Bill to renew Mississippi tourism sale tax rebates in home stretch

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Published: March 21,2014

Tags: Business, Mississippi, Politics, taxes

bag of money_rgbA proposed three-year renewal of Mississippi’s tourism incentives includes a provision designed to spur development of a convention center hotel in Jackson and perhaps Biloxi.

Convention hotels would be eligible for sales tax rebate of up to 80 percent over 15 years under two conditions: the properties are built within 1,000 feet of an existing convention complex and the local government in the locality in which the property is built approves the sales tax diversion.

The renewal of sales tax rebates Mississippi offers developers of resort hotels, golf courses, theme parks and retail attractions in designated “entertainment districts” would be expanded under the legislation as now written.

The incentive offers developers of “destination” properties sales tax rebates of 80 percent over 15 years, up from the current 10 years. As with the convention hotels, local governments have to approve the sales tax diversion.

The three-year renewals are included in HB1358 which the House passed early in the session and the Senate on March 1. Amendments include a reduction in the required cost of each guest room from $150,000 to $125,000 and add to the eligibility list hotels built or restored in historic districts or next to convention centers.

Another amendment sets a distance of at least 50 miles from any cultural retail attraction that opened before Jan. 1, 2014.

The sales tax rebates may seem large at 80 percent but a high-end resort hotel with $40 million or so in private investment must do consistently well to truly benefit from it, said Gaines Sturdivant, CEO of MMI Hotel Group and member of the Jackson Convention & Visitors Bureau board.

“A hotel has do a lot of business for it to recoup the kind of sales tax that would be really meaningful,” said Sturdivant, whose company owns, manages and developers hotel throughout the South.

“By the same token,” he added, “that could get them over the hurdle.”

Sturdivant called the incentives a worthy investment in the state’s visitor industry without requiring an actual outlay. “It’s a sales tax rebate. They are not writing you a check for a set number,” he said.

The bill has also been amended to allow rebate eligibility for developers who spend $125,000 per room, an amount previously set at $150,000. Sturdivant said the $125,000 a room would make for a “very nice hotel,” and would bring the cost of a 320-room hotel to $40 million.

That sounds like a convention center hotel, he said, calling it an outcome him and other members of the Jackson CVB board would welcome.

“I think from the CVB perspective we would be very much in favor of anything that would incentivize high quality hotels to come — even it is not downtown.”

Rep. Alex Monsour, bill sponsor, said he expects some further changes as the rebate incentives go through the conference process. The conference work, he said, will be aimed “at avoiding something that costs the state a lot of money.”

While the standard resort private investment to qualify is $40 million, the Senate amendments allow a hotel built or restored in a historic district or within 1,000 feet of a convention center to qualify with a private investment as low as $5 million.

A hotel investment as low as $15 million can qualify but the developer would have to spend at least $200,000 on each guest room with a minimum of 25 rooms, according to HB1358.

With a $10 million investment, the sales tax rebates are available for resort golf courses, theme parks, motor speedways, convention centers and a host of other visitor attractions, the bill says.

Also under HB1358, a $50 million investment can qualify a “Cultural retail attraction” for the Tourism Rebate Program, though the project must combine destination shopping with cultural or historical elements specific to Mississippi.

A retail project that is part of master-planned development for which $100 million in private investment is made can also qualify. The bill requires that a retail center must have at least 50 tenants and at least 300,000 square feet.

The rule of a 50-mile distance from an existing retail destination also applies.

All projects must be submitted for approval by the executive director of the Mississippi Development Authority before June 30, 2017, according to HB 1358.

 

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