With so much at stake, including potentially tens of millions of dollars to address homelessness and funding for cultural arts, music and preservation projects — all without adding a dime to homeowners’ tax bills – the Austin City Council should not shut the door on the mayor’s “Downtown Puzzle.”
Mayor Steve Adler’s puzzle plan has drawn competition that if passed today could kill it.
Like Adler’s, that proposal by Council Members Ellen Troxclair, Leslie Pool, Kathie Tovo and Ann Kitchen relies on the hotel occupancy tax, also called HOT, which visitors to Austin pay when they stay in hotels or short-term rentals.
The city’s share of the HOT — 9 percent of the total 15 percent — goes to fund the Austin Convention Center and Visit Austin, the city’s marketing arm. The remaining 6 percent goes to the state. The maximum that can be charged under state law is 17 percent. Austin would meet that threshold under Adler’s proposal.
Before deciding on either plan, the council should get all the facts, including whether both can survive. And while it is tempting to fixate on the business case for expanding the convention center in terms of bookings and losses, the more relevant question is whether expansion can be leveraged to access tens of millions in new dollars for projects the Austin community deeply cares about but lacks the money to address, from homelessness to art and music.
It’s worth noting that unlike other city assets, the convention center is financed mostly by the HOT. Even when revenues from bookings of conventions don’t cover expenses, the convention center operates in the black because it receives more than enough revenue from the HOT to cover losses and generate a healthy reserve fund. The expansion would also be financed through the HOT, and therefore, tourists would pay for it and not Austin taxpayers.
Given that, the council should delay Troxclair’s proposal, as it might shut the door on Adler’s plan.
Under Troxclair’s plan, a total of $11.1 million of HOT revenue would be carved yearly from the budgets of the convention center and Visit Austin. That revenue would be used to finance operations and maintenance of the city’s historic facilities and sites.
After satisfying that directive, additional funding could be used on restoring and preserving other city treasures, such as the Barton Springs Bathhouse, Red River Cultural District, Montopolis Negro School, Palm School and Lions Municipal Golf Course.
CONTINUING COVERAGE: Tug of war intensifies over hotel taxes going to convention center.
A key benefit is that financing historic projects with HOT revenue frees up money in the general fund for other things, including services for homeless people or a tax cut. The HOT would remain at 15 percent on hotel bills for each day a person stays at a hotel or short-term rental.
While enticing, those figures don’t stack up to the revenue generated through Adler’s plan for preservation projects, music and cultural arts and for serving the needs of Austin’s homeless population.
Adler’s plan is akin to a three-legged stool, utilizing the convention center, the HOT and a Tourism Public Improvement District to generate money.
At the core is expansion of the convention center built through a public-private partnership. By doing that, the city can raise the HOT by 2 percent to its maximum 17 percent. That would be used to finance $400 million in bonds, while land and some construction would be financed by private sources to keep much of the expansion property on city and county tax rolls.
Because the $400 million is more than is needed for the expansion, the extra would steer $162.3 million to historic preservation over 10 years and $36.3 million for music over a decade. Another $59 million would go to other projects near the convention center.
Projects eligible for historic preservation under Adler’s plan include the Mexican American Cultural Center, Palm School and historic features in parks near the convention center.
The leg that has gotten the most attention because it dedicates a source of money to serving the needs of Austin’s growing homeless population is the Tourism Public Improvement District. Under state law, downtown hotel operators can tax themselves through that mechanism and have indicated to do that up to 2 percent, which would be added to hotel bills on top of the HOT.
The city would get a big slice — 40 percent — of that.
In the first three years, the tax would be 1 percent and generate $4 million a year for the homeless. The next seven years, the tax would rise to 2 percent and generate $8 million a year. The total would be $68 million over 10 years. The idea is to use much of that for permanent housing for the homeless. And that would be a good move, because there is little money available in the city’s general fund for that purpose.
In a nod to Troxclair, Adler today will ask the city staff to examine how much money can be cut from the convention center and Visit Austin budgets without endangering his measure.
That is a wise approach, as no harm would be done to Troxclair’s proposal or Adler’s. But the extra time would do a world of good in bringing greater clarity to solving expensive challenges facing Austin.
If the council fails to do that, it just might kill the most innovative initiative to come along in a long time for funding several community needs and assets Austin residents care most about — music, arts, preservation and providing permanent homes and greater services for people who are homeless — without costing a penny more in property taxes.