The $7.5-million tax break crucial to proposed hotel and retail space at Newport on the Levee has survived a special session of the state legislature — so far.

        The Kentucky House, in special session, has passed a state budget draft that includes extension of a tax break for the second phase of the $215-million levee project.

        But the draft spent Wednesday being debated in the Senate budget committee, where the major arguments were about public funding of political campaigns. If the budget is passed by the Senate with the tax break intact, the levee's second phase should proceed.

        Columbus-based Steiner & Associates has said it would be difficult to move forward on the $30 million second phase, slated to include a Hilton Garden Inn and more retail space, without the tourism tax break.

        The levee project, which has run behind its completion schedule because of the post-Sept. 11 economic slowdown, requires an extension of the tax break.

        “It is kind of surprising that it's gone this far without being resolved,” said Newport City Manager Phil Ciafardini. “It's really up to the Senate leadership and the representatives from Northern Kentucky to make it happen.”

        The tourism incentive allows the levee developers to get back up to 25 percent of sales-tax receipts over 10 years.

        The special session began Tuesday. It was called by Gov. Paul Patton because the legislature failed to pass the state's next two-year budget by April 15, as is required by law.

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