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Va Beach considers hotel tax hike to pay for arena

Brock Vergakis, Associated Press

NORFOLK, Va. (AP) -- Virginia Beach will consider raising the city's hotel tax by one percentage point to help pay for the construction of a proposed 18,500-seat arena at the oceanfront.

City officials want to build an arena in the hopes of bringing a pro sports franchise to the state's largest city. A likely target for relocation would be the NBA's Sacramento Kings. The team's owners pulled out of a plan to help finance a new arena there earlier this year, saying it didn't make financial sense for the franchise. The Kings appeared determined to move to Anaheim last year before Sacramento's mayor convinced the NBA to give the city one last chance to help finance an arena, but that deal fell through this spring.

Under a proposal that will be presented to the Virginia Beach City Council on Tuesday, construction of the proposed arena would be paid for without any financial contributions from the unidentified pro team that would serve as its primary tenant.

The presentation calls for the city to pay $195 million toward construction costs and $45.8 million to finance it. The state would be asked to pay $70 million toward arena construction and $80 million to offset the team's moving costs and franchise relocation fees.

Philadelphia-based sports and entertainment company Comcast-Spectacor, which would operate the arena under a 25-year-lease agreement, would be asked to pay $35 million. Comcast-Spectacor would be responsible for finding a pro franchise to serve as the arena's primary tenant, and no arena would be built without one. Company president Peter Luukko is scheduled to speak at Tuesday's council meeting for the first time since the arena proposal was unveiled in August.

The city's current hotel tax rate is 8 percent, although there's also a 5 percent state sales tax on top of that. The city last raised its hotel tax rate in 2001, from 5.5 percent. The hike in the hotel tax would be expected to raise about $2.8 million each year, according to the presentation. The presentation council members will hear says that would bring the annual available revenues for an arena to $29.1 million. Those figures include revenue from a $2 ticketing fee, an admissions tax and a governor's sales tax rebate that would be dedicated to debt service.

A timeline in the draft presentation calls for the city council to vote on whether to proceed with pursuing the construction of an arena on Dec. 11. An official vote on whether to finance and build the arena wouldn't come until February or March, after state lawmakers vote on whether to approve state funding.


Brock Vergakis can be reached at https://twitter.com/BrockVergakis