Lancaster visitors bureau opposes hotel tax hike to help convention center

Tim Stuhldreher//June 6, 2012

Lancaster visitors bureau opposes hotel tax hike to help convention center

Tim Stuhldreher//June 6, 2012

However, the board opposes raising the county hotel tax for that purpose.

“The PDCVB Board of Directors … does not support an increase in the hotel tax or excise tax” to fund the convention center’s debt service, operating expenses or upkeep, the statement said.

The financial issues surrounding the convention center have been a topic of public concern for many months. The facility is exceeding its targets for revenue and holding down expenses, officials say, but the county hotel tax, which was supposed to cover the convention center authority’s debt payments, is proving insufficient to do so.

Four months ago, the bureau convened a task force to review the situation, particularly the terms of the bond issue. Task force members presented their findings, followed by the position statement, this afternoon at a news conference at the center.

Normally, 80 percent of the county’s 3.9 percent hotel tax goes to the convention center, with the remaining 20 percent, about $900,000, going to the bureau for tourism promotion. However, because the convention center’s bond reserves fell below minimum levels, it has been receiving the bureau’s share of the revenue in addition to its own for several months.

If the funding isn’t restored in some fashion by the end of 2013, the bureau’s marketing efforts will be significantly hampered, bureau President Chris Barrett said.

To achieve a solution for the center, the bureau board recommended mixing revenue enhancements with cost reductions. It did not offer specifics, though it called for “spreading the incremental burden across the entities that benefit” from the convention center.

It recommended developing a formal agreement between the bureau and convention center authority defining their respective roles in marketing the facility.

It said there are no tourism industry representatives on the convention center authority’s board and called for the appointment of at least three. However, authority board member Sharron Nelson said the law governing convention center authorities would prohibit that.

Task force chairman Al Duncan called the structure of the convention center’s financing “the 800-pound gorilla in the room.” He focused on a variable-rate component of the bond interest, which bondholder Wells Fargo charges as the cost for assuming risk.

The rates are due to reset in March and could spike upward if the revenue stream to make bond payments is not adequate and assured.

Preventing that would require some form of “credit enhancement,” such as additional bond guarantees or significant additional revenue.

Convention Sports & Leisure International, the consultant retained by the Lancaster County Convention Center Authority at Wells Fargo’s behest, recommended raising the hotel tax before the March 2013 reset. However, it’s important to look farther down the road to possible future resets, Duncan said. As long as there is a variable component to the debt structure, the cost of financing it can’t be fully known, he said.

“As long as that open door exists, we don’t have a solution,” he said.

The bureau posted its statement, the task force report and today’s presentation materials on its website.