancy tax should cover extra police ,emergency medical and ocean rescue on the beach so as not to burden tax payers on the main land. The mainland has created there on funding problems with uncontrolled residential building that requires more schools, police and infrastructure.

    Thursday, Mar 21 @ 9:24 am
  • Community > tourism

    I fear this will have unintended negative consequences. I’m all for sticking it to the govt., but it seems like they were using it on things the community actually needed. I hope we don’t start beach nourishment- such a waste of money & it hurts the environment.

    Thursday, Mar 21 @ 9:38 am
  • Travis

    But is there some allegation that the money was used for some kind of personal gain by anyone in Currituck? In other words, was the money they collected to put sand on the beach instead used for a new public works building? Or is there some pocket lining/hookers/blow aspect to this mis-spending?

    Seems you could justify just about anything as an expenditure that attracts tourism and business.

    Thursday, Mar 21 @ 10:42 am
  • OBX Dan

    Love this! What say you, “Ike” McRee? You were so confident in your assertion that mainland Currituck could steal this money rather than have mainland residents pay their fair share. Don’t let the door hit you on the way out!

    Ac, property owners in Corolla shouldn’t be in the business of providing open-ended welfare payments to the mainland. Use mainland tax revenue to fund mainland priorities. Your golden goose stopped laying eggs.

    Thursday, Mar 21 @ 4:31 pm
  • PJ

    “Has this changed now? Is the bulk of the revenue now going to be used for attracting more tourists, and for beach nourishment?”

    Outis, the short answer is yes. Originally the tax was, as you suggested, “to offset the cost of providing public services (trash pickup, police, ambulance, etc.) to the tourist population”. In 2004 the legislature changed the law and narrowed the scope dramatically to expenses that “are designed to increase the use of lodging facilities, meeting facilities, recreational facilities, and convention facilities in a county by attracting tourists or business travelers to the county.”

    Currituck County pretty much ignored the 2004 law and illegally dumped 2/3 of the occupancy tax into their general fund — meaning they could use it for pretty much anything. So it’s not about “rich jerks” or “cash cows” or ” using it on things the community actually needed”. It’s all about doing with taxpayer money what the law says you have to use it for. That doesn’t seem unreasonable. The gas tax goes to transportation costs. If the state started using it to fund other programs, a lot of people would take issue with that…

    Thursday, Mar 21 @ 5:23 pm
  • surf123

    Anything that put the government in check is good. It was more than obvious to anyone the funds were not being spent on what they were designated for. The next move is to run all of these commissioners as soon as their terms end. Can legal action be taken against the county and/or personnel for doing it and then allowing it to go on. The property taxes on the Currituck OBX are more than enough to pad the coffers of the county. @Travis someone will need to do some digging to find out if there were indirect beneficiaries.

    Thursday, Mar 21 @ 7:02 pm
  • surf123

    I have an idea for newly discovered occupancy tax that will be collected this year…use it to buy out the companies doing the horse harassment tours and put an end to it.

    Thursday, Mar 21 @ 7:03 pm
  • Just Another Mike

    OBX Dan – Amen brother…when Currituck County started talking about raising taxes for beach nourishment the mainland folk said they shouldn’t have to pay for it, but we should be paying for their services. This is simple, the broke the law. If you think they should be able to steal money raised through tourism and spend the money for whatever they please, the argue against the law. However, the law states if you have a lodging tax you have to spend it on certain things. If you don’t like that, change the law or eliminate the lodging tax. Irrespective of that, the COUNTY BROKE THE LAW. Pay it back!!!! Don’t raise taxes for beach nourishment, pay back the money you stole and pay for it that way.

    Thursday, Mar 21 @ 8:06 pm
  • Corolla Citizen

    The trick will be finding an amenable resolution that doesn’t involve raising taxes to pay back the money that was improperly spent.

    Friday, Mar 22 @ 6:16 am
  • Goose

    The head cow is always grazing…

    Friday, Mar 22 @ 8:40 am
  • Mark Jurkowitz | Outer Banks Voice

    Let’s be a little less cryptic, Goose.

    Friday, Mar 22 @ 12:12 pm
  • AC

    OBX Dan,

    I fail to see how guests paying occupacny tax is “property owners giving welfare to mainlanders”. I’m also sure you don’t care that our taxes are used to provide services to the people you are gouging for $4000 a week while you sit in new york

    Friday, Mar 22 @ 12:37 pm
  • Cam

    Nice reporting Mark! Is there any concern that Dare County will need to make similar changes to what Currituck is being forced to make?

    Tuesday, Mar 26 @ 9:09 am
  • SAJ

    Before the law changed, Currituck had descretionary control on the 2/3 of the occupancy tax funds, and they were to be earmarked for the tourist burden. I think, overall Currituck, did a great job with the money. The problem with the new law, in my opinion, was there was not a clear definition of what is the “Tourism Burden” expenses we face. Our Currituck beach population is approximately 1000 year round people, which swells to 40,000 during the summer. The new law does not consider our burden to pay for the health and safety of the residents (EMS, Fire, Rescue) to be part of that equation. This is clearly part of the tourism burden and should be a reasonable expense. Further, some of the expenses were used for stablizing the Historic Jail (tourist related) and the NC Wildlife Museum (tourist attraction), but these expenses were denied as tourist expenditures. The Beach stabilization is debatable and should be left to science on whether that qualifies, and must also be weighed against other pressing needs of the county. Currituck needs to change the law at the State level and get the definitions established for what are the Tourism Burden expenses. It is diengenious to think we, the year round local population, must pay for the additional expenses to service the tourist with our own tax base. It would seem obvious to me that this is exactly what the occupancy tax would be for. Tourist Economy: we want it. I agree that there must be transparency and clarity in the way we use the funds. I think Currituck pays our way in this relationship and is certainly not taking more than our share, however, the vagueness of the current law is our issue.

    Wednesday, Mar 27 @ 11:40 am