The executive director of the Lancaster County Convention Center Authority today called for raising the county hotel guest tax from 3.9 percent to 5 percent to help the financially troubled facility meet its funding shortfalls.
“We are at a critical juncture,” Kevin Molloy wrote in a recommendation released this afternoon to stakeholders and the media.
Molloy’s proposal is not unexpected, County Commissioner Scott Martin said. However, the commissioners plan to conduct “a full analysis of fiscal accountability” and see a tax hike as a last resort, not a first step, he said.
The Lancaster County Convention Center and the privately owned Lancaster Marriott at Penn Square together form a $177 million complex. From the start, the convention center was budgeted to run annual operating deficits. To cover them, it receives 80 percent of the hotel tax. That amounted to $3.4 million through the first 11 months of 2011, Lancaster County Treasurer Craig Ebersole said.
However, the hotel tax has brought in less than projected, and utility costs have run high. In August, the authority was unable to make a $545,000 principal payment, and borrowed $750,000 to pay refinancing costs and bills through the end of the year, according to the Lancaster Sunday News.
The authority is not allowed to let its reserve account fall below certain levels, according to the terms of its bond agreements. If it does, the visitors bureau loses the 20 percent of the hotel tax that it receives. Further steps may be taken if that does not solve the shortfall, under the bond terms.
The hotel tax combines with a 1.1 excise tax to create an overall 5 percent tax.
Raising the tax an additional 1.1 percent would not impact room demand, and would create financial stability for the convention center, Molloy wrote.
Taking action also would benefit the Pennsylvania Dutch Convention and Visitors Bureau, which otherwise would have some of its funding redirected to the convention center beginning in April, under the terms of the tax ordinance, Molloy wrote.
Diverting the visitors bureau’s funding would not be enough to meet the authority’s funding needs, Molloy wrote.
Calls to the visitors bureau seeking comment were not immediately returned.