Tax for Rupp renovations clears House panel, but some council members still have questions

jcheves@herald-leader.comMarch 19, 2014 

FRANKFORT — At the urging of Lexington Mayor Jim Gray, a House committee on Wednesday unanimously passed a bill to let the city increase its hotel tax to help pay for the renovation of Rupp Arena and a new convention center.

House Bill 544 would give Lexington the authority to raise the city's transient room tax from 6 percent to 8.5 percent, netting an estimated $3.5 million a year. Gray called it "a critical, pivotal funding source for the project."

The money would help pay for the $310 million construction cost and retire $18 million in debt from the 2004 renovation of the facility, although Gray has not yet released details of how he plans to raise the rest of the money.

The House Local Government Committee swiftly approved HB 544 and sent it to the full Democratic-led House for passage. But it faces an uphill climb in the Republican-led Senate with only 10 workdays remaining in the legislative session.

GOP senators have generally expressed opposition to higher taxes, even a local tax increase that Lexington would impose within its own borders.

"They've made clear their position that they're not in the mood for any fees or tax increases," said Senate Minority Leader R.J. Palmer, D-Winchester, whose district includes part of Lexington.

"My argument is, we need to remember that when we gave Lexington the planning money for Rupp last time, we asked them for a financing plan," Palmer said. "That was part of the deal. So now they're back with a plan, and if we're going to oppose this request, then what do we expect them to put in its place to fill that hole?"

Gray will make a stronger case in the Senate if he can demonstrate unified support for the bill in Lexington, especially among hotel and motel owners, Palmer said.

Gray and the bill's sponsor, Rep. Jesse Crenshaw, D-Lexington, said Wednesday that they could not predict the bill's outcome in the Senate.

"We're working vigorously, we're working hard in the Senate just like we did in the House," Gray said.

Still, it's not clear how much support Gray has back home at City Hall.

Some members of the Urban County Council told Gray during a Tuesday work session that they wouldn't sign a letter to legislative leaders supporting passage of the bill. They said they felt left out of discussions about the hotel tax and were hesitant to sign the letter or testify in Frankfort on Wednesday without more information.

Councilman Kevin Stinnett said he received the letter late Tuesday, but that it seemed that other council members already knew about it and had been asked to testify. That not everyone was kept informed created distrust on the council, he said.

"We need the utmost transparency on this project," Stinnett said. "We need it for the public, but we also need it for the council."

Stinnett said he didn't appreciate "that there were council members who have signed this letter before I even got to read it."

Councilwoman Jennifer Mossotti said she couldn't sign the letter because it stated that the council will support raising the hotel tax if HB 544 is approved by the legislature, and she hasn't spoken about that topic yet with anyone in the hospitality industry or the Lexington Convention and Visitors Bureau. Mossotti also said she needs to speak to constituents.

Council members Jennifer Scutchfield and George Myers expressed similar concerns.

Gray said Tuesday that the letter was circulated at the last minute because he learned only late last week that he was to testify Wednesday. That didn't give him much time to contact all of the council members.

After Wednesday's House committee hearing, Gray told reporters he has the commitment of a majority of council members "to support the ordinance for the Rupp project."

Council members Bill Farmer, Peggy Henson, Harry Clarke and Julian Beard traveled with Gray to Frankfort on Wednesday. Vice Mayor Linda Gorton and council members Shevawn Akers and Diane Lawless have also voiced support for the measure.

Farmer has said that the bill will allow Lexington to raise much-needed funds for a key economic development project in the heart of downtown.

In addition to the hotel tax, the legislature is considering a $65 million bond for Rupp Arena and the convention center. The House included the bond in its $20.3 billion, two-year budget bill, which it passed last week. The Senate is expected to unveil its version of the state budget early next week.

Senate President Robert Stivers, R-Manchester, has not said whether he would support HB 544. Sen. Tom Buford, R-Nicholasville, whose district includes part of Lexington, said many senators have concerns about both the hotel tax and the $65 million bond.

The renovation plans involve moving the convention center to the west of the current building. That could mean that part or all of the convention center would close during construction, Buford said.

"We kept asking those questions and we never got any answers," Buford said.

City officials have said they are working on multiple plans on how to deal with convention center business during construction.

Bill Owen, the president and CEO of the Lexington Center Corp., which manages Rupp, the convention center and the retail space inside it, has said that conventions often book two to five years in advance.

The uncertainty concerning what will happen with the convention center in coming years has affected the center's ability to book conventions through 2017. Owen said convention center staff can't guarantee what space will be available at that time.

John Cheves: (859) 231-3266. Twitter: @BGPolitics. Blog: bluegrasspolitics.bloginky.com

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