Ky. House panel approves bill for hotel-tax increase in Lexington

With Gov. Matt Bevin’s blessing, a state House panel approved a bill Thursday that would allow Lexington’s Urban County Council to pass an additional 2.5 percent transient room tax to help pay for expanding Lexington Convention Center.

State budget director John E. Chilton told members of the House Economic Development Committee before they voted on House Bill 441 that Bevin is “very much in favor” of the measure.

Two committee members, both Republicans, voted against the bill, which now goes to the full House for consideration. Voting no were Reps. Lynn Bechler of Marion and Russell Webber of Shepherdsville.

The $250 million renovation and expansion would include a 100,000-square-foot exhibit hall, a 22,500-square-foot ballroom and an additional 30,000 square feet of meeting and breakout space.

The bill, sponsored by Rep. Ruth Ann Palumbo, D-Lexington, would allow the council to increase the hotel and motel tax in Fayette County by 2.5 percentage points, bringing it to 9.5 percent.

Mary Quinn Ramer, president of VisitLex, said the higher tax rate is in line with or slightly less than competitor cities, including Louisville.

Each percentage point increase in the tax is expected to generate about $1.6 million a year.

On Feb. 18, the Urban County Council passed a unanimous resolution asking the state legislature to allow the council to authorize and pass the room tax increase.

The council also would commit $10 million in city funding to the project.

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 revenue. Debt payments on the $171 million would come from revenue generated by a 2 percentage point increase in the hotel and motel tax for Fayette County.

But 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 0.5 percent increase to the local hotel and motel tax, which would go back to the state to pay for debt payments on the $60 million.

The renovation and expansion is designed to attract more conventions to Lexington. The average convention attendee in Lexington spends $290 a day, lawmakers were told Thursday.

Craig Turner, treasurer of the Lexington Center Corp. board of directors, told the committee that modern convention centers need at least 100,000 square feet of contiguous exhibit space to be considered by many clients.

“Cities with more space and amenities — such as Chattanooga, Grand Rapids and Kansas City — are poaching potential Kentucky visitors,” he said.

The center currently has 66,000 square feet of contiguous exhibit space.

“It no longer serves the needs of the region, and other cities and regions are growing and capturing our market,” Turner said.

Turner specifically expressed concern about meeting the needs of the popular Lexington Comic and Toy Convention and the Alltech REBELation convention.

The convention center has an estimated annual economic impact of $42.1 million on the regional economy, Turner said. If expanded, that impact would increase by $28.5 million. With no investment, the impact is projected to drop to $29 million, he said.

Turner also said public investment in the convention center will lead to new private money being invested into downtown Lexington, particularly in the form of new hotels.

Work on the project would take place in two phases over two years, and the center would remain open and continue hosting conventions and trade shows during the construction.

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.

This story was originally published February 25, 2016 at 11:05 AM with the headline "Ky. House panel approves bill for hotel-tax increase in Lexington."