Now that two-thirds of Jackson voters have approved raising hospitality taxes to build the $61-million Capital City Convention Center, hoteliers and restaurateurs are preparing for the tax levies, effective January 1: a 1% restaurant tax, a 3% hotel tax, and later, a 3% tax on catering in the convention center.
“I don’t think the tax increase will have much impact on our bookings,” said Steve Bohannon, manager of the Jackson Hilton, who opposed the tax increase. “We have pretty solid bookings for the next year or two, and it’ll be a blip on the screen.”
Jeff Good, owner of Bravo! restaurant and Broad Street Baking Company, a staunch supporter of the “yes” vote on November 2, said the restaurant tax is “inconsequential … to help fund the campaign effort so the convention center could become a reality.”
“The simple fact is a penny on a dollar is not going to make anyone choose to eat at one restaurant over another,” he said. “People choose restaurants for a number of reasons, and certainly price is one, but 1% is negligible, and I truly believe if given a choice between two fast food options on opposite sides of County Line Road, a customer will pull into the one which is easiest to drive into. The 1% will not even enter into the equation.”
Earl Gaylor, owner of the Edison Walthall in downtown Jackson, said the bulk of the money used to build the convention center would come from the 3% room tax, “which isn’t major enough to make a difference.”
“I don’t like to see the 3% go on there, but we’re way under room rental rates for competitive full-service hotels anyway,” he said. “Maybe 90% of the users of our rooms are from out of town, so the citizens of Jackson are going to get a multi-million dollar capital investment primarily paid for by other people.”
Dr. Joe C. Hutchinson, interim chair of the Gulf Coast Division of Business at Southern Miss, said Jackson as a destination represents “a good value,” even with increased hospitality taxes. “Jackson’s tax rates for hotels are lower than comparable cities,” he said.
Now that Jackson voters have given the green light to finance the convention center, are the projections realistic?
“We know there will be enough money to pay for everything,” said Charlie Johnson, author of the Financial Justification Report on the Capital City Convention Center, published last month. “How it all shakes out has not yet been defined.”
Construction on the convention center is estimated to take three to four years, with at least three full years of taxes collected before it opens. Based on current interest rates for municipal bonds, the annual debt service payment would be approximately $3.7 million.
Johnson, no relation to Jackson Mayor Harvey Johnson Jr., estimated that the convention center would incur annual net operating losses from as much as $600,000 in the first start-up years to $153,000 in the seventh year. Future operations should be stable after this period, based on six different summary cash flow statements, he said.
“The worst-case scenario is that the deficit will be doubled or there will be a 10% overage on capital budget expenditures,” he said. “We have illustrated that there are no real gaps, maybe one or two years of shortfalls, before reserves begin to build. It also depends on the legal authority and who’s running it.”
To oversee the convention center, House Bill 1832 created a nine-member commission, comprised of eight mayor-appointed members, who have not been named, and one governor-appointed member, Steve Rogers, president of Parkway Properties. The commission will determine whether to contract with a private management company or hire a general manager.
“A private management company is going to charge around $350,000 a year, but in theory will earn its keep,” said Johnson. “However, it’s probably smart to hire a very seasoned general manager, even though some benefits may be missed that a private management company could bring. We’ll counsel the commission on that decision, which needs to be made over the next six months.”
Beau Whittington, owner of Convention Display Services in Jackson, said he hopes the commission hires “an experienced manager with a passion for this type project.”
“I’ve seen some of these big national companies that manage buildings and it’s just another piece of business for them,” he said. “I look at the Mississippi Gulf Coast Coliseum and Convention Center, managed by Bill Holmes and his group. Those guys are aggressive and energetic, and if they want a piece of business, they’re going after it, whatever it takes. That’s the kind of something we need here.”
Contact MBJ contributing writer Lynne W. Jeter at firstname.lastname@example.org.