The Lebanon City Council recently accepted the Tennessee Legislature’s private act relative to the city’s hotel-motel tax after city leaders sought to increase the tax.
Councilors initially sought to increase the hotel-motel tax from 2 cents to 5 cents. State Rep. Clark Boyd addressed the council during its most recent meeting to discuss a “compromise” achieved by state lawmakers.
Boyd said years ago, cities that had a hotel-motel tax could place revenue money from the tax into its general fund to be used however city leaders desired.
“It became sort of policy - or unspoken policy - in the state of Tennessee a few years back that hotel-motel tax had to go exclusively to economic development or tourism,” Boyd said.
However, because Lebanon already had the hotel-motel tax, a joint Tennessee House-Senate committee came to a compromise on the issue.
The City of Lebanon will be allowed to continue to use revenue from the current 2 percent tax in any matter city leaders choose. However, the additional revenue from a potential hotel-motel tax increase must go toward economic development or tourism.
Boyd said the city’s case was a special circumstance because a lot of counties are only allowed to use revenue from the tax for economic development and tourism.
The Lebanon City Council has deferred action on the hotel-motel tax increase last year after some pushback from hotel owners, led by Roshan Patel and Krishna Patel.
“We know the numbers from our hotels. We know how they represent and how they’re going to move forward. The council may think that a 2 percent to 3 percent increase may help with your short-term budget, but we know long-term wise, that’s not the right decision,” Roshan Patel said.
Patel, the owner of the La Quinta Inn and Suites in Lebanon at I-40 and the president of the Middle Tennessee Hotel Association, said hotel revenues are down about 12 percent and Lebanon hotels are behind some surrounding areas.
“We’re falling behind the city of Mt. Juliet. They have full-service hotels. They have one already opened. There’s two more under construction. Lebanon — we have zero,” he said.
Krishna Patel said the increase could be almost a 20 percent net increase of what guests pay now.
“(Guests) may be an easy target to tack on a 2 percent tax hike to, but we’ve also got to keep in mind that in order to facilitate healthy business — to keep our businesses healthy and keep those tax dollars flowing in — we have to remain competitive in the environment,” Roshan Patel said.