If a Virginia city builds a convention center next to a privately owned hotel, can the city capture the sales tax from the hotel as if it were part of the public facility?

Plain-English summary

When certain Virginia cities (Winchester among them) build a "public facility" like a convention center using bonds, Va. Code § 58.1-608.3 lets the city recapture all the state sales tax generated at that facility to help pay off the debt. The statute's definition of "public facility" can include a hotel that is "attached to and an integral part" of the facility, or "adjacent to" a convention center under a public-private partnership.

Winchester's city attorney Anthony Williams wrote the AG about a real planning question. The city was about to build a convention center, and a privately owned hotel sat directly across the street. The consultant said the hotel would be an integral part of the project. Could the hotel be folded into the "public facility" definition so the city could capture sales tax from it? Williams asked three sub-questions: does the hotel have to have been built as part of the facility, can a hotel across a public street still count as "adjacent," and what if the two are connected by a bridge or walkway?

Herring's answers, in order:

1. The statute doesn't say anything about when the hotel was built, so an existing pre-built hotel can qualify just as readily as a newly built one.

2. "Adjacent" in Virginia case law and Black's Law Dictionary means "lying near or close to, but not necessarily touching." The Supreme Court of Virginia has held that a billboard separated from a highway by a road was still adjacent to the highway. So a hotel across a public street can be "adjacent to" the convention center, and the city can capture its sales tax under subsection (iv) if it (a) owns the convention center and (b) enters a qualifying public-private partnership with the hotel.

3. A bridge or walkway connecting the hotel and convention center makes them "attached" for purposes of subsection (iii). Combined with a finding that the hotel is an "integral part" of the project, that triggers sales tax capture.

The AG was careful to note he was giving general guidance, not deciding whether the specific Winchester hotel actually qualifies; that's a factual call.

Currency note

This opinion was issued in 2015. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify the current text of § 58.1-608.3 and the list of qualifying municipalities before relying on any specific rule mentioned here.

Common questions

What kinds of Virginia localities can use § 58.1-608.3 to capture sales tax?

Only the localities specifically listed in the statute. The provision is a special-purpose financing tool, not a general option for any city. Winchester was on the list.

Does the hotel have to be brand new?

No. The statute is silent about construction date. Herring concluded that an existing hotel can qualify if it meets the other definitional requirements.

How close does the hotel have to be to count as "adjacent"?

Close enough that a court would say it "lies near" the facility, even if there's a public street or other intervening object between them. Touching is not required.

What if the hotel is two blocks away?

The opinion didn't draw a bright line, but it relied on the Virginia Supreme Court's holding that "adjacent" can include separation by an intervening road. A two-block gap would test that meaning. Specific factual situations are beyond the scope of this opinion.

Does the city need to partner with the hotel?

Under subsection (iv) (adjacent + public-private partnership), yes. The city must "contribute infrastructure, real property, or conference space" in the partnership. Under subsection (iii) (attached + integral part), the partnership requirement doesn't appear.

Background and statutory framework

Section 58.1-608.3 of the Code of Virginia is a special sales tax recoupment statute for designated municipalities that finance public facilities through bonds. The recoupment lets cities use sales tax from the facility to service the bond debt, effectively letting the project pay for itself out of the sales it generates.

The statute defines "public facility" in subsections that include:

• (iii) a hotel "attached to and an integral part" of a qualifying facility (such as a convention center)
• (iv) a hotel "adjacent to a convention center owned by a public entity and where the hotel owner enters into a public-private partnership whereby the locality contributes infrastructure, real property, or conference space"

Both subsections turn on undefined adjacency or attachment terms, which Herring interpreted using:

• The Virginia Supreme Court's billboard case (State Highway & Transp. Comm'r v. Creative Displays, 1988), which held that "adjacent" allows for an intervening object like a road.
• Black's Law Dictionary's definition: "lying near or close to, but not necessarily touching."
• The plain dictionary meaning of "attached" as "to fasten on or affix to; connect or join," which fits a bridge or walkway connection.

Herring repeatedly invoked the principle that courts give statutory words their ordinary meaning when the statute itself doesn't define them.

Citations

• Va. Code Ann. § 2.2-505 (AG advisory opinions)
• Va. Code Ann. § 58.1-608.3 (sales tax recoupment for public facilities)
• Williams v. Commonwealth, 265 Va. 268 (2003)
• Vaughn, Inc. v. Beck, 262 Va. 673 (2001)
• Thomas v. Commonwealth, 256 Va. 38 (1998)
• City of Va. Beach v. Bd. of Supvrs., 246 Va. 233 (1993)
• Grant v. Commonwealth, 223 Va. 680 (1982)
• State Highway & Transp. Comm'r of Va. v. Creative Displays of Norfolk Ltd., 236 Va. 352 (1988)
• Holston S. & P. Co. v. Campbell Trustee, 89 Va. 396 (1892)
• Mattaponi v. Dep't of Envtl. Quality, 270 Va. 423 (2005)
• Black's Law Dictionary 44 (8th ed. 2004)
• The American Heritage Dictionary 139 (2d College ed. 1985)
• 2009 Op. Va. Att'y Gen. 80
• 2010 Op. Va. Att'y Gen. 56

Source

• Landing page: https://www.oag.state.va.us/annual-reports-opinions/official-opinions
• Original PDF: https://www.oag.state.va.us/files/Opinions/2015/14-081_Williams.pdf

Original opinion text

COMMONWEALTH of VIRGINIA
Office of the Attorney General
Mark R. Herring
Attorney General

February 5, 2015

900 East Main Street
Richmond, Virginia 23219
804-786-2071

Anthony C. Williams, Esquire
City Attorney for the City of Winchester
15 North Cameron Street
Winchester, Virginia 22601

Dear Mr. Williams:

I am responding to your request for an official advisory Opinion in accordance with § 2.2-505 of the Code of Virginia.

Issues Presented[1]

You inquire regarding the application of the term "public facility" as used in § 58.1-608.3 of the Code of Virginia, which entitles the municipal owner of such a facility to recoup certain sales tax revenues. You specifically ask whether a hotel with any of the following descriptions may qualify as a "public facility" under subsections (iii) or (iv) of § 58.1-608.3(A):

(i) A hotel not originally constructed as part of a qualifying public facility;
(ii) A hotel located across a public street from a qualifying public facility; and
(iii) A hotel located across a public street from a qualifying public facility and connected to that facility via a bridge or walkover.

Background

You relate that the City of Winchester has purchased certain property for the purpose of constructing a convention center satisfying the requirements of the definition of "public facility" under § 58.1-608.3 of the Code of Virginia. You further advise that a hotel is located directly across the street from the proposed convention center property and that the city's consultant for the convention center has identified the hotel as an integral part of the convention center project. You state that there are no other hotels within a two-mile radius of the proposed convention center site and no other hotels capable of supporting a convention center within the entire city. In addition to the hotel's current ninety guestrooms, the feasibility study for the convention center indicates that the project will require an additional fifty guestrooms, which may be constructed either as part of the existing hotel structure or upon the property purchased for the convention center. The question has arisen as to whether the existing hotel will qualify as part of the proposed convention center ("public facility"), entitling the City to all sales tax revenue generated by the hotel under § 58.1-608.3(C).

Applicable Law and Discussion

Section 58.1-608.3(C) of the Code of Virginia entitles selected municipalities, including the City of Winchester, to recoup all sales tax revenues generated by transactions at a public facility for which the municipality has issued bonds.[2]

In order for a municipality to be entitled under § 58.1-608.3 to recoup sales tax revenue from a hotel, the hotel must qualify as part of the public facility under the statute. A hotel may qualify as part of a public facility under subsection (iii) of § 58.1-608.3 if it is "attached to and is an integral part" of a qualifying facility, or under subsection (iv) of § 58.1-608.3 if it is "adjacent to a convention center owned by a public entity and where the hotel owner enters into a public-private partnership whereby the locality contributes infrastructure, real property, or conference space."[3] The focus of your inquiry concerns the application of the terms "attached to" and "adjacent to."

You first ask whether a hotel can meet the requirements of either subsection (iii) or subsection (iv) of the statute if it was not originally constructed as part of a qualifying facility. The relevant provisions make no reference to the time or purpose of the construction of a qualifying hotel.[4] "Under basic rules of statutory construction, [courts] determine the General Assembly's intent from the words contained in the statute."[5] Because the statute does not incorporate construction dates into its definition of "public facility," I conclude that a hotel may meet the requirements under subsections (iii) and (iv) even if it originally was not constructed as part of the qualifying facility. Thus, assuming the other definitional requirements are met, the municipal owner of the public facility would be entitled to recoup sales tax revenues on both the public facility and the hotel.

Next, you inquire whether a hotel can meet the definition of "public facility" under subsection (iii) or (iv) of § 58.1-608.3(A) if it is separated from the qualifying public facility by a public street. Specifically, you ask whether the hotel can be considered "adjacent to" the qualifying public facility. Because the statute itself does not define "adjacent," the term "adjacent" should be interpreted according to its ordinary meaning.[6] Black's Law Dictionary defines "adjacent" as "lying near or close to, but not necessarily touching,"[7] and the Supreme Court of Virginia, in construing the term, has found that, to be "adjacent," objects need not touch, but may be separated by the intervention of some other object.[8] Specifically, the Court determined that although a billboard was separated from a highway by a road, it was, in fact, adjacent to the highway.[9] Accordingly, a hotel may be considered adjacent to a convention center even if separated by a public road, and can satisfy the definition of a "public facility" under subsection (iv) of 58.1-608.3(A), so long as: (1) the convention center itself is owned by the city, and (2) the city enters into a public-private partnership with the hotel whereby the city contributes infrastructure, real property, or conference space. Provided these additional criteria are met, the municipal owner of the public facility would be entitled to recoup sales tax revenues on both the public facility and the hotel.

Finally, you ask whether a hotel could qualify as a "public facility" under subsection (iii) or (iv) of § 58.1-608.3(A) if the hotel were connected to a qualifying public facility via a bridge or walkover. Like "adjacent," the word "attached" is not defined for purposes of the statute and must be given its plain meaning.[10] To "attach" is "to fasten on or affix to; connect or join."[11] Thus, I conclude that, should a bridge or walkway be constructed to connect a hotel with a qualifying convention center, the two structures would be "attached" for purposes of subsection (iii) of § 58.1-608.3(A). Thus, so long as the hotel also has been determined to be integral part of the public facility, the municipal owner of the public facility would be entitled to recoup sales tax revenues on both the public facility and the hotel.

Conclusion

Accordingly, it is my opinion that § 58.1-608.3 of the Code of Virginia allows for a hotel not originally constructed as part of a qualifying public facility to meet the definition of "public facility" under subsection (iii) and/or (iv) of § 58.1-608.3(A). It is also my opinion that a hotel separated by a public street from a qualifying public facility is "adjacent" to the facility within the definition of "public facility" under subsection (iv) of § 58.1-608.3(A). Finally, it is my opinion that a hotel which is separated from a public facility by a public street but is connected to the public facility by a bridge or walkway is "attached" to the public facility within the definition of "public facility" under subsection (iii) of § 58.1-608.3(A). If both or either of these definitions is satisfied, the municipal owner of the public facility is entitled to recoup sales tax revenues on both the public facility and the hotel.

With kindest regards, I am

Very truly yours,

Mark R. Herring
Attorney General

[1] I note that your inquiry arises from a specific factual situation. Although I am unable to comment definitely on the particular circumstances about which you inquire, I offer the analysis herein as general guidance. Whether the specific hotel in question qualifies in fact as a "public facility" for purposes of § 58.1-608.3 is beyond the scope of this Opinion. See 2009 Op. Va. Att'y Gen. 80, 81 and n.17 ("Attorneys General consistently have declined to render official opinions on specific factual matters ...."); 2010 Op. Va. Att'y Gen. 56, 58 (the Attorney General "refrain[s] from commenting on matters that would require additional facts[.]").

[2] Va. Code Ann. § 58.1-608.3(C) (2013).

[3] Section 58.1-608.3(A).

[4] Id.

[5] Williams v. Commonwealth, 265 Va. 268, 271 (2003) (citing Vaughn, Inc. v. Beck, 262 Va. 673, 677 (2001); Thomas v. Commonwealth, 256 Va. 38, 41 (1998)).

[6] City of Va. Beach v. Bd. of Supvrs., 246 Va. 233, 236 (1993) (quoting Grant v. Commonwealth, 223 Va. 680, 684 (1982)) ("An important principle of statutory construction is that 'words in a statute are to be construed according to their ordinary meaning, given the context in which they are used.'").

[7] Black's Law Dictionary 44 (8th ed. 2004).

[8] State Highway & Transp. Comm'r of Va. v. Creative Displays of Norfolk Ltd., 236 Va. 352, 354 (1988) (quoting Holston S. & P. Co. v. Campbell Trustee, 89 Va. 396, 398 (1892)).

[9] Id.

[10] See Mattaponi v. Dep't of Envtl. Quality, 270 Va. 423 (2005).

[11] The American Heritage Dictionary 139 (2d College ed. 1985).