Metro’s hotel-motel tax is fueling more debate on the proposed $585 million Music City Center, with project opponents maintaining its revenues could be spent elsewhere and proponents arguing the dollars are inherently tied to a new convention center.
Kevin Sharp of Nashville’s Priorities, an advocacy group that opposes building Music City Center, believes proceeds from Metro’s hotel occupancy tax, half of which is dedicated to a new convention center, could be used for other purposes, potentially by changing a state law that outlines the way the city must use those funds.
“I’m not saying we take that money and go, ‘OK, we’re going to put it into sidewalks in some particular part of town,’ ” Sharp said. “Using the dollars to boost tourism here is an admirable thing to do with it. I’m just saying it doesn’t have to be a convention center.”
But Walt Baker, CEO of the Tennessee Hospitality Association –– an ardent supporter of Music City Center –– sent a letter to Council members Tuesday that called redirecting funds “fiscally irresponsible” and a breach in trust with the hotel industry, a group he claims has supported the tax since it was first enacted more than three decades ago.
“If anyone is looking at the hotel occupancy tax for revenues to fund initiatives other than those specifically legislated, and without involving the hospitality industry in those discussions, we suggest they look somewhere else,” the letter reads.
Under Tennessee state law, municipalities can levy taxes on occupants at hotel and motel lodgings to collect proceeds for tourism development. The rate in Nashville, which has changed over the years, currently stands at 6 percent, 3 percent which would help pay off an estimated $40 million annual debt service to build a convention center south of Demonbreun Street under a finance plan put forth earlier this month by Mayor Karl Dean. (The project would also collect money from a $2 hotel room tax, rental car taxes, an airport taxi and departure tax and sales tax from a tourism development zone.)
With the state’s authorization, Metro’s hotel occupancy tax is currently allocated in the following way:
“Two percent of the 6 percent tax is specifically allocated to the convention center, with an additional percent being eligible for use toward the funding of a convention center,” Metro Council attorney Jon Cooper wrote in a legal opinion last month. “Thus a state law change and Council ordinance would … be required to use this 2 percent for purposes other than ‘modifying, constructing, financing and operating a convention center.’ ”
Given the tax’s broad aim to fund tourism development, Sharp said he isn’t sure allocating revenues for uses other than the convention center actually requires changing the law, but added, “it can be done.”
“I’ve talked to a couple of folks in the General Assembly, who just go, ‘We just want to know what Metro wants to do,’ ” Sharp said. “So, there’s not any magic going on over there. They’re creating those laws and what the money gets spent for based on what Metro has asked them to do. So, if the Council asks them to change it, they will change it.”
Asked if adjusting the law could gain traction, state Sen. Joe Haynes (D-Nashville) –– who openly supports the convention center –– said “absolutely not.”
“I don’t know how they’re going to change it,” Haynes said. “It would be affecting Davidson County. I can’t speak for Sen. (Thelma) Harper, Sen. (Douglas) Henry or Sen. (Jack) Johnson, but I wouldn’t be in favor of it.”
But Councilwoman Emily Evans, a critic of the Music City Center, pointed out that while it’s true some of the tax streams are specifically set aside for the convention center, one penny on every dollar could continue funding the Sommet Center, while another percentage point is simply reserved for “tourist-related activities” and could benefit the city’s parks, the Nashville Zoo or the Schermerhorn Symphony Center, for example.
“That’s clearly legal and appropriate,” she said.
“I wish (the Tennessee Hospitality Association) were as energetic about raising revenue for other purposes except the ones that serve their self-interests,” Evans said. “We’ve got a lot of needs in this city.”