Tug of war intensifies over hotel taxes going to convention center

Battle lines are being drawn at City Hall over whether the Austin Convention Center should continue to receive most of the city’s hotel taxes — and be expanded — or whether other city tourist draws should get some of that revenue for improvements.

Council Members Ellen Troxclair, Kathie Tovo, Leslie Pool and Ann Kitchen are backing an item for a vote next week that would slightly reduce the percentage of hotel taxes going to the convention center and city marketing arm Visit Austin from 85 percent to 70 percent — or from $59.8 million to $55.3 million. The measure would put $11.9 million into parks and preservation instead.

That money could go to improving historic attractions that might draw tourists, such as Barton Springs, Zilker Park, the Montopolis School or Palm School, the proposed resolution says. Using hotel tax money could free up some of the general fund dollars that currently go toward those facilities.

The city’s hotel occupancy tax of 9 percent yielded more than $90 million in 2017. But only a small percentage of visitors to the city — 2 percent, by one estimate using 2013 numbers — come here for conventions.

Mayor Steve Adler fired back at the proposal with a post to the council’s message board Tuesday afternoon calling it a threat to the “Downtown Puzzle” idea he brought forward last month to expand the convention center and raise money to help the homeless.

RELATED: Adler calls for tax plan to help Convention Center and homeless

“Item 60 threatens our tourism industry,” he said of the other council members’ agenda item. “Excessive cuts to convention center funding would harm our ability to host conventions even at our current scale, which threatens existing service and hospitality industry jobs downtown.”

The Downtown Puzzle, as Adler proposed it, would increase hotel taxes 2 percent by 2021 to fund a larger convention center, and it would create a downtown Tourism Public Improvement District that would also collect taxes on hotel stays to address downtown issues, including homelessness.

The plan would commit $559 million of an estimated $609 million in hotel tax revenue through 2021 toward expanding and promoting the convention center. It would allow perhaps $4 million to $8 million per year during that time to go to homeless initiatives.

Adler argued the council members’ proposal would torpedo those efforts, and he immediately moved to add discussion of the Downtown Puzzle to the Aug. 31 council agenda. But Troxclair said in a response to the mayor’s message that the allocation of hotel tax money for next year is a separate matter from Adler’s proposal to add new hotel taxes.

Hotel tax, by law, can only be spent on specific things that directly bring tourists to Austin. Only 15 percent of it can go to cultural draws, such as arts and music, and 15 percent can go toward the preservation of historic attractions. The city already spends the allotted amount on cultural things. Troxclair’s proposal would allocate 15 percent to historic park features.

The debate over the convention center’s allocation of city hotel taxes is by no means a new one. Last year, the council convened a task force to study the city’s tourism and review how to best spend hotel taxes. Their recommendation came back in May: to expand the convention center.

RELATED: Task force calls for raising hotel tax to pay for convention center expansion

Last week, Troxclair pointedly asked task force Chairman James Russell if he felt the task force was able to consider all of its options with convention center advocates, including the CEOs of the convention center and Visit Austin, as members.

“I don’t think anybody could argue that there were a couple sales pitches on expanding the convention center,” Russell said. “It was a pretty big turn-off to a lot of folks. … I (said,) ‘If this task force ends up recommending a convention center expansion, it’s going to be in spite of, not because of (those pitches).’ And that’s, quite frankly, where we got to.

“We, frankly, decided that more money was better. And the way to get more money was to expand the Cconvention Ccenter.”

During a budget workshop Wednesday, Tovo and Council Member Alison Alter asked about the convention center’s business model, how much hotel tax money it needed to cover its debt and how much money it keeps in reserves. Others made the point repeatedly that only a small portion of Austin visitors are conventiongoers.

“I have difficulty understanding the relevancy of whatever that number is,” the mayor replied. “The convention center’s job is not to increase that percentage. … Is it bringing in people? Is it pushing revenue or restaurants? Is it creating hotels?”

He argued that the convention center is key to bringing in visitors during the week, to keep business steadier for restaurants and hotels that often draw weekend visitors.

IN-DEPTH: Was convention center’s last expansion a failure or a success?

“I like to think of downtown as kind of the boiler room of the city,” Adler said. “We feed in the coal here and the energy happens, and we end up with pocket parks all over the city and clinics all over the city and planning for health and human services all over the city.”

Troxclair and Kitchen replied that they agree having a robust convention center is important, but believe it could still operate well with somewhat less funding.

“It’s a matter of degrees,” Kitchen said. “There’s a lot of things that go into supporting tourism in our city, not to mention some of the things people come here for. … Tourism would be hurt if we didn’t have a Zilker Park, if we didn’t have a Barton Springs, if we didn’t have an Umlauf gardens. That is part of our engine.”

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