When it comes to the world of tax increases, Lawrence city commissioners are beginning to look at one they’re hopeful voters won’t mind much: an increase in what overnight guests pay to stay in a Lawrence hotel room.

Commissioners at a study session on Tuesday will have their most serious discussion yet about raising the city’s transient guest tax from its current rate of 6 percent. Some commissioners previously have said they would like to discuss raising the rate to 7 percent or perhaps 7.5 percent. Each percentage point increase, based on current hotel usage rates, would generate about $240,000 of new revenue.

“Nobody likes to see a tax go up, but at least it is a tax that generally applies to noncommunity members,” said Commissioner Matthew Herbert.

Operators of the city’s hotels, however, are closely watching the issue.

“We need to be competitive with Topeka and Olathe,” said Linda Honeyman, general manager of the Holiday Inn Express Hotel & Suites. “That’s who we compete with a lot on sporting events business.”

Olathe currently has a 6 percent guest tax and Topeka’s is at 7 percent.

The guest tax is a special tax paid in addition to standard sales taxes. Currently, the combined guest tax and sales tax rate on most Lawrence hotel rooms is 14.7 percent. A few hotels — such as The Oread and the new Marriott at Ninth and New Hampshire — have a special 1 percent transportation development tax added to the room as well. When the recently approved state sales tax increase is implemented in July, the total taxes paid on a standard Lawrence hotel room will be 15.05 percent, or 16.05 percent in the special taxing districts.

City Commissioner Stuart Boley said adding on an increase to the city’s guest tax may be too much.

“Topeka has just raised taxes already,” Boley said. “I’m not looking to raise any taxes at this point. It is just too early.”

Herbert said he’s seen signs that the Lawrence hotel market can absorb the tax increase. He noted hotel rooms are still full on weekends when the city has major events in town. The city’s guest tax collections also have been surging in recent months. The city’s guest tax collections of $1.42 million were up 17 percent from 2013 totals, and thus far collections are up 23 percent in 2015, according to figures from the city.

“I don’t think we are on the edge of having a lot of hotel rooms sit empty,” Herbert said.

Spending debate

Raising the tax rate is expected to be only part of the debate at City Hall. Commissioners also are considering how to spend guest tax revenues. The city has long had a policy that guest tax revenues should be spent to promote events, marketing or other such functions designed to spur more overnight visitors in the community.

Herbert said that still should be the purpose, but he thinks the city can think more broadly about what type of activities bring visitors to a community. He said providing guest tax money to fund new trail projects, or other types of parks and recreation projects, should receive consideration.

“I don’t want to start using it to pay for city staff salaries or anything like that, but there certainly are some amenities we like in Lawrence that are increasingly expensive to provide,” Herbert said.

Boley said that while he’s not supportive of increasing the tax rate, he does want to have a discussion about changing how the money can be spent. He said using some of the existing tax proceeds to pay for operational costs at the city’s recreation center at Rock Chalk Park. He said the project was sold as one that would draw visitors to Lawrence through youth tournaments and other such events.

“But there are costs to run that piece of city infrastructure,” Boley said. “I think it would be entirely appropriate to say we’re paying to promote Lawrence by running Rock Chalk Park, so let’s use some of that guest tax money to fund Rock Chalk Park.”

Some hotel operators said they are concerned the City Commission could broaden the uses of the guest tax dollars too much. Honeyman said she would rather the city stick to funding new events that will attract overnight visitors to town, including tournaments at Rock Chalk Park. She said the recreation center has been a major reason the city’s guest tax collections have soared. But using the tax to fund basic operations of the center may not be the best use of the guest tax funds.

“I think people are always more favorable when they know it is for something specific,” Honeyman said.

Derek Felch, general manager at the Hampton Inn, said he also has concerns about the city straying too far from the original purpose of the guest tax. He said if commissioners wanted to raise the tax for new purposes, he would encourage the city to use some of the guest tax for economic development funding that would help bring more businesses to the community. He said the city’s hotel industry needs the most help in filling beds Sunday through Thursday. More businesses in the community will increase the amount of business travelers, he said.

Some advocates for an affordable housing trust fund have mentioned communities in other states have used guest taxes to fund affordable housing programs. Both Boley and Herbert said they didn’t see that being a likely solution in Lawrence.

Commissioners will discuss the guest tax and other convention and visitors bureau matters at a study session at 3 p.m. Tuesday at City Hall.