FRANKFORT — The Kentucky House voted 52-40 on Friday to approve a bill that would let Lexington raise its hotel tax to help pay for a major renovation of Rupp Arena and rebuild the adjoining convention center.
Lexington Mayor Jim Gray, who described the hotel tax increase as "a critical, pivotal funding source for the project," watched the vote from the House gallery.
However, House Bill 544 faces an uncertain future. Most of the 46 House Republicans opposed the bill as an election-year tax increase, and its next stop is the Republican-controlled Senate.
"We're getting it late in the session," Senate President Robert Stivers, R-Manchester, said Friday when asked about the bill's chances. "The reality is we only know of the essence of the bill. We don't know its details. We understand there is quite a bit of division in Lexington over the issue, and we have four days left (to vote on new House bills). Someone somewhat more cynical than I might say they dropped it right at the last minute to not give us the opportunity to thoroughly vet it."
The Urban County Council has not debated the merits of the proposal during a public meeting, but 10 of 15 council members, including Vice Mayor Linda Gorton, have signed a letter to lawmakers saying they support the tax increase because "without it this project cannot become a reality."
Other council members have expressed reservations, some citing concerns raised by businesses that rely on tourism. Plans for the project involve moving the convention center to the west of the current building, which could require closing part or all of the convention center during construction.
HB 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. The money would help pay for the $310 million construction cost for the arena and convention center and retire $18 million in debt from a 2004 renovation, although Gray has not yet released details of how he plans to raise the rest of the money.
Several Republican members of Fayette County's House delegation voted against the bill Friday, including Robert Benvenuti and Stan Lee, both of Lexington, and Ryan Quarles of Georgetown.
"I just do not believe that it's appropriate to raise taxes," Benvenuti said after the House vote. "We've got to make decisions about what the government is going to do and what it's not going to do, and the answer can't continue to be 'Let's keep going back to the taxpayers for more.'"
The bill's sponsor, Rep. Jesse Crenshaw, D-Lexington, said an improved entertainment complex in the city's downtown would create several thousand new jobs.
Even at the higher proposed rate, Lexington's hotel tax would be cheaper than those found in other regional cities, including Louisville, Columbus, Cincinnati, Nashville, Memphis, Knoxville and Indianapolis, Crenshaw said.
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 Monday afternoon.