There are new concerns that the Salt Palace Convention Center expansion will lead to a property tax increase for Salt Lake City businesses and residents.

Sen. Michael Waddoups, R-Taylorsville, says his expan- sion-funding bill, SB211, should include a provision that diverts $1.5 million away from Salt Lake City's general fund every year for 10 years. The expansion is needed to keep the lucrative Outdoor Retailer convention, which had outgrown the existing Salt Palace, from going to a different city.

That general-fund money, which pays for such things as fire, police, garbage pickup and street repair services for city residents, would instead help fund convention-center expansion.

City leaders maintain such a diversion would create a big hole in the city's $165 million general fund. Even though the diversion represents less than 1 percent of the total fund, it could mean higher taxes for city residents.

"If the Legislature tells us how we have to use a portion of our general fund, we will either have to reduce services or increase taxes," Council Chairman Dale Lambert said.

City leaders maintain they are running a lean budget and note that last year most employees didn't receive raises. Making further cuts this year would be painful. Still, Lambert said, "I won't say it automatically means a tax increase."

Councilman Dave Buhler agreed the potential scenario would be bleak for a city that already has the highest taxes of any Wasatch Front municipality.

"The only tool we have to replace it is a property tax increase, two-thirds of which would be paid by businesses," he said.

Waddoups' current plan is to require $1.5 million of the city's Innkeepers Tax to be diverted to expansion funding over 10 years, costing the city a total of $15 million. His present bill wouldn't require the state to pay for any of the expansion cost. He noted that his bill could be amended in various ways before it is passed by the Legislature.

"You just lose some support (from other lawmakers) when you take it out of state funds," Waddoups said. He added that "I haven't found any logical (state) funding source to put in there."

Some observers close to the talks maintain the city's initial unwillingness to share in the expansion costs and a general dislike for liberal Mayor Rocky Anderson are causing state lawmakers to be overly punitive to Salt Lake City.

Waddoups denied that his bill is born from the conservative Legislature's dislike of Anderson.

Whatever the reason, the scenario isn't fair, city leaders say, because latest projections show the state will earn an additional $2.2 million in extra yearly tax revenue from the expansion, yet state leaders aren't willing to pay for any of the expansion costs. Salt Lake City, on the other hand, would only gain $600,000 a year in extra revenue, with Salt Lake County getting a $1.2 million boost.