Marlborough’s City Council has approved a 2 percent increase in the hotel occupancy tax, which is expected to generate between $400,000 and $500,000.

The funds will be targeted for economic development spearheaded by the Marlborough Economic Development Corp. (MEDC), according to a statement.

The hotel rooms tax in the city is 9.7 percent, with 4 percent collected by the city. The proposal approved by the council would increase the tax to 11.7 percent with 6 percent allocated to Marlborough. The city has averaged about $1.1 million per year in revenue from the hotel tax at the current 9.7 percent rate.

Currently, Massachusetts levies a 5.7 percent room occupancy tax, and allows up to an additional 6 percent to be levied by cities and towns. Neighboring cities and towns that have voted for the added rooms tax include Auburn, Framingham, Hudson, Natick, Shrewsbury, Westborough and Worcester.

"We want 2011 to be the year of the plan, the year that Marlborough’s citizens develop and commit to a 10-year plan that will preserve stable residential tax rates while building an increasingly vibrant, diverse and healthy community," said City Council President Arthur Vigeant. "Marlborough has an extraordinary opportunity to secure a regional leadership role in defining and developing economic activities that will directly benefit the city and shape its future opportunities."