Evanston hotel managers say a 2.5 percent increase in hotel tax rates that was passed during Monday’s city council meeting will actually benefit their business.

The increase from 5 to 7.5 percent was passed unanimously without debate as part of the council’s consent agenda. The tax is charged to lodgers as a percentage of the hotel’s rate.

City Finance Director Bill Stafford said the tax increase would bring in between $200,000 and $250,000 in added revenue to the city.

The hotel tax increase was part of the city’s Tax Increment Financing agreement with Arthur Hill, developer of the Church Street Plaza project, which includes the Century Theatres. The agreement allows Evanston to pay off $21 million in bonds that were used to build the Maple Avenue garage with hotel tax, sales tax, parking tax, parking revenues and incrementally increasing real estate tax within the TIF districts.

Hotel managers said they believe adding parking spots will help lure travellers to Evanston and increase hotels’ customer base.

“Everybody benefits immediately,” said George T. Finn, general manager of the Evanston Holiday Inn and Conference Center, 1501 Sherman Ave. “We need parking. It’s a win-win situation in that respect.”

The tax increase passed Monday night was less than the original proposed increase of 4 percent, which brought a smile to Finn’s face.

“I knew it was coming, and I’m glad it wasn’t 4 percent,” he said. “I think it’s going to be good for the community.”

The Maple Avenue garage is about one block away from the new Hilton Gardens in Evanston, 1818 Maple Ave. Stafford said the garage provides service to the entire downtown area, which will benefit all three major Evanston hotels – the Hilton, Holiday Inn and the Omni Orrington Hotel. There are also several smaller hotels in the area.

Hotel managers expressed concern over the possibility that the increased tax could drive potential customers to nearby suburbs that have lower tax rates.

“The only downside (of the tax increase) is that we have to pass the cost along to our customers,” Finn said. “Skokie will steal our customers because our tax just went up.”.

But Michael Ginter, general manager of the Hilton, which opens July 2, said he isn’t worried about losing customers to other suburbs because Evanston offers unique benefits, such as proximity to Lake Michigan.

“There’s always a concern that if tax rates are too high it will deter business from coming to a city, but it won’t deter my ability to compete in this market,” Ginter said.

Stafford said the City would annually monitor the tax’s effect on the local hotel business, but he did not expect the increase to have a detrimental effect.