Thursday, March 07, 2002

Hotel tax deal seals financing
for convention center

By Dan Klepal
The Cincinnati Enquirer

        For the first time, the city of Cincinnati and Hamilton County have agreed to a financing package that paves the way for a $198 million expansion and renovation of the Albert B. Sabin Cincinnati Convention Center.

        Hamilton County commissioners on Wednesday approved the plan with a 2-1 vote. Commissioner John Dowlin, former mayor of Sharonville, voted against the deal. Cincinnati City Council previously approved it.

        The centerpiece of the financing structure is an increase in the countywide hotel-motel tax from 3 percent to 7.5 percent, starting Jan. 1. The city's tax will double, from 1.5 percent to 3 percent, beginning April 1.

        The result is that lodgers will pay a 13.5 percent tax for rooms in most county municipalities, after the 6 percent countywide sales tax is tacked on. The rate will vary slightly from community to community, depending on whether there is a local tax. Lodgers will pay 16.5 percent in Cincinnati.

        The new countywide tax is expected to bring in about $7.8 million a year; the city's tax increase will add about $1.3 million. That money, combined with cash from naming rights and money from the city of Cincinnati and the Convention and Visitors Bureau, will pay off about $141 million in bonds over 30 years.

        It's a controversial plan: Downtown hotel managers view it as a savior, while their counterparts to the north view it as a threat to their livelihoods.

        Mark Schutte, general manager of two Red Roof Inns in Sharonville, said hotels in the northern part of the county won't get any benefit from an expanded convention center and the higher tax rate will drive visitors across the county line.

        “This is a win for about eight hotels in downtown Cincinnati and punishes everyone else,” said Mr. Schutte, adding that there is now a coalition of northern hotels that will fight the issue on the state level.

        Before the deal can become final, the state legislature must pass a law that allows counties to raise their tax above 3 percent and dedicate proceeds to a convention center. The bill is pending in the House.

        “They have succeeded in awakening a giant,” Mr. Schutte said. “We were not part of the process (drawing up the financing package), and now they run the risk of losing the expansion altogether.”

        Michel Sheer, president of the Greater Cincinnati Hotel-Motel Association, said an expanded convention center is the only way for the city to compete with the likes of Louisville, Columbus and Indianapolis.

        Mr. Sheer said that in the 1990s, the convention center accounted for 55 percent of the business at the Omni Netherland Plaza, where he is managing director. Last year, it accounted for 15 percent.

        “It's hard to understate how important this issue is for the hotel community at large,” Mr. Sheer said. “Our center has been eclipsed in size and features by centers that surround Cincinnati, in Ohio and outside of the state.”

        There have been a variety of plans to expand the convention center at Fifth and Elm streets — along with schemes to pay for it. Initial plans called for a $325 million expansion; one idea had it spanning Interstate 75.

        The current plan is to add space to the west, covering land occupied by the WCPO-TV building and parking lot on Central Avenue. A portion of the center would extend over Central Avenue.

        Delta Air Lines has signed a deal for the naming rights of an expanded center — which would increase exhibit space from 162,000 to 194,000 square feet; increase ballroom space from 35,000 to 70,000 square feet; and give the facility a face lift. Delta will pay in the neighborhood of $30 million to put its name on the building.

        Designing and expanding the center would take about a year, with construction beginning in 2003 and being complete in 2005.

        Commissioner Todd Portune, who unveiled the financing plan in January with Cincinnati Mayor Charlie Luken, said there's still a chance that the rate increase will be less than 4.5 percentage points before it takes effect on Jan. 1.

        The plan assumes hotel receipts will grow at 1 percent per year. If a higher growth rate can realistically be projected, the tax rate could go down, he said.

        “Those issues are still very much in play,” said Mr. Portune, who in February tweaked the plan to give $500,000 per year back to northern hotels, to be used as either a tax rollback or for marketing.

        He and Commissioner Tom Neyer voted for the increase.

        Mr. Dowlin, who had a competing plan, asked that the vote be delayed.

        “It's premature to pass this, knowing more hearings are required (in Columbus),” he said.



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