A proposed 21c Museum Hotel in downtown Lexington received approval Monday for up to $9 million in state tax incentives over a decade.
The Kentucky Tourism Development Finance Authority, which oversees tax credits for tourism and film-related projects, approved the sales tax credit for the 90-room hotel planned for Lexington's historic First National Bank Building.
To receive the tax rebate, a tourism project must cost more than $1 million, be open more than 100 days a year and attract at least 25 percent of its visitors from out-of-state by its fourth year of operation. The rebate is based on sales tax generated by the tourism attraction.
The 21c hotel is projected to exceed all of the tax rebate's requirements, said Gil Lawson, spokesman for the Kentucky Tourism, Arts and Heritage Cabinet. The boutique hotel has a budget of $42 million, will be open year-round and is expected to attract 42 percent of its visitors from out-of-state, he said.
The state's tourism authority heard a report Monday from Huden Strategic Partners, the consulting firm hired to review the 21c's application for incentives.
Other tourism projects that have been approved for tax incentives by the authority include the Newport Aquarium, Kentucky Speedway, the Ark Encounter and welcome centers at some of the distilleries on the Kentucky Bourbon Trail, Lawson said.
Louisville art collectors Laura Lee Brown and Steve Wilson opened the first 21c hotel in Louisville in 2006. In April, they announced plans to open a boutique hotel, art museum and restaurant in the 15-story former bank building at 167 West Main Street in Lexington.
In October, Lexington's Urban County Council approved a $1 million loan for 21c to be repaid over 10 years. The loan will be used to hire low- to moderate-income workers, said Craig Greenberg, president of 21c Museum Hotels. Money for the loan was left over from a federal Department of Housing and Urban Development grant originally given to the Lexington Festival Market project on West Main Street.
The hotel also is asking the city for a $6 million federal Department of Housing and Urban Development Section 108 loan, and to provide a $5.8 million tax-increment financing plan.
The Section 108 loan program was established to help cities finance economic development projects. As collateral, the city pledges future Community Development Block Grant money it receives annually from HUD. Lexington gets about $2 million a year in Community Block Grant money.
Under the tax-increment financing plan, the city would finance improvements using 80 percent of new property taxes and payroll taxes generated by the project over 20 years.
In December, the Kentucky Economic Development Finance Authority also approved a $500,000 tax-increment financing plan for a portion of the project. The money would be used for public infrastructure improvements such as curbs, sidewalks, street lighting and sewer upgrades, according to city documents.
The hotel project also will rely on a $14 million loan from Central Bank and federal historic and new-market tax credits.
The company has said work on renovating the historic bank building will get underway in 2013, with the hotel expected to open in 2014.