December 8, 2004 

Contact: Jeb Schrenk, Mobile Press Register

Council Approves Hotel Tax Increase
(Reprinted from Article in Mobile Press Register dated December 8, 2004)

Additional 2 percent will be used to fund city’s commitment toward USA’s cancer institute.

The Mobile City Council passed Mayor Mike Dow’s proposed hotel tax increase Tuesday, with much of the revenue over the next 10 years slated to pay for the city’s previous commitment toward the University of South Alabama’s Cancer Research Institute.

The additional 2 percent of tax – bringing the city’s rate to 8 percent and the total tax rate inside the city to 14 percent – will raise just over $1 million a year, according to the city.

Dow said in August that he would put forth a 2 percent increase to help fund long-term raises for employees. Tuesday, Dow said, funding the cancer center is a better use for the money that will help the local economy.

“I’m trying to promote growth for future years,” Dow said after the meeting. “That growth is what’s going to give us our raises further down the road.”

Council members Connie Hudson and Ben Brooks voted against the tax and abstained from subsequent votes to commit $7.6 million of revenue to USA. The other five council members, including Reggie Copeland, who was back from heart surgery, approved the measures.

“At best, I think it’s misleading…to the people of Mobile to suggest that this hotel tax is needed to fund the cancer center,” Brooks said. “The cancer center is funded regardless of whether we pass this tax.”

Hudson said Dow was tying the cancer center to the tax to make passing that tax more palatable.

Since its creation in 2000, USA’s cancer institute has ranked among the university’s highest priorities, with a long-term goal of developing advanced capabilities in prevention, diagnosis, treatment and research. Leaders there aim to earn a National Cancer Institute comprehensive cancer center designation.

Ground has not yet been broken at the center’s site, next to USA Knollwood Hospital. The university is trying to raise a total of $112.7 million for the facility.

The city’s lodging-tax increase, which will take effect Jan. 1, will increase the tax on an $85 room from $10.20 to $11.90.

Dow previously said that the city’s $6 million commitment to the cancer center would be made using money set aside each year for economic development. Dow has said the city should set aside $40 million over the next 20 years for economic development, and the city budgeted the first $2 million for that this fiscal year.

The $7.6 million figure now going to the cancer center includes the $6 million pledge plus 5 percent interest over the next 10 years.

The Mobile County Commission has committed the same amount, which will be paid through an increase in tobacco taxes.

Dow said he did not want to use money that’s being set aside for economic development.

“There are some fairly large, large opportunities in the wing,” Dow said at a council conference before Tuesday’s meeting.

Hudson, at the meeting, said the council could always approve more money for incentives if the need arose.

No one spoke at Tuesday’s meeting representing the Mobile Hotel Motel Association.

Pat LaRocca, representing Ashbury Hotel and Suites along Interstate 65, told the council he’s concerned that a tax increase would widen the disparity between Mobile and rates in outlying areas, pushing visitors to stay outside the city.

The lodging tax rate in the police jurisdiction will increase by 1 percent to 9 percent.

A Mobile Register review in August comparing Mobile with some areas nearby showed Mobile already at the top with the current 12 percent tax on rooms.

Councilman Clinton Johnson said he doesn’t believe people will pay attention to the tax rate when booking rooms. Councilmen Fred Richardson and Thomas Sullivan said the tax will not be one being paid by the city’s residents.

About $760,000 of the room tax revenue each year will go to USA, Dow has said. The rest will not be earmarked.

In other business, the council approved moving up a 2.5 percent merit raise for employees that was set for April 1.  

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