VOL. 118 | NO. 74 | Thursday, April 29, 2004
Bed Tax (lead)
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
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
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
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