Two increases of hotel taxes on tourists will allow Austin to help the homeless, expand the Convention Center and build a funding base to address various pieces of the “downtown puzzle” associated with city growth, Mayor Steve Adler said in an ambitious launch Monday of a new goal set.
The mayor’s plan would add 1 percent to the hotel tax bill immediately and another 1 percent in 2021 to create a Tourism Public Improvement District to address homelessness and other downtown issues.
“We know from visitors who are coming to town that the predators that are surrounding our homeless community are beginning to impact the experience that tourists and visitors have when they come to Austin,” Adler said. “And, quite frankly, the experience that Austinites have when they come downtown.”
The so-called “downtown puzzle” plan is just a series of ideas at this point, with no details worked out and no briefings to City Council, which would eventually have to approve its components. It ties funding of a larger Convention Center with homelessness funding, a possible downtown tax increment financing district, which allocates tax revenues above a base level for use in the area, as well as a time extension of a Waller Creek tax increment financing district. That would create a revenue source, Adler said, to address downtown needs and build a series of connected parks up Waller Creek.
By state law, hotel tax can be used only for things that bring tourists to an area. The city already has a 9 percent tax and the state administers a 6 percent tax, bringing the total tax on a night spent in Austin to 15 percent.
To win the support of hoteliers, Adler is supporting an additional 2 percent increase of hotel tax to expand the Convention Center. That would involve committing $559 million of the total $609 million hotel tax revenue through 2021 to building new convention space, with the condition that it include retail and restaurant space on the ground floor and residential towers above it.
“The community asked for a couple things: One is that the ground floor be active. Then you have the Convention Center—it kind of floats, in my mind — maybe on floors three through seven,” Adler said. “Then above that are towers that would ensure that we have the same ad valorem tax benefit from those blocks downtown that we would have had if there wasn’t a Convention Center.”
That proposal, which would likely involve partnering with private developers, could include two towers on top of the expanded convention center: One for office use and another with affordable housing for people making less than 30 percent of the median family income, according to the mayor’s office.
Agreement to expand the Convention Center was key to getting hotel support for the additional fee for the tourism district, as was having a secure source of funding for marketing, which will also come from the district, said Scott Joslove, president of the Texas Hotel and Lodging Association.
“We’re proud to support this plan,” Joslove said. “We negotiated with the mayor for how to get there and we talked about how the expansion of the Convention Center could be reflective of the council’s vision.”
About 40 percent — $4 million to $8 million a year — of the tourism district money would go to homelessness, in Adler’s vision, though specific projects haven’t been outlined. Aside from that and marketing for the hotels, it could also fund downtown cultural districts and historic efforts, Adler said.
Council Member Kathie Tovo, whose district includes downtown, said she strongly supports extending Waller Creek tax increment financing, and supports exploring different funding mechanisms for addressing homelessness. But she’d like to see the components addressed separately.
“I don’t think ending homelessness in this community needs to be tied to expanding the Convention Center,” Tovo said, adding that coupling the project with retail and residential space did not completely mitigate her concerns about convention centers creating dead zones in downtown areas.
Council Member Ellen Troxclair agreed that expanding the Convention Center should be a separate decision from adding funding to address homelessness or other projects.
Council Member Leslie Pool, who has been publicly unenthusiastic about proposals to expand the Convention Center, said she also has many questions.
“It seems like a quid pro quo to me and I’m not sure how I feel about that,” Pool said. “This part depends on that part, which depends on that other part, and it’s all kind of like a Christmas tree — there’s lots of stuff being offered to different people, but they don’t get their stuff unless we expand the Convention Center.”