Council re-enacts 1% transient-occupancy tax and directs funds to Main Street Lexington

City Manager (presenter) summarized an ordinance to maintain a 1% transient-occupancy tax (TOT) that had been in place to support the Virginia Horse Center but which would have lapsed after the Horse Center paid off a promissory note. Under current state law the total occupancy tax rate automatically dropped, but the ordinance before council reimposed the 1% so the city would continue receiving the same overall occupancy rate.

The manager said 1% of occupancy tax has historically raised about $100,000 annually and that the city had supported Main Street Lexington at approximately $96,000 over the last two fiscal years. Staff recommended dedicating the 1% to Main Street Lexington, with the city pledging not to let annual support fall below $96,000. The manager explained the ordinance also incorporates state-law changes related to short-term rental platforms such as Airbnb and includes provisions to aid collection.

Council members discussed alternatives: amending the budget each year to fund Main Street versus tying a 1% dedicated tax directly to the organization. Councilmembers cited the tourism link and incentive value of predictable funding for Main Street. One council member said dedicating TOT to a local tourism organization "gives them incentive to continue to work hard and work with the hotels, work with the restaurants, work with businesses." Another asked whether the allocation would be the greater of $96,000 or 1% receipts; staff confirmed the intent was to ensure Main Street receives at least $96,000 or the full 1% if it raises more.

A motion to approve Ordinance 2025-O5 (amending chapter 366, taxation, lodging sections 366-17 through 366-24) passed unanimously on roll call. Council recorded the vote as unanimous and thanked staff and Main Street representatives for their work. The change was enacted locally by ordinance at the meeting.