The State of Changes: Updates on Hot-Button Topics

State of the Chamber Brings Keynote Speaker on Top Issues
Jan 23, 2019
Photo by: Maria Scandale

How far and how fast is the state moving toward tweaking the tax to short-term rentals, possibly legalizing recreational marijuana, upping the minimum wage and banning plastic bags statewide? Frontline topics impacting tourism and lifestyle in New Jersey were updated to businesspeople at the State of the Chamber Jan. 16 at the Holiday Inn Mainland in Manahawkin.

Speaking to the Southern Ocean County Chamber of  Commerce was Joseph Simonetta, senior partner of Public Strategies Impact and executive director of the nonprofit NJ Tourism Industry Association. As an advocate lobbying for the tourism industry, which generates $42 billion in revenue for the state, Simonetta has a front seat on legislative developments.

An impactful issue for the shore is the new sales tax on “transient accommodations,” otherwise known as the short-term rental tax, that went into effect Oct. 1, but by most accounts has changes still under discussion. The law currently includes private homeowners who rent rooms for fewer than 90 days.

“There are fixes being discussed right now to concentrate this tax on the online platform such as AirBnb, VRBO, Home Away,” Simonetta said. He was alluding to concerns about the private homeowner inclusion.

He summarized, “There are fixes to try to avoid some of the properties that really do not fit the idea – single rentals for a couple months out of the year that help to pay the individual’s mortgage. ... There are fixes, but we’re working on legislation; we’re working on language.

“There are also total repeal bills in – quite frankly, the total repeal bills are not likely to pass,” Simonetta added in his opinion, due to its $15 million to $20 million in projected revenue.

A question from the audience asked if it appears the law would be enforced or whether it was another rule “to scare everybody to death.”

“Right now, the way to do it is by giving the Division of Taxation the ability to audit,” Simonetta answered.

The tax, totaling 11.6 percent is made up of a 6.625 percent sales tax and a 5 percent state occupancy fee.

So, “there is an audit procedure; I don’t know how the Division of Taxation is going to apply that to individual rentals that are not on that (transient space marketplace) platform,” he said.

Another bill proposes requiring the lessor to register. It is designed to ensure that the accommodations meet safety requirements.

Asked if he sees any hint of a timeline on when these “fixes” could reach the governor’s desk, Simonetta said, “I think people want to get this done before the season. ... There are a couple of bills that need some work ... but I’m suggesting that you’ll probably see some clarifying language on the governor’s desk May, early June.”

Incidentally, AirBnB started out as four guys in an apartment in San Francisco, the speaker said. One moved out, leaving the others short on rent money. They rented the empty room with – here’s where the name came from – an air mattress.

As the platform grew, so did complaints in the tourism industry that those benefiting were not “paying their fair share” toward taxes that brought in money for tourism promotion, as the hotels and motels were paying.

Legalizing Marijuana

For Recreational Use

“There are going to be budget issues that will drive this,” Simonetta said regarding legalizing  – and taxing – recreational marijuana.

In Gov. Murphy’s State of the State address the day before the chamber forum, he called on the Legislature to “start 2019 by finishing what we began” in 2018 on the issues of legalizing marijuana and raising the minimum wage to $15 an hour.

“In the last budget address that the governor gave back in February of 2018, and the budget that was adopted July 1 of 2018 scored about $80 million in revenue from recreational marijuana,” Simonetta noted.

“Obviously we’re not collecting any of that revenue now. The budget ends on June 30 of this year. There will be a move to get this moving within the next month or so, to get something on the books and to start licensing people.

“I don’t think we’ll make the revenue projections for this year, so that puts an $80 million hole in the budget.

“There is also a report from the Division of Taxation that income tax is about 2½ to 3 percent behind projections, so there are going to be budget issues that will drive this as well.”

Last month the state expanded its initial six medical marijuana licenses to add six more, Simonetta noted.

“This administration has loosened up the more restrictive language from the Christie administration on who can qualify and what diagnoses can qualify for medical marijuana,” the speaker said. “Those licenses were awarded last month and are going through the process of coming online.”

Among the sticking points to legalization is the amount that it would be taxed.

“There are also urban versus suburban issues,” he said. “Some of the urban legislators feel that this is nothing more than an added problem to some of the social problems that they already have.”

Recreational marijuana is legal in Washington state, Oregon, California, Nevada, Colorado, Alaska, Michigan, Maine, Vermont, Massachusetts and the District of Columbia.

Minimum Wage Hike:

“Going to Happen”

The business audience at the chamber forum was interested in the status of the governor’s call to raise the minimum wage to $15 per hour, although they didn’t debate it at the Jan. 16 forum. They were able to listen, though, to the tourism industry association leader’s take on the latest developments.

A current proposal has most workers phased in to $15 an hour by 2024.

“This is as fresh as 4 o’clock yesterday afternoon,” Simonetta told the chamber, “and it could change by the time I’m done talking to you, but, the minimum wage increase is going to happen.

“You have to realize that we have a Democratic governor, Democratic legislature – this is not going to be a situation where you have opposing parties philosophically. They philosophically agree that a $15 wage is a minimum for a family of four to afford living in New Jersey.”

Negotiations are over exemptions, he said.

“To be clear, the governor had said many times publicly that he would like to see no exemptions. The Legislature is a little bit more pragmatic ... and very concerned how this will affect the tourism industry, and seasonal workers, and teenagers.”

There is some concern that bumping the pay of the entry-level jobs, commonly held by workers younger than 18, to the $15 limit “will ratchet up all the other salaries that employers will have to pay.”

The proposal that the Legislature offered to the governor Jan. 15 was this, he outlined: “Most workers will be at $15 by 2024,” he said of those who are not considered exempt. “Exempt workers will get $11.25 by 2024, currently $8.85. Seasonal workers and small businesses, to $15 by 2027.”

The proposed definition of a seasonal worker is a worker employed by a seasonal employer – in other words, by an employer who generates two-thirds of their gross annual income within 91 days.

“There are some problems to that, and we’re pushing for an expansion to that definition to say that a lot of seasonal operations sell tickets, packages, presales during the off-season,” Simonetta said.

The definition of a small business in the current legislation is six employees or fewer.

Farm workers are a proposed exemption. Their proposed salary is $12.50 in five years and then the topic would be reviewed.

There was no teenager exemption as of the time Simonetta addressed the chamber.

Tipped workers were not exempt in the current legislation, but were handled differently.

“There will be an increase for tipped workers. It has not been decided what that increase will be. There is a thought that if other workers are being raised on their base, that tipped workers should be raised as well, and their tips getting to the minimum that is set.”

Paid Sick Leave:

It’s the Law

Paid sick leave “is a law,” the tourism industry executive reminded the audience.

“The law says you can’t take any punitive action ... no punitive action by the employer for taking what has been earned,” Simonetta said.

The New Jersey Paid Sick Leave Act went into effect Oct. 29 after being signed into law by Gov. Murphy on May 2.

“It says that one hour is earned for every 30 hours worked, up to 40 hours each year,” Simonetta outlined.

There are no exemptions on who earns the time, but there is an exemption on use – “that is, you are not able to use your first day of sick leave until after the 120th day of employment. This was the only way we could get a seasonal worker exemption,” he said.

That clause was fought for by the NJ Tourism Industry Association and its vice president, Southern Ocean Chamber Chief Executive Officer Lori Pepenella. The reason concerns the natural temptation that summer employees would have to cut out early at the end of the season.

“If people are sick, they do deserve to take the day off,” Simonetta said, “but we were very concerned that the seasonal employee – I was one, I worked on the boardwalk – if it was the Friday before Labor Day and I was going to get three days paid, you’re never gonna see me.

“We made that argument with the Legislature, and luckily, half of the Legislature who were on the appropriations committee debating this had been either a lifeguard, worked on a wheel on the boardwalk, or on the ski slopes, and they all realized that.”

Plastic Bag Ban

May Go Statewide

Companion bills A 4330/S2776 prohibit carryout bags made of plastic film, polystyrene foam food service products,and single-use plastic straws, and assess a fee on paper carryout bags. The State of the Chamber audience heard background on the bills, which are of particular interest now that Stafford and Long Beach townships are among the municipalities already banning carry-out bags.

“Be careful what you wish for,” Simonetta started the topic. “It is not without controversy, but I expect it to be passed in this Legislature and on the governor’s desk probably by mid-June.”

The governor has said that he wants “a complete ban,” Simonetta noted. Murphy vetoed a bill that he did not feel went far enough.

“So this September a more-robust bill was introduced. It bans the use of all plastic bags, expandable polystyrene (the material that fast food burgers come in) and single-use straws, which are a big issue all over the country.

“It also includes a 10-cent fee on paper bags, half of which the retailer gets to keep, and half of which the state gets.

“There are some exemptions: the plastic that normally is separating meat from vegetables and fish; some of the things you get on the prepackaged grocery shelf; there are fish, meat, chicken (exemptions where) polystyrene can still be used,” he listed as a few examples. Another is that single-use straws would be allowed for people who require it due to a disability or medical condition.

The new legislation would supercede any local laws, as the proposal states.

The topic raised one question from the audience, whether the NJTIA believes the plastic bag ban would hurt tourism. The questioner noted that some people right now are saying they shop in a different town than Stafford “because of the inconvenience.” She wondered if tourists might go to another state than New Jersey for the same reason.

Simonetta said, “I don’t know if there is any economic data on that,” but added that if it is something observers think should be discussed, that could be done.

The State of the Chamber was sponsored by Atlantic City Electric. Approximately 100 businesspeople attended the forum, held from 8:15 to 10:30 a.m.

— Maria Scandale

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