Manitoba hotel owners allege the city is misusing tax dollars they generate to fund a $180-million Convention Centre expansion that won’t benefit them.

The city’s executive policy committee approved a proposal to use hotel tax revenues to offset potential repayment shortfalls on a city-guaranteed loan to the Winnipeg Convention Centre Corporation (WCCC) on Wednesday.

This amounts to a “tax subsidy on top of a tax subsidy,” according to Canad Inns owner Leo Ledohowski.

“How much more do you guys want to bleed us?” Ledohowski asked EPC members.

Since 2008, the hotel tax has supplied $19.6 million for the Convention Centre expansion and $10.5 million toward its operating costs, according to the Manitoba Hotel Association (MHA).

Ledohowski said the plan amounts to having hotels fund their own competitor, which is already publicly subsidized.

“If the city chooses to have these monument buildings, then they should be paid for by the city, they shouldn’t be loaded on the backs of the hotel industry,” said Ledohowski.

The plan threatens to empty a fund that should be used to secure major events to increase tourism to Winnipeg, said Jim Baker, president of the MHA.

Repayment of the $33-million loan was put in jeopardy when a planned hotel at 220 Carlton St. wasn’t built. That hotel was expected to cover the loan by sparking $17 million in new convention centre business and $16 million in tax revenues.

The repayment plan calls for the destination marketing reserve (raised through the hotel tax) to fund shortfalls on any annual debt payments, if council approves it. WCCC operating surpluses would repay the reserve and be applied to the debt.

But Ledohowksi laughed when asked if that repayment addressed his concerns, calling the notion the WCCC would achieve a surplus “a joke.”

The WCCC projects a net loss (before debt service charges) of $1.2 million in 2016. A profit of $1.3 million is expected by 2019. But that assumes a new hotel is completed by Jan. 1, 2019, which isn’t guaranteed.

The report also suggests extending repayments to the bank and the province and offsetting the loan with a $3.75-million penalty Stuart Olson paid the city for failing to secure a hotel at the site.

Those measures should help reduce the reliance on tax revenues, said Mayor Brian Bowman.

But Bowman said the hotel tax is the best fund to draw from, if needed, because it was earmarked to support the Convention Centre.

“This fund, previous council direction had set aside 40% to be used specifically for this project, this is consistent with that,” said Bowman.

The original funding plan for the expansion included $51 million each from the province and city, plus up to $46.6 million from the federal government.

RAKING IT IN

How much money the hotel tax has raised since its inception:

2008$4,367,450

2009$6,954,173

2010$7,252,211

2011$7,665,425

2012$7,553,198

2013$7,289,803

2014$7,852,305

TOTAL: $48,934,565

FOLLOW THE MONEY

Where hotel tax revenue has gone:

Economic Development Winnipeg $14,680,370

Convention Centre expansion $19,573,826

Convention Centre operating $10,500,000

Administration expenses $420,000

Marketing fund$4,010,135

joyanne.pursaga@sunmedia.ca

Twitter: @pursagawpgsun