Philly’s effort to recoup back taxes from tiny nonprofit could cost it something special | Inga Saffron

For three very long days last week, an attorney from Philadelphia’s Law Department and a representative from the Chamounix youth hostel jousted in a virtual courtroom over an issue most people wouldn’t waste a nanosecond thinking about: the precise meaning of the word hotel. There have been murder cases that have taken less time to resolve.

As a simple matter of spelling, only a single letter differentiates hotel from hostel. Yet, if that consonant were dropped, and the Friends of Chamounix Mansion were deemed a hotel, the nonprofit would be on the hook for more than $500,000. That’s how much the Friends, which runs its hostel out of a historic Fairmount Park mansion, would owe the city treasury for failing to pay Philadelphia’s hotel tax from 2008 to 2013.

It’s a strange time for the city to be pushing a big tax case against a tiny, do-good organization, especially one that occupies and maintains a city-owned historic site. The hotel industry is in dire straits. In October, the occupancy rate in Philadelphia was down to just 36% because of the pandemic — about half of normal, according to Visit Philadelphia, the city’s tourism promoter. Chamounix itself has been closed since March, and the organization is running on fumes, says Bill O’Brien, chairman of the hostel board. The assessment would put Chamounix out of business, he insisted during testimony last week before Common Pleas Court Judge Lori A. Dumas.

While the optics couldn’t be worse, it is also true that the city needs every penny it can get. Tax collections are crashing, and revenue officials anticipate a $750 million shortfall this year. At some point, travelers will start traveling again. And many of them will end up staying in nontraditional lodgings, such as Airbnb, Roost, or Sonder. What would happen if those companies were to suddenly start claiming that they aren’t hotels and therefore not subject to the 8.5% tax the city imposes on hotel guests? (All now pay the hotel tax.)

“Chamounix absolutely meets the definition of a hotel,” Brian Cullin, the deputy city solicitor handling the case, argued during the hearing. A quick look at Philadelphia’s hotel tax ordinance suggests he’s on solid ground: Included in the long list of things that could be called a “hotel” is “any place recognized as a hostelry.” All the city’s other hostels pay the hotel tax.

And yet, in this case, being right and doing right may be two different things.

Tucked in a hard-to-reach corner of West Fairmount Park, on a hill overlooking the Schuylkill, Chamounix Mansion is one of 19 architecturally significant estates that the city inherited when it used eminent domain to create Fairmount Park in 1867. For years, many of those great old mansions sat moldering away — easy targets for vandals — as the city struggled to find uses for the quirky buildings. The Chamounix mansion had just experienced a serious fire when the Friends agreed in 1964 to take over the building and operate it as a youth hostel. “It was boarded up, and they were going to demolish it,” O’Brien says.

Since then, the nonprofit has raised more than $1 million to renovate the 1802 house, which was built as a summer home for a wealthy Philadelphia merchant. The Friends of Chamounix are now a vital part of the city’s efforts to maintain its scattered collection of historic Fairmount Park houses.

» READ MORE: Philly’s reserve funds could be dangerously low by July. City officials hope for more federal aid.

The Friends’ commitment and hard work hasn’t stopped the city from relentlessly pursuing the group for back taxes. After discovering in 2013 that the hostel hadn’t been paying the hotel tax (which helps defray the cost of running the Pennsylvania Convention Center), the city sent the Friends its first invoice. The group refused to compromise.

So city lawyers went to the city’s Tax Review Board. When that board determined it had no jurisdiction, the dispute was moved to the Court of Common Pleas. The case is now in the hands of Judge Dumas, who looked both amused and confounded as the two sides offered competing definitions of hotel.

During the hearing, the Friends of Chamounix responded to the city’s offensive by rallying a group of high-profile witnesses to its defense. Among them were two former mayors, Ed Rendell and Michael Nutter. Both testified that they were astonished to see the city making an example of a tiny hostel.

“I never considered it a hotel,” Nutter said. “It’s a youth hostel.”

As evidence, the Friends’ attorney, John Mattioni, compared the accommodations at Chamounix with what you might find in at a hotel in Center City. For starters, Chamounix charges just $22 a person to stay at the mansion. For that, you get to sleep in a bunk bed and share a large dormitory-style room with strangers. According to house rules, which were designed to encourage visitors to spend time touring the city’s attractions, you must leave the mansion by 11 a.m. and can’t return until 4:30. Only people who are members of Hostelling International are allowed to stay.

“We are not a motel. We are not an inn. We are not a guesthouse,” Mattioni argued. “Our license compels us to operate as a hostel.” O’Brien noted that the other well-known hostel in Philadelphia, Apple Hostel on Bank Street in Old City, is licensed as a rooming house. (It is also licensed as a hostel, according to its owner, Marc Desmaris.)

“The city has offered ample evidence that Chamounix meets the definition of a hotel,” Cullin countered. “They receive fees from overnight guests,” just like a hotel. He claimed that the Friends “are interested in competing with Airbnb,” and not paying the hotel tax is a way to gain “an edge over their competitors.”

And, so it went. For the record, the hotel tax would add $1.87 for the price of a night’s stay at Chamounix.

In the end, Rendell offered a Solomonic compromise. Since the Friends have already done so much good for the city, forget the back taxes, he advised. When — and if — the hostel reopens, then the city can start charging the hotel tax.

Now it’s up to Dumas to define what a hotel is, once and for all. She promised to issue a written decision soon.

NOTE: The story was updated to include additional information about Apple Hostel.