Owensboro city commissioners are considering creating a 4% city transient hotel tax as a way to fund construction of an indoor sports complex.
Commissioners held first reading on the ordinance Tuesday evening. If approved at the commission’s next meeting later this month, the city will begin taxing hotel room rentals in January.
The tax would also apply to other types of rentals, such as rentals through airbnb.
Daviess Fiscal Court already has a 6% hotel-motel room tax. The proceeds from 3% of the city’s tax would go to fund construction of the planned indoor “sportsplex,” while 1% would go to the Owensboro Convention Center for operations, City Manager Nate Pagan said.
“We debated internally for a while,” Pagan said Tuesday morning. “It’s tied more towards the funding mechanism for the indoor sport facility.”
Commissioners have previously said they support building an indoor sports complex as a way to increase sports tourism. A consultant told commissioners last month an 88,000-square-foot indoor sports complex would result in $1.3 million in hotel room rentals and $3.1 million in other sales annually, if the facility were booked with tournament 50% of available weekends.
An 88,000-square-foot facility would cost approximately $16 million to $17 million to build and would require $307,000 annually to operate, the consultant said.
“We have moved the sportsplex forward, and we are going to have expenses, so it made sense” to introduce the hotel tax now, Pagan said.
The tax would be on top of the county’s transient hotel room tax, making taxes on local rooms “at the higher end” of rates, Pagan told commissioners Tuesday evening. But, virtually all the revenue “will be generated by visitors,” he said.
The city is subsidizing the convention center out of its general fund. Pagan said the 1% generated from the tax will replace the city dollars that go to the convention center. Those city funds, in turn, will be funneled towards the sportsplex project, Pagan said.
The hotel tax would not apply to places that provide continuous lodging to people for 30 days or more. City Attorney Mark Pfeifer said he does not believe the tax would apply to hotels that rent rooms by the week, as long as the occupant kept the room for 30 or more days in a row.
As part of the proposal, the city must create a tourist and convention commission, and commissioners held first reading of that ordinance.
Pagan said the commission would have no real duties, but the city is required by law to have a commission if it creates a hotel room tax. Tourism marketing would continue to be handled by the Owensboro-Daviess County Convention and Visitors Bureau, Pagan said.
“We are not trying to create a second CVB,” Pagan said. “The existing CVB will continue to market the community.”
When asked for comment, Madison Silvert, president of the Malcolm Bryant Corp., said the investment into the sports complex needs to be worth the hotel tax increase. The Malcom Bryant Corp. owns the Hampton Inn & Suites Downtown Owensboro-Waterfront.
“I think all of us want Owensboro to be the best it can be, both for our citizens and our visitors,” Silvert said. “If we intend for Owensboro to have the highest taxes that a hotel guest will pay anywhere in the Commonwealth, and this new tax will result in us being tied for the most expensive, then whatever we decide to build better will be the absolute best.
“I hope it can be. Owensboro deserves it.”
Mark Calitri, president and CEO of the Convention and Visitors Bureau said in an email the city’s hotel rates, with the tax, would be competitive with other Kentucky cities.
Calitri said, “in general, the total tax increase can be a deciding factor with some travel planners,” but said he supported the idea of the sports complex.
“I see a bright future with a quality sports facility, effectively managed, combined with Owensboro and Daviess County’s well-established market position in sports tourism,” Calitri said.