FARRAGUT (WATE) - The Town of Farragut is proposing a new tax on hotels and motels and wants to use that money to promote tourism.
A 3% tax would be placed on top of the 5% county's hotel-motel tax.
The move has already passed the Board of Mayor and Aldermen on a first reading.
Amit Patel owns two hotels: Comfort Suites and the Country Inn & Suites on Campbell Station Road.
Patel said the tax could drive up average rates by about $4, enough for travelers to look at hotels elsewhere. He estimates an average daily rate at his hotels range from $80-$100.
"It would be a direct hit on the travelers," he said. "Travelers are more savvy and are on a tighter budget than they've ever been, so every dollar counts."
Town officials say the tax is being proposed in an effort to better fund tourism, parks, and capital improvement projects that could attract more people to the town.
Many surrounding towns and cities, including Lenoir City and Knoxville utilize a hotel-motel tax.
"If we're going to develop the historic resources and the tourism resources, we have to have a fund stream to do that," said Farragut Mayor Ralph McGill.
It's estimated the tax would generate around $400,000 each year for the town.
Supporters say that would offset what the town gets each year from the Hall Income Tax. Officials say that revenue has decreased over recent years.
David Purvis is the owner of Farragut Wine & Spirits and president of the Farragut Business Alliance.
The organization doesn't have a position on the tax, but will meet with business owners this week to decide
"We've got to listen to see what impassions the businesses, not just the hotels, but all the businesses in the town, too. If used the right way, it may have a positive effect, but if not, it may not," Purvis said.
Farragut already has eight hotels within town limits. A ninth is currently under construction.
Alderman Bob Markli cast the only vote against the new tax, saying it would impact the town's economy in a negative fashion.
"There is no such thing as a victimless tax," Markli said.
The Farragut business alliance will host a community forum to discuss the issue on Thursday morning.
The second and final reading for the proposed tax will be taken up at next week's Farragut Board of Mayor and Aldermen meeting.