A discussion whether to dissolve the McCracken County/Paducah Tourism Commission continues in the local Fiscal Court.
County commissioners in a workshop on Monday asked county attorney Sam Clymer to seek clarity on the seemingly complicated legal implications of a move that seeks to generate a million dollars in additional revenue for the county each year.
A central aspect to the split would be the county’s potential collection of a three percent tax on hotels in the county and City of Paducah. Commissioner Eddie Jones suggested the possible additional county funding could be used for a future sportsplex.
Jones said the primary reason to separate from the CVB is to see if the two commissions can both be empowered to charge a 3% transient room tax on hotels. “And if we can increase the revenue to do it separately, then it makes sense. If we can’t increase the revenue, then it doesn’t make sense to do it separately,” he said.
That 3% would create an estimated additional million dollars in revenue that would go into a designated fund for projects that could create more tourism. “We certainly could use the extra revenue for things like sports recreation facilities that would increase tourism,” Jones said, such as a potential sportsplex.
“The overall goal would be able to generate a bigger pot of money, paid for by people who basically visit our town,” said Jones. “It’s kind of our lemonade stand, if you will. They come here and buy hotel, and we’re really ideally set up for this.” He noted Paducah is well-positioned geographically and that people often spend the night on their way to someplace else.
Jones said, “If we can do this. If we generate enough now and over the next 20 years - we’ve got $20 million dollars of revenue that’s paid for by people that don’t live here, from people that visit here. And then, if we can create an environment to generate an additional income, I’ve got to believe that with something like the sportsplex we could generate another four or five hundred thousand dollars, so now we’ve got $30 million dollars that we’re investing into not only activities but a park that would be served by all of us and would generate money.”
Currently, there is a local 6% transient room tax. Of that, 3% goes to the CVB office, 1% goes to the convention center for operations and 2% is used to retire debt (for convention and expo centers and performing arts centers). This is according to Paducah CVB Executive Director Mary Hammond. In addition to that, there is a 1% state transient room tax that goes to Frankfort. Should the county collect an additional 3%, as it is seeking, then the total transient room tax would be 10%.
“This is something that sounded really, really extraordinarily simple at first - that this can be done. And it also sounded simple that both governing bodies should be able to just, essentially, pass their own transient room tax ordinance and fund their own CVBs,” said County Attorney Sam Clymer (not to be confused with McCracken County Judge/Executive Craig Clymer). He then explained two reasons why he couldn’t fully endorse the idea at this time: “Number one: It’s incredibly complicated. And number 2: there’s no clear cut answers to it.”
Withdrawing would not be a problem, Clymer said, adding that dissolution would be another, more complicated, option. The issue, he explained, is the implication on the taxing authority and figuring out how to have two separate taxing entities with two separate taxing jurisdictions.
If the city or county were to go forward with dissolution and then one board would manage city operations and another county operations each being funded by their own transient room taxes, there would then be two separate taxing entities. Clymer said, with regard to separating, that the state constitution says that there are two requirements for taxation: the tax is limited to geographical territorial limits and those taxes have to be uniformly applied to the subjects in that limit.
“So, what we get into is with the 1% additional tax for the operational expenses of the convention center,” he said. “If we got the city taking care of city operations within its boundary, county doing the same out in the unincorporated portions of the county. If we have that going on, then the county doesn’t have a qualifying entity or a triggering entity. The convention center doesn’t exist within the territorial boundaries of the county and it would be counterintuitive to a taxing authority to be able reach outside your taxing authority, outside your taxing boundary and utilize something that’s outside of your jurisdiction to levy a tax in your jurisdiction.”
Clymer said he couldn’t imagine how both the city and county taxing authorities could impose a 3% tax on, say, a hotel within the City of Paducah - that there would not be a legal justification. That issue is because the taxing body is limited to its taxing authority.
When asked why this isn’t an issue with regard to the county collecting housing property taxes within the City of Paducah, Clymer explained that that is not a problem because ad valorem taxes are not a “separated ordinance” (such as city ad valorem vs county ad valorem). In other words, there’s no differentiation between the two entities in collecting housing property taxes, as there would be with two CVBs.
Clymer said his two main concerns are a limitation on territorial authority - taxing within the authority and a potential violation of uniform application to all subjects of the tax in the territory, whereas the county can pass certain rates that a city cannot. He said a transient room tax is good when applied on a county-wide basis because it can then take advantage of every facility in the jurisdiction of the county and not worry about the city.
A potential solution, Clymer said, is that the county withdraws from the current joint board and organizes its own commission, the city restructures its board as it sees fit and both are funded by a county-wide transient room tax.
Commissioners asked Clymer to look into the matter further and consult with the Kentucky Association of Counties.
Commissioner Jones said he’s not interested in changing anything unless it generates more revenue. “It’s a million dollar question,” he said. “Literally.”
Executive Director Mary Hammond said she thinks the existing CVB would become a city bureau. She expects it will continue to do the same work currently being done and said “of course” she’d work with the county CVB. She said there is discussion underway in the county possibly contracting with the current CVB to handle the sales aspect since the infrastructure is already in place. “There’ll definitely be cooperation,” she said. Most definitely.”