Memphis City Council members gave an initial thumbs up this week to an ordinance that increases the city’s hotel-motel occupancy tax to boost funding for upwards of $550 million in renovations to the FedExForum.
The increase would bring the tax to 4 percent, increasing it by 0.5 percent. Members unanimously approved the ordinance sponsored by Memphis Mayor Paul Young on its first vote, during an executive session Tuesday, Feb. 18. City leaders are counting on the tax to be one of the major funding sources for a series of long term renovations to the facility.
“Right now, it’s at 3.5 percent. It was envisioned over the past two or three years that 0.5 percent would be a part of the capital stack. That’s how we structured it. The task today is to begin the process,” said Young.
The city’s hotel-motel tax rate hasn’t changed since it was approved by voters in 1985.
Council members also approved on first vote $80 million for the first round of renovations, an initial step in securing another long-term agreement with the Memphis Grizzlies to play in the arena.
The money would go towards updates to elevators, chillers and emergency generators at the 19,000-capacity arena, improvements that are expected to sustain the long-term core of the building, Young said.
“It also includes dollars for the architecture and engineering for the long-term renovation of the facility, which is what is needed to get to very specific costs that are going to be needed to fund the full project,” he stated.
The city-owned arena’s 20-year lease with the NBA team is set to expire after the 2028-29 season. Young is currently negotiating with team ownership on another deal. The Memphis Tigers men’s basketball team also plays home games at the FedExForum.
An $80 million outlay would also allow the city to use its dollars “more efficiently,” instead of putting up the whole sum up front. Future repairs will be taken care of after the dotted line is signed by team ownership.
The resolution would be funded from $230 million the State of Tennessee earmarked for sports facilities, according to Young. If passed, the money would be transferred to the Memphis-Shelby County Sports Authority Board, which would have to approve any expenditures.
Around $150 million would remain in the fund if the first allocation passes on a third and final vote. “We don’t expect to touch that until we have reached a long-term lease,” said Young.
The remaining $320 million in renovations would be paid through the hotel-motel tax.
Members are expected to bring both items up for first readings during the next meeting on March 18.
The last renovations to the FedExForum included a new HD scoreboard, HD displays, LED lighting and fan amenities. Work was completed before the start of the Grizzlies’ 2017-18 season. The total cost was $1.8 million.
