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Court Finds That City of Tulsa’s Tax Increase on Hoteliers Violates Oklahoma Law and Potentially the Oklahoma Constitution

On January 15, 2020, a Tulsa County District Court declared the Tulsa Improvement District No. 1 (“TID”) violated Oklahoma law as a result of the City of Tulsa improperly and arbitrarily attempted to tax hotels with 110 rooms or more in violation of state law, which requires that hotel improvement district taxes of this type apply to all hotels of 50 rooms and up.

In 2017, the City of Tulsa began a campaign to raise money for the marketing of Tulsa.  Oklahoma law states that if over 50% of those included in such a tax object, the City of Tulsa cannot create such a tax.  When the City of Tulsa began their campaign, they sought approval from 50% of hotels with 50 rooms or more.  However, a majority of hoteliers with 50 rooms or more objected because (1) the hotels did not have a majority on the board that controls how this tax revenue was to be used, (2) there was no transparency or oversight on how the funds were to be spent, (3) there were substantial issues with the benefits of this tax being distributed evenly among the hotels,  and (4) the tax rate proposed was too large of a burden on such hotels.  Thus, the City did not have the support from the hotels to create the Tulsa Improvement District No. 1.

The City of Tulsa, undeterred by the lack of support, attempted to create this TID with hotels of 65 rooms or more.  Again, the City could not find sufficient support.  The City made several other attempts to pass this TID, arbitrarily increasing the number of rooms until it thought it had enough support. Finally, the City of Tulsa passed the tax covering hotels with 110 rooms or more, and on an emergency basis no less. The City of Tulsa’s position was that the health, safety and welfare of Tulsa’s citizens was at stake and therefore the tax needed to be rushed through on an emergency basis.

Ultimately, the Court saw through the conduct of the City of Tulsa and Tulsa Hotel Partners, LLC, an intervenor in the lawsuit, and held that Oklahoma law was clear and unambiguous that a TID may only be created with the support of 50% of hotels with 50 rooms or more, not the 110 proposed by the city.  The court found the Statute allowed no room for discretion or manipulation.

Undeterred, the City of Tulsa and Tulsa Hotel Partners, LLC have appealed the decision, remaining steadfast in their determination to further tax and restrain Tulsa hotels without transparency and oversight.

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