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VOL. 118 | NO. 74 | Thursday, April 29, 2004

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It generates this yearw we have budgeted for $10

Lingering Debt Plagues Local Officials

Convention center costs absorbing citys marketing dollars


The Daily News

For the first time in about 15 years, the combined city and county hotel-motel bed tax will yield a financial deficit, meaning the Memphis Cook Convention Centers operating costs will be paid in part by residents tax dollars.

The lingering $92 million in construction costs associated with the construction of the Cannon Center for the Performing Arts and the renovation and expansion of the convention center has multiple ramifications for local government.

Funding breakdown. Memphis Convention and Visitors Bureau president Kevin Kane said between 60 percent and 70 percent of the bed tax is set aside to pay for convention center bond indebtedness, while about 35 percent of the funds are used by the CVB to market the city to tourists.

Kane said officials are facing two serious issues: the outstanding bond debt and the loss of as much as $1 million in hotel tax revenue each year because of discounted Internet hotel reservations.

You have a couple of forces working here that could paint hopefully only a short-term deficit from the hotel-motel bed tax, he said.

Priorities. Wayne Tabor, president of the Memphis Hotel and Lodging Association, said he worries that local governments strain to pay off debt could compromise other priorities the tax was designed to fund beyond the convention center.

There is going to be a $1.9 million loss at the convention center this year, so that will have to be funded out of the county tax, and a portion of the convention center construction is also coming out of the county tax, Tabor said. What we dont want to see happen is the Convention and Visitors Bureau or the convention center get cuts in any way to help pay those bonds off to make it solvent.

High taxes. Including sales tax, the tax rate for all hotels and motels in Memphis stands at 16.9 percent, ranking it as one of the top five most expensive taxes of its kind in the country.

James Huntzicker, county director of administration and finance, said the countys 5 percent bed tax rate generated $10.8 million for the fiscal 2004 budget; next year, the tax is projected to generate $10.3 million.

That tax is set up to be used for a variety of things, Huntzicker said. But first it goes to pay the original debt on the Cook Convention Center. Then it funds the Convention and Visitors Bureau.

If there are any funds after that this year there probably wont be, but there have been in the past they would go to fund new debt on the convention center and/or operating expenses at the convention center.

Pat Black, assistant city treasury official, said most of the 1.7 percent bed tax is earmarked for the bond debts of the convention center renovation.

Meeting specific needs. The citys bed tax, which reportedly generates about $1 million annually, will end in about nine years.

In the past, the tax has generated funds for the Wonders Series, as well as improvements to the Mid-South Coliseum. Black said any excess funds help pay for the CVBs city marketing efforts.

Tabor said many hoteliers would like to see the CVB be able to step up its marketing efforts in the future.

Tabor, a member of the CVBs board of directors, said the bureaus staff does a good job promoting the city, but its efforts are limited because funding is limited.

The bureaus portion of the tax is about $5 million, but we dont have enough advertising funds because a lot of the bureaus funds are used for payroll and administrative needs the same ones that any office would need, Tabor said. I wouldnt like to see a tax increase, but I would like (the CVB) to have more funds for advertising the city of Memphis. If you look at their advertising budget, it is well below a lot of cities we compete with.

More advertising dollars. Kane said if the CVB had additional funding, it would go entirely toward advertising.

We could use one or two more people on staff, he said. But the issue is promoting Memphis. We would pursue hard-core advertising money for national cable and national print advertising promotional things that would drive business and activity to the city.

However, the citys financial restrictions in promoting conventions and other events are offset somewhat by the dynamic transformation happening Downtown.

A lot more is happening now that the city is marketing on its own, Tabor said, noting the Memphis Grizzlies surge into the NBA playoffs, two heavyweight boxing fights in The Pyramid, Memphis In May events and the annual Liberty Bowl and Southern Heritage Classic college football games.

All of this plays a big part in marketing the city and helps a lot more than just relying on the bureaus promotion efforts, Tabor said. These things are mushrooming to the citys advantage.

Collectively, theyre helping to get the citys name out there.


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