Hotel tax money from communities all over the Bay State could be pledged to secure the bonds for the $1.1 billion expansion of the Boston Convention & Exhibition Center.
"I would say it's a red flag," said Charles Chieppo of the Pioneer Institute. "It's just a very puzzling provision. ... You can make a determination it's worth the extra money or not, but it's not going to pay for itself."
The controversial expansion bill before Beacon Hill lawmakers would give the state treasurer and the secretary of administration and finance the power to essentially use the state hotel tax money as collateral against the loans for the project. That means revenue generated by communities as far away as the Berkshires or Cape Cod could secure the bonds for the Boston project.
Last year, the state hotel tax amounted to $195 million. Some 65 percent of it goes to the general fund (the rest goes to the Massachusetts Tourism Fund).
Chieppo said using the hotel tax as collateral could have implications on how much the state can spend on capital projects, such as bridges and buildings.
And it's a break from the legislation that constructed the convention center in 1997, when the bonds were backed largely by fees generated by Cambridge and Boston.
The provision applies to the 5.7 percent state hotel room tax revenue, not the local hotel tax option that many towns and cities also tack on to room bills.
Massachusetts Convention Center Authority spokesman Mac Daniel told the Herald that using the funds would lower state borrowing costs and could produce a higher credit rating on the bonds.
"The statewide hotel excise tax would remain intact and would not be used to pay for the proposed BCEC expansion. We have no intention to draw upon these taxes. It's simply to provide additional security and lower costs," he said.
The MCCA wants to add 1.3 million square feet of space, including 335,000 square feet of exhibition space, and says it can do it without new fees or taxes.
The Herald first reported yesterday that the MCCA is proposing to skirt the state's transparency laws by keeping secret all financial information of the private businesses they contract with, even as they seek more power to make deals with them.
Those provisions are in a convention center expansion bill the House Committee on Bonding, Capital Expenditures and State Assets will hear tomorrow.
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