Austin And Travis County Voters Will Decide The Future Of Hotel Tax Revenue. Here's What That Means

Oct 30, 2019

Expansion of the Austin Convention Center and the Travis County Expo Center could be on the line with two local ballot propositions this November. At the center of those two propositions is tax revenue from hotel stays – and how it's spent locally.

Both propositions are born out of the Austin City Council's decision to expand the Austin Convention Center, and both have far-reaching impacts on how that money is spent.

It's complicated, and deciding on which way to cast your ballot requires you to understand how we got here.

Why expand the Austin Convention Center?

In May, the Austin City Council voted to expand the convention center. It decided to spend more than $1.2 billion to buy the Palm School from the county and expand the convention center to the three adjacent blocks on its west side. It would be paid for without raising taxes locally, but with income from the Hotel Occupancy Tax (HOT).

According to Austin Mayor Steve Adler, the passage of the city’s Proposition B could mean the inability to run the convention center at all. Also, the distribution of tourist tax dollars could look different after the election.

“I don’t know anybody that likes that existing convention center, because it’s dead space in our community,” Mayor Steve Adler said. “I mean it takes out a six-block area.”

So, how would adding three blocks to it make that any better?

Adler likens it to the new Austin Central Library downtown.

“Just like we built the library downtown that people go in and say, ‘Oh my goodness. If this is what you meant about a library, I love it,’” Adler said. 

Plans for the new convention center would have space for year-round, ground-floor stores, restaurants and clubs. The new design would have 2nd Street reopened all the way to what is to become Waller Park. The new convention center would be elevated above Waller Creek, connected by walkways.

The money would come from taxes on hotel stays in Austin.

Every night, Austin's hotel visitors pay a 17% tax. The city gets 9 cents in tax revenue for every dollar, while the state gets 6 cents.

In 1998, the city was granted an extra 2% of that revenue by voters to pay down the debt on the current convention center. The city could pay that debt down as soon as 2021, but if the new convention center is built, that could push out the city’s need for the additional money for an additional 30 years.

Let's move on for now, but put a pin in that 2% – it's going to come up later.

Where did Austin's Proposition B come from?

The drive to raze the convention center raised some questions for some Austinites.

  • Why would the 20-year-old convention center have to be scrapped for a new one?
  • What is the environmental impact of tearing it down?
  • Why take those city blocks off the tax rolls?

Those questions led to the formation of Unconventional Austin, a political action committee (PAC), that put forth another citizen-led petition. It gathered enough signatures to bring the ordinance to a vote, then sued over the ballot language the city decided upon.

After that win in court, this is what you’ll see on the ballot:

Shall an ordinance be adopted that prioritizes the use of Austin's Hotel Occupancy Tax revenue by continuing the City practice to spend 15% of the Austin Hotel Occupancy Tax revenue on cultural arts and 15% on historic preservation, limiting the City' s spending to construct, operate, maintain, or promote the Austin Convention Center to 34% of Austin's Hotel Occupancy Tax revenue, and requiring all remaining Hotel Occupancy Tax revenue to support and enhance Austin's Cultural Tourism Industry to the potential exclusion of other allowable uses under the Tax code; and requires the City to obtain voter approval and public oversight for convention-center improvement and expansion costing more than $20,000,000.

What’s at stake with Austin’s Proposition B?

Voting for Prop B is a vote against expansion. A vote against Prop B is for expansion.

The petition ordinance wants to stop the expansion of the convention center.  But Unconventional Austin's ballot proposition also goes a step farther.

If passed, Proposition B would also alter the way the city disperses its cut of the HOT. Unconventional Austin claims that shift would send more money to parks, preservation, cultural arts and homelessness programs, while curtailing what the city can spend on the convention center.

“What we’re saying is do more than what we’re already doing,” said John Reidie, Austin Tourism Commission member and Unconventional Austin supporter. “If we can’t increase an already existing allocation because it’s illegal, then the allocation is illegal.”

Other groups disagree with that legal interpretation.

The Chamber of Commerce and the Austin City Council are both, predictably, against the proposition. But there are many groups Unconventional Austin's proposition aims to help that oppose the ballot measure – including the Ending Community Homeless Coalition, the Music Venues Alliance and the Red River Cultural District.

“The music industry in Austin supports convention center expansion,” said Cody Cowan, executive director of the Red River Cultural District. He says the expansion and the added HOT revenue will help keep live music clubs alive. 

“Other cities want what we have,” Cowan said. “They want to be the ‘Live Music Capital of the World,’ but in the, sort of, rapid development that we’ve had in Austin, it’s just become unaffordable. So, we need to do everything we can to be sure that we can retain musicians, that we can retain music businesses, and a convention expansion will do that.”

And if enacted, Adler argues, the ordinance could run afoul of state law.

“It would probably even stop our ability to even operate the existing convention center,” Adler said, calling it "an unintended consequence."

What does state law say about spending hotel tax revenue?

State law is explicit about what the city’s 9% can go toward. Convention centers, sports venues, promotion for those convention centers and sports venues, as well as tourism promotion– those are all OK.

There also is a carve out in the law for cities to spend a portion, at their discretion, for things that draw visitors like Austin’s music scene or parks.

“If there was a way for us to take all those tourist dollars and spend them on Zilker Park and parks throughout the city, we would have done that years ago,” Adler said. “It’s against the law to do it that way. You have to spend the tourist dollars on a convention center. But the law also says, if you do that, we’ll let you take 30 percent off the top and spend it on arts and historic preservation.”

The city is using a portion of that money now to help some iconic music venues with their property taxes.

Why are the city and county at odds over this?

Unconventional Austin got things heated at the county level, but not over the redevelopment of the convention center – not exactly. Four of the five Travis County commissioners stopped by the City Council meeting on Aug. 9 to let the Austin City Council know how they feel about that 2% in tax revenue. Remember, the 2% we put a pin in earlier?

The Austin City Council voted to extend its collection of it to prop up its redevelopment of the Austin Convention Center.

“In my 11 years on the Commissioners Court, I have never appeared before any city council of any city within Travis County,” said County Judge Sarah Eckhardt. “We should avoid public conflict... except... where the action contemplated could harm interests of Travis County… and where the county’s involvement in the city’s deliberations could avoid the harm.”

Eckhardt said Travis County officially has no stance on the convention center, but her colleagues hinted at their objection to the redevelopment at that meeting.

Commissioner Brigid Shea told Council members "it would be nice to have a consistent and honest discussion" about the city's hike, and that the decision could put Austin-Travis County at the state-imposed ceiling for tax revenue.

Credit Miguel Gutierrez Jr. for KUT
Where did Travis County's Proposition A come from?

The City of Austin has been the recipient of all of the local hotel tax revenue for years. That's because, most, if not all, the hotels were within the Austin city limits, as were the tourism attractions.

But that was then.

Now hotels have been built and proposed elsewhere in the county in places like Bee Cave, Westlake and Pflugerville. 

Here's where that 2% gets back in the mix.

Because the Austin City Council voted to charge that until 2029 or when the city pays off the convention center debt (scheduled now for 2021, assuming it is not rolled into any new convention center.)

County Prop A is asking voters to redirect that 2% of the HOT from Austin and send it to Travis County to pay for a renovation of its Expo Center.

Eckhardt told KUT on Wednesday the Austin City Council's actions didn't push the county into the referendum. State law requires the county to put its request to redirect the 2% in tax revenue on the ballot.

"The reason why four of the five county commissioners went down [to City Hall] was because the decision that the city makes with this mechanism affects the rest of the local governments,” Eckhardt said. “And to do so without any thought to how it affects the rest of us is a problem to us.”

With that, here's what you'll see on the ballot:

Authorizing Travis County, Texas to provide for the planning, acquisition, establishment, development, construction, renovation, and financing of new and existing facilities of the type described by Section 334.001(4)(A) of the Texas Local Government Code, including a multipurpose arena and adjacent support facilities and any related infrastructure in the area of the Travis County Exposition Center and designated by a resolution of the Commissioners Court of the County adopted on July 30, 2019 (the “Resolution”) as a sports and community venue project within the County in accordance with applicable law (the “Venue Project’’), and to impose a new hotel occupancy tax on the occupancy of a room in a hotel located within the County, at a rate not to exceed 2% of the price paid for such room, and if approved, the maximum hotel occupancy tax rate imposed from all sources in the County would be 17% of the price paid for a room in a hotel, for the purpose of financing the Venue Project, and approving the Resolution.

Why renovate the Travis County Expo Center?

The Travis County Exposition Center is managed by the county, but sits on City of Austin land at Walter E. Long Park. Built in 1983, it has not seen significant renovations since the 1990s, when they added climate control for the old Austin Ice Bats hockey team.

It is home to seasonal events like car shows and the ROT Rally. Its primary tenant is Rodeo Austin. Every March, the rodeo awards more than a half a million dollars in prizes and more than $2 million in youth scholarships.

But the county would like it to do more.

Since it sits on city land, county commissioners say redeveloping it would create an asset for both city and county. They also point out it’s in a location that both intra-local governments have targeted for economic growth.

And Rodeo Austin has been eyeing better facilities for years. It argues a renovated venue would create more opportunities to raise the rodeo’s stature on the pro circuit and bring in more scholarship money. 

There have been a number of plans in the past to do so. In 2016, designers proposed a $620-million replacement. In late 2017, developers proposed a 15,000-seat arena and a 40,000-seat open-air stadium on the site.

What's at stake with Proposition A?

Prop A passing does not guarantee any development for the Travis County Expo Center. It would authorize Travis County Commissioners to exact the 2% of the HOT for the county’s purposes. If it passes, there are still conditions to be met.

  • First, the city’s convention center debt must be paid off.
  • Second, the debt (perhaps because of said expansion project) is not paid, but it is the year 2029, and the city’s option on that tax expires.
  • Third, the county would have a year to come up with plans for rehabbing the Expo Center.

Once those three conditions are met, the county could use that 2% tax revenue.

Correction: A previous version of this story said the official name of Austin’s rodeo was Star of Texas Fair & Rodeo. That is no longer the case. It is now just called Rodeo Austin.