The group developing a high-rise hotel, condo and parking complex at Ninth and O streets wants to use a special occupational tax -- much like an additional sales tax -- to help finance construction.
The Lincoln City Council is being asked to approve the project as an “enhanced employment area,†which is the first step in creating the special occupation tax.
Allowing a 2 percent tax on hotel rooms and banquet service would be a separate issue and would require a council vote later, said Mike Lang, aide to Mayor Chris Beutler.
If created, the occupation tax would apply only to the building to go up on the southeast corner of Ninth and O, next to the Terminal Building.
Developers expect the tax could generate $2.35 million in revenue over 20 years, which would be used to pay for public improvements related to the project.
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The council will hold a hearing and likely vote on a resolution creating the enhanced employment area during its Monday meeting that starts at 5:30 p.m.
Lincoln already has an enhanced employment area tax at SouthPointe Pavilions at 27th Street and Pine Lake Road. The 1 percent tax on most retail purchases, but not restaurants, went into effect Jan. 1 and will help finance a new parking garage at the mall near an expanded Scheels.
Merchants at SouthPointe can either absorb the new tax and pay it themselves, or include it as a separate item on sales slips. It would be labeled as either a parking fee or parking assessment.
The downtown hotel condominium complex is also expected to use an estimated $10 million to $14 million in tax increment financing for the $65 million to $70 million project.
Through TIF, additional property taxes paid on a new building, beyond its current property tax, is diverted to pay off bonds used for a given project. TIF is intended to fund construction that is considered to be in the public interest.
The potential TIF funding does not cover all the public-related items, so the additional occupation tax would help make up the difference, said Lang.
"We would not be considering the enhanced employment area if we didn’t know there was a demonstrated gap," he said.Ìý
Neither the new tax at SouthPointe nor this potential tax applies to restaurant food, Lang noted. City leaders have exempted restaurant food, since the city already imposes a 2 percent occupation tax on it to help pay for Pinnacle Bank Arena and related construction in the West Haymarket.
The arena-related occupation tax also includes a 4 percent tax on hotel rooms and vehicle rentals.
In order to create an enhanced employment area, the city must show the project will result in at least 25 new employees and new investments of at least $2 million. The project at Ninth and O meets that threshold, according to Lang.
The downtown hotel condominium complex could be the third tallest building in the city, likely rising 14 or more stories.Ìý
The project will include a Holiday Inn Express on three floors and a more upscale boutique hotel and restaurant, plus parking and event space.
The group developing the project -- Hotel Land Investments LLC -- is led by the Lincoln Hotel Group and includes Lincoln firms Speedway Properties and Nelnet.
The enhanced employment area occupation tax, allowed by the Legislature, is being used at Nebraska Crossing Outlets in Gretna and a shopping mall in Scottsbluff.
The Lincoln City Council authorized a similar tax in June 2014, a 2 percent occupation tax on concessions, gate fees and fee rentals at the proposed Great American Sports Park. But the softball complex, planned for Sun Valley Boulevard and Charleston Street, was never built.