Council debates lodging-tax rewrite tied to new arena financing; item held for further review

The Mobile City Council discussed a proposed amendment to the lodging tax ordinance (item 34-0004) that would increase the lodging tax calculation from 8 percent to 10 percent and change how the additional revenue is distributed among Visit Mobile, the Mobile Airport Authority (MAA), the Convention Center and arena debt.

Council staff presented a spreadsheet showing projected distributions under a reworked allocation. Scott Collins, a city staff member who delivered the spreadsheet, summarized the change: “The language … shows that it’s, going from 8 percent to 10% on the lodging tax.” Collins said the draft was reworked so Visit Mobile would receive 37.5 percent of the existing 8 percent share rather than 37.5 percent of the full 10 percent, and the Mobile Airport Authority would receive lower payments in the early years and be “made whole” over an extended period.

Why it matters: Council members tied the lodging-tax adjustment to financing for the new arena and to debt service for the Civic Center. Collins said the reworked draft would prevent a near-term net loss to the city’s general fund by shifting some of the increase’s timing: “We would make that money up in calendar year 11 so that they receive the full $30,000,000 over 11 calendar years. So they would be made whole in that. The city would not experience any loss to the general fund…”

Council members pressed staff on the numbers and assumptions. Councilman Carroll asked about scheduling and timing and confirmed that the Mobile Airport Authority would receive $2.5 million in early years under the revised model; Collins confirmed the plan would make up the shortfall later so the MAA receives the full $30 million over an extended period. Collins also described the growth assumptions used in the spreadsheet: 3 percent annual growth for the first years and 4 percent thereafter as a conservative projection compared with Visit Mobile’s higher forecasts.

Staff also reviewed how the additional revenues would be allocated in fiscal 2026 under the spreadsheet Collins distributed: the estimated total lodging tax for the year and line-item totals shown in the spreadsheet included an example allocation where Visit Mobile would receive roughly $4.68 million and the city roughly $10.92 million in that fiscal-year model; Collins said the spreadsheet used conservative growth rates and removed COVID years from the historical baseline.

Related financing and contracts: Council members also discussed the larger financing package and construction contracting tied to the arena. The council introduced an ordinance to authorize the issuance of up to $250 million in general obligation warrants (first reading and 7-72 notice scheduled), and staff said the second reading and formal vote on the bond would occur at the next regular meeting. Construction timing and contract issues were discussed: staff said the anticipated award and contract execution would be March 12 once bond funds are received, and they described contract allowances including a $15 million contingency, a $500,000 allowance for reinstalling murals and a $200,000 allowance for sprinkler work, and design and project-management fees reported at $26 million.

Minority participation and procurement: Council members asked about disadvantaged/minority participation goals for the arena construction. Staff said the submitted subcontracting/DBE plan produced a 13.1 percent figure in the bid documents, with an internal target of about 15 percent; the city attorney and procurement staff said the subcontracting plans are public records and can be provided on request.

Next steps: Council members asked staff to provide the revised ordinance and spreadsheet to council members ahead of a 10:30 a.m. meeting and to the finance committee for detailed review. The lodging-tax ordinance (34-0004) was held over to allow the council to review the revised language and spreadsheets; the bond ordinance for up to $250 million will have a public notice / hearing at the next meeting and a second-reading vote then. Meanwhile, council approved a roll-call to enter executive session later in the agenda by recorded affirmative votes.