Sales tax rebates and property tax waivers part of convention hotel deal

June 26, 2011

Business

A March 3 memorandum of understanding between TCI Investments and the City of Jackson shows deal

The Dallas developer seeking to partner with the City of Jackson to build a $94-million convention headquarters hotel wants a rebate on 80 percent of the sales tax collected at the hotel for its first 10 years.

The rebate could cover as much as 30 percent of the costs incurred by TCI Investments, an arm of Intercontinental Realty Investments.

TCI Investments also wants a waiver on property tax obligations to the city, Hinds County and the Jackson Public Schools District. Waivers from the county and school district could be difficult to get, the tax assessor’s office says.

Further, the developer wants the City Council and Hinds County Board of Supervisors to establish a Tax Increment Financing district in the vicinity of the hotel, with money raised from the TIF earmarked for offsetting the costs of water, sewer, street upgrades, parking and related improvements. TIF districts gain revenue from increased property values. Once the value exceeds an established threshold, revenue collected beyond the threshold goes to the district.

The sales tax rebate and ad valorem tax waiver proposals are included in a March 3 memorandum of understanding between TCI Investments and the city. The city is negotiating a deal with TCI Investments by which the two entities would be 50-50 partners in building a 308-room, 16-floor convention center hotel on land TCI owns on Pascagoula Street next to the Jackson Convention Center Complex.

A combination of tax-free Gulf Opportunity Zone bonds and New Market Tax Credits would pay for the bulk of the project, with repayment of the debt coming from hotel revenues. Should revenues falls short, city taxpayers would cover debt payments on the city’s $40 million-plus stake in the project.

The sales tax rebate would be sought through the Mississippi Sales Tax Rebate program administered through the Mississippi Development Authority. “Preliminary discussions with the MDA were favorable,” the developer and city reported in a Government Assistance/Participation exhibit included in documents the city provided under an Open Records Law request.

The 80 percent rebate to the developer — state statutes forbid the city form getting a rebate — would be limited to 30 percent of the developer’s costs or for a term of 10 years, whichever threshold occurs first.

Hotels are among the tourism-related projects that the state’s Tourism Incentive Grant program authorizes for sales tax rebates. Other eligible uses include resorts, entertainment complexes, theme parks, water parks, public marinas, public golf courses and the non-gaming portion of casino projects.

It’s unlikely TCI would be eligible for sales tax rebates on revenue from the retail shops and restaurants it plans to build at some point after completion of the convention hotel.

Meanwhile, Hinds County supervisors would have to OK any property tax waivers on the developer’s 50 percent share of the hotel project, said Benny W. Keyes, appraisal supervisor for the Hinds County Tax Assessor’s Office.

The Jackson Public Schools District does not have the option of granting a waiver, according to Keyes. State law forbids it, he said.

“You can’t abate school district taxes.

“What you’ve got there is a prayer list. That’s what they are praying for.”

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