Rising interest rates have hit the Classic Center arena project, and executive director Paul Cramer wants to tax hotels to make up the difference.
Cramer told Athens-Clarke County commissioners during a June 14 work session that he plans to sell $30 million in bonds to finance part of the $132 million arena. Interest rates are up to 5.3% from 2.2%, adding millions of dollars to the cost of borrowing.
The Classic Center initially sought to raise the local hotel/motel tax from 7% to 8% to help finance the arena. The commission approved the hike in January, but the state legislature didn’t act on it. Cramer’s latest idea is to create a special tax district consisting of all the hotel properties in Athens-Clarke County and raise their property taxes by two mills.
As with the hotel/motel tax, the idea is that the arena will benefit hotels because visitors to arena events will generate an estimated 90,000 room-nights a year, so hotels should help pay for it. “It’s a great tool for the local government,” Cramer said. “When you create something that’s going to give back to the private sector, it’s a great way to help pay for that.”
Unlike raising the hotel/motel tax, though, hotel owners haven’t endorsed the special tax district, Cramer acknowledged. “I think it’s only fair to say, their opinion would not be to move forward with this. They would be very opposed to this,” he said in response to a question from Commissioner Carol Myers. “I have talked to them. They don’t like the idea of their property tax going up. They don’t want their property tax to go up.”
The opposition is despite a relatively small cost that could be passed on to customers. The tax hike averages 73 cents per room per night, with a maximum of $1.25, according to Cramer. It would raise $400,000 a year, the same amount as raising the hotel/motel tax by a point. “That’s the gap that’s really needed to bring this second bond all the way home,” Cramer said.
Payments on the $30 million bond would be about $1.9 million per year for 38 years. Other sources of revenue would include a portion of the existing hotel/motel tax, naming rights for the arena and lease payments from developers on surrounding property controlled by the Classic Center.
Cramer asked the commission to vote on creating the special tax district at its Aug. 2 meeting. Several commissioners said they’d like to explore alternatives and get more feedback, though.
“It just seems like a large new thing to take on,” Commissioner Jesse Houle said. “This body debated [tax allocation districts] for millennia, it seemed like, before that passed. I just hesitate to jump so quickly into something else. It needs more time, at least for me to be comfortable with it.”
Despite the additional interest expense, the arena remains under its $135 million budget, even after the Classic Center authority added back in some expenses that had been cut earlier, such as a canopy over the entrance and padded seats. In addition to the upcoming second bond issue, other sources of funding include $33 million in local sales taxes from the voter-approved SPLOST 2020, $49 million from a previous bond issue, state grants and corporate funding.
Commissioner Russell Edwards suggested an alternative: Rather than tax hotels, tax the apartment buildings around the arena, such as The Mark, which opted out of joining the Athens Downtown Development Authority and paying its one-mill levy. “I think we can make the argument these properties are going to benefit,” Edwards said. “They’re right next to a beautiful arena with cushioned seats.”
Such tax districts have been created in geographical areas before, like the Cumberland Improvement District around the Braves’ Truist Park. But ACC could be on shaky legal ground if it tried to tax one downtown apartment building but not an apartment building across the street, said Allison Dyer, an Atlanta lawyer specializing in public-private partnerships. Taxing all of one type of use, like all hotels, would be allowed, she said.
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