12 - Love Civic Center & Hotel Occupancy Tax Rate

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Item No. 12 s TO: Mayor & City Council FROM: John Godwin, City Manager SUBJECT: LOVE CIVIC CENTER & HOTEL OCCUPANCY TAX RATE DATE: October 12, 2018 BACKGROUND: The Love Civic Center was built in 1993 and is in need of major renovations, especially regarding major component systems such as HVAC, lighting and sound, and roofing. The Love Civic Center Board, a sub -component of the Lamar County Chamber of Commerce, is charged with oversight and management of the center. In 2017 this board contracted with WRA Architects to study the facility and help develop a long-range improvement and capital maintenance plan. Probable costs for all of the things that were looked at and identified totaled approximately $3 million, as of April 2017. The board has consistently looked at a much smaller figure, but even so, current revenues will be insufficient to fund many of the needs. STATUS OF ISSUE: Some of the board members addressed the city council in 2017 about various funding mechanisms, most prominently an increase in the Hotel Occupancy Tax (HOT) from its current 7%. Since that time the Chamber of Commerce eliminated a position from the VCC side of their overall budgeting to reduce costs, and with the city's agreement moved an additional '/2 cent from the VCC to the LCC. LCC board members have also visited with local innkeepers about an overall increase to the net HOT rate to eight or even nine cents. Support for the latter rate was a challenge, but most innkeepers see the need to repair and improve the Love Center, and understand too that current revenues will not allow us to even maintain the status quo at that aging, city -owned facility. Members of the LCC board initially asked to make a presentation to, and have a discussion with, the city council in October. However, much more work has been done in the interim. At this point, the board is asking for a two -cent rate increase in order to fund approximately $1.5 million in improvements. These costs would necessarily be funded by the issuance of certificates of obligation (COs). Our financial advisor ran a debt schedule on $1.5 million in debt with a 10 - year payback. Using the most recent year's remittances to the Chamber ($662,108), a two cent rate increase would yield $189,173. The annual debt payment would average around $185,000.