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Corolla Civic Association (CCA) filed a suit in 2019 claiming that Currituck County has been improperly spending occupancy tax revenue on things like law enforcement and public safety services and equipment, and is requesting that the court order the county to transfer $40 million from the General Fund back to its Occupancy Tax Fund.

A judge recently dismissed the constitutional claim for the same items. A plaintiff can assert a constitutional claim only when there is no other claim they can make. According to county attorney Ike McRee, the CCA has 11 other direct claims, therefore a constitutional claim was dismissed.

Both sides believe they have the law on their side.

CCA believes that the county has exceeded the scope of authority granted to it under local legislation, which regulates the spending of occupancy tax funds. “The county is faced with the task of ensuring that one-third of the occupancy tax funds are spent on the marketing of tourism, with two-thirds of the funds being spent on tourism-related expenditures,” said Casey Varnell of Sharp, Graham, Baker & Varnell, LLP, legal counsel for CCA in an emailed response. “The plaintiffs adamantly believe that the county has abused its discretion in interpreting the local legislation to provide carte blanche authority to the county to expend these occupancy tax dollars in any manner they see fit.”

CCA cited county law from the 1980s which specifically spoke to utilizing the tax for law enforcement. In 2004 that language was removed. CCA claims that the removal of the language is indication that occupancy tax should not be used for law enforcement and related services, but the county claims that the amended language actually gave commissioners broader discretion and more freedom in how to spend the money.

Said Varnell: “The plaintiffs simply want to see proper use being made of this restricted tax fund as outlined in the statute, i.e., ‘ …to increase the use of lodging’ and other facilities ‘by attracting tourists and business travelers to the County.’”

The plaintiff is claiming that since the county spent money to increase law, fire and EMS services, and because of the influx of tourists who benefited from those services, that those expenditures are illegal. The county disagrees. “It is indeed appropriate because we believe that by providing the tourists facilities, that increases the likelihood that people will be attracted to come here and use lodging and recreation facilities,” McRee said.

CCA desires that the $40 million they’ve requested be transferred to the General Fund be used for beach nourishment. “Beach nourishment is a vital aspect of the process which will ensure that the Outer Banks of Currituck County will remain a thriving tourist destination,” said Varnell.

Said McRee, “Even if they prevail, there’s nothing [in county ordinances] that requires the county to spend $1 on beach nourishment.

Varnell responded, “While the plaintiffs believe that a focus needs to be placed on beach nourishment by Currituck County, they understand that they cannot dictate exactly how occupancy tax funds are spent by the county. However, given beach nourishment is a use of occupancy tax funds which is explicitly approved by local legislation, it is the Plaintiffs’ hope that Currituck County will realize its significance to the long-term health and viability of the tourism-based economy which provides more than 60% of the county’s revenue.”

So what’s at stake for the residents of Currituck if the county loses the suit? “That could have consequences on the county to meet capital improvement needs and operation needs on the whole,” McRee said.

According to Varnell, however, residents could benefit: “All taxpayers desire to see the government spend tax dollars for their intended use. Success in this lawsuit will achieve that goal. When these occupancy tax funds are used as they are meant to be used, the Plaintiffs and Currituck County stand to benefit greatly.”

The next step for both parties is mediation planned for this month.

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