Fayette County

Hospitality group backs hotel tax increase to pay for overhaul of Lexington Convention Center

The newly renovated Lexington Convention Center was renovated in 2003, but officials say it needs to be renovated and expanded.
The newly renovated Lexington Convention Center was renovated in 2003, but officials say it needs to be renovated and expanded. LEXINGTON HERALD-LEADER

A group of hotel, motel and other hospitality professionals has voted unanimously to back a new financing plan for a $250 million overhaul of Lexington’s downtown convention center.

The Bluegrass Hospitality Association is the first of several business and downtown groups asked to support the new plan in the next two weeks.

On Feb. 18, the Urban County Council will take a final vote on a resolution supporting the new financing plan that includes a 2.5 percentage point increase in the Fayette County hotel and motel tax and commits $10 million in city funds to the project.

Brent Rice, chairman of the Lexington Center Corp., told the Lexington Forum at its Thursday morning meeting on the University of Kentucky campus that community-wide support for the convention center overhaul will be crucial in getting the financing plan through the state General Assembly. Lexington Center manages the convention center, Rupp Arena and the Lexington Opera House. The vote Wednesday by the Bluegrass Hospitality Association was an important one. The increase in the hotel and motel tax will go on local hotel bills.

“It’s a good investment,” Rice said. “That’s the case that we are trying to make.”

Originally, the proposed financing plan for the renovation included $75 million in state money, $171 million in bond money and $4 million from Lexington Center reserves and other revenues. Debt payments on the $171 million would come from revenues generated by a 2 percentage point increase in the hotel and motel tax for Fayette County.

But Gov. Matt Bevin included $60 million instead of $75 million in his proposed budget for the project. As part of the new financing plan, Bevin’s administration wanted an additional .5 percent increase to the local hotel and motel tax. That .5 percent would then go back to the state to be used for debt payments on the $60 million. Rice said the details of the plan have not yet been finalized.

In addition, Bevin wanted the city to put money into the project as well. The new financing plan would include $10 million from the city and would increase the hotel and motel tax in Fayette County by 2.5 percentage points. If passed by the General Assembly, Fayette County’s hotel and motel tax would be 8.5 percent, with an additional 1 percent statewide tax on top of that. That means the total hotel and motel tax would be 9.5 percent. That’s in line with or slightly less than competitor cities, including Louisville.

Rice said the bill to increase the hotel and motel tax has not yet been filed in Frankfort. The group wants to get the support of the Urban County Council and other community and business groups, including Commerce Lexington, before the legislation is filed.

Sen. Reggie Thomas, D-Lexington, said the legislature wants to see that Lexington is behind the project.

“I think it’s critical in order to get this bill through,” Thomas said. “All we are asking for is our fair share.”

Under former Gov. Steve Beshear, the legislature approved a $57 million direct allocation to Louisville for an expansion of its convention center in 2014. The legislature also approved an increase in Jefferson County’s hotel and motel tax for debt payments on bonds for that overhaul.

During Thursday’s meeting, Rice and Bill Owen, president and CEO of Lexington Center Corp., said multiple studies have shown that if the convention center doesn’t expand its exhibition hall space, Lexington will lose convention business.

A recent study by Convention Sports and Leisure showed that the convention center generates $42 million a year in revenue through hotel stays and spending at restaurants and local businesses. If the convention center is expanded, that impact would grow to $57 million.

“If we do nothing, that $42 million becomes $27 million,” Rice said.

Owen, who celebrated his 25th year at Lexington Center on Thursday, said the proposed renovation includes an exhibition hall of more than 100,000 square feet to be built west of Rupp Arena. The current exhibition hall that faces Main Street will be converted to more ballrooms and meeting rooms. If the plan is approved by the General Assembly and the city, the design phase would start in May, with construction probably starting in early 2017. Construction would take a little more than two years because the plans call for the convention center to remain open during construction, Owen said.

Owen said the convention center already lost one of its long-time clients — Coal Prep — to Louisville this year because it’s too small. Coal Prep is the annual coal processing and exhibition conference. Alltech also is considering moving some of its larger conferences to other cities because the Lexington convention center doesn’t have enough space, Owen said.

Beth Musgrave: 859-231-3205, @HLCityhall