Item 60, 8/31 HOT Allocation and the Downtown Puzzle

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Item 60, 8/31 HOT Allocation and the Downtown Puzzle

Postby Steve Adler » Tue Aug 22, 2017 4:37 pm

Colleagues:

I have concerns about Item 60 and its impact on the work of the Visitor Task Force and the Downtown Puzzle proposal. I am being asked for my thoughts on this item and hope this posting is the best forum to present them.

If I understand correctly, not all of the co-sponsors of Item 60 were focused on any aspect of the item other than the continued effort to see if there is HOT revenue allocated to the Convention Center and, separately, to Visit Austin (Austin Convention and Visitors Bureau) that could be re-allocated. I believe there are both opportunities and limitations in this regard and I think we can all work together on this element.

However, Item 60 goes far beyond that simple inquiry and includes unrealistic and uncertain assumptions. I believe it would preclude the opportunity to implement the Downtown Puzzle and, as a consequence, poses significant threats and missed opportunities:

-- Item 60 does not create new funding for long awaited local priorities and instead merely re-allocates existing funding (except for STR funding not otherwise available).

-- The Downtown Puzzle brings more than $180 Million of new, non-property tax revenue to be deployed for community needs.

-- Item 60 realistically takes the following possibilities off the board for now, including:

o Creating no money for homelessness. Zero new dollars. No dedicated funding stream for the homeless. There’s no mention of the Downtown Puzzle’s $30 Million capital expenditure for housing for the homelessness.

o We lose the most direct path to fund the purchase of the Palm School, an important part of our Latino community’s heritage in Austin.

o Once again, we are leaving the MACC plans on the drawing board while waiting for some other “future” funding idea.

o Item 60 has no new revenue for historic preservation for 6th Street, the Red River Cultural District, and other long-standing needs throughout our community.

o There’s no dedicated revenue stream for the local music industry, without which Austin may no longer be the Live Music Capital of the World.

-- Item 60 doesn’t work because there would be no convention center expansion, and thus no TPID. With no TPID, there is no dedicated funding stream for the homeless.

-- There is no recognized available STR HOT funding stream at this point that is sufficient to impact this budget preparation, since it does not conform to existing STR policy.

-- Item 60 seems also to be dependent on Council’s willingness to approve budget line items from offset general fund spending that really should be handled as part of the budget process.

Item 60 closes off the opportunity to have tourists fund so many local needs, including creating new dedicated funding streams for the homeless and historic preservation, boosting the local music industry, preserving the Palm School, and building out the MACC, among others. As bad as that is, it might not be the worst possible consequence of Item 60.

Item 60 threatens our tourism industry, which currently generates enough sales tax revenue to offset about $1,000 in taxes for everyone in town. As I said above, I believe there are efficiencies and re-allocations of the Visit Austin budget that could be put to other community benefits. However, it is my understanding that the $3.3M in revenue for the Convention Center, taken away by Item 60, is pledged and not available to be re-allocated. 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. And I question whether it is appropriate to re-allocate $6.3M of Visit Austin monies ($4.3M directly and $2M through dedication).

Item 60 risks millions in sales tax general fund revenue and, because it threatens our local hotel business, we would also be risking millions in existing property tax revenue as well. Any downward change to this existing tax revenue would place a greater burden on the tax burdens of Austin homeowners. Finally, cuts to Visit Austin that are too deep not only endanger existing tourism promotion efforts but also the existing funding for the arts and historic preservation as well, since they are funded through HOT revenue.

After careful review of Item 60 and Exhibit A, I have 16 questions for the Council to consider on this proposal:

1. How much is the unremitted STR revenue? What is the source of that amount? What STRs have not remitted tax? Are we ready to make the allowances or exceptions necessary to collect those monies?

2. What is the “other revenue” for music funding?

3. What is the SXSW marketing item? Has SXSW indicated they desire these marketing funds? Are they willing to accept the responsibility for public safety in exchange?

4. Has the hotel industry agreed to this TPID and its use of funds?

5. What is the impact of the cuts to the convention center budget? How many and what kind of city jobs will be impacted?

6. Does this remove obligated revenue from existing Convention Center bonds?

7. Does this impact payback schedule on existing venue and Convention Center bonds as compared to the Visitor Task Force proposal?

8. What is the impact of the cuts to the Visit Austin budget?

9. Does this pay for any new historic preservation projects?

10. Did the Visitor Impact Task Force review these reallocations?

11. What stakeholder groups impacted by current HOT usage and potential HOT usage have reviewed this proposal?

12. Has the city budget office reviewed this proposal?

13. How large is the budget cut to both the convention center and Visit Austin if unremitted STR revenue is not collected? (I’ve estimated this amount in my comments, above.)

14. Does this plan allocate revenue before revenue is realized?

15. Under what state statute can HOT revenue be used for park spending?

16. Has city legal signed off on this reallocation?

We’ll be filing an Addendum to put our Downtown Puzzle resolution on the agenda next week, though not because we think it should be heard at that time, but in case Item 60 is advanced despite these concerns, so our alternative can be discussed at the same time. We still think the ideal time for our resolution to come before the Council would be the end of September, but are prepared to bring it up earlier as part of the Item 60 conversation if that is the will of the Council.

s
Mayor
Steve Adler
 
Posts: 160
Joined: Fri Jan 16, 2015 3:12 pm

Re: Item 60, 8/31 HOT Allocation and the Downtown Puzzle

Postby Ellen Troxclair » Wed Aug 23, 2017 8:36 am

Mayor,

Thank you for posting your comments and concerns. I look forward to having these important discussions with you, our Council colleagues, and the community.

Item #60, as you have correctly pointed out is one part of a much larger discussion around the City’s spending priorities, downtown, and tourism in Austin. I want to be clear, any action taken on this resolution does not preclude or prohibit us from having any of the other important and subsequent conversations that we must have and will have. It focuses on effectively allocating existing HOT revenue, while your plan focuses on possibilities with revenue from a 2-3% increase in the HOT levy and other new revenue sources.

Please see this one pager with graph for a depiction of how this proposal can benefit our community: http://assets.austintexas.gov/austincou ... 082549.pdf

The Resolution is an attempt to provide balance and equity in how the City Council chooses to invest existing tourist dollars. Many in the community and some colleagues on the dais have expressed a concern that the investment is heavily weighted to the convention industry and our hope is that we can find a better balance with the things that make Austin unique, and make so many people want to live in and visit our City. I believe this conversation must happen separately, and before we make a decision on increasing the HOT levy, and we look forward to your participation in that conversation.

By bringing forward your downtown puzzle as an emergency item on the 31st, rather than viewing these as separate issues, I fear that you will pit the issues, the community and the Council unnecessarily against each other, despite the fact that these are not competing proposals

Here are some quick responses to the questions you have raised:

- Before we create new funding streams, we must best invest and utilize our existing revenues to highest benefit of the residents we serve.

- The Council may still consider elements of the Downtown Puzzle that create new, non-property tax revenue, including a TIF for permanent supportive housing or the TPID, regardless of action taken on item #60.

- Item 60, by reinvesting funds into Parks & Historic expenditures currently funded by the General Fund, frees up $13m+ in funding for other community priorities, including a dedicated stream for homelessness, additional funding for preservation, or the 6th Street and Red River Districts.

- By utilizing existing hotel tax dollars or by considering different venue proposals, one of which you laid out in the downtown puzzle, the Council can fund both the Palm School and the MACC.

- Item 60 does create a dedicated revenue stream for local music industry in this budget cycle. Your plan envisions one sometime in the future.

- The TPID – the illustration in the exhibit is for example purposes only. The resolution doesn't create a TPID, but there is also nothing stopping the city from pursuing a TPID as either part of your plan or separately if conversations with the industry showed this kind of investment to be mutually beneficial. This is one example of what that could look like.

- STR revenue – the hotel tax projections include conservative estimates provided by industry stakeholders who have expressed a willingness to remit those additional funds to the city.

- It is my intention that through item #60, we send a signal to the community that we intend to reinvest hotel tax but that final decisions will be made during the next few weeks of budget deliberations. I have submitted the proposal as a budget concept menu item as well.

- Item #60 invests much more money in local needs than is currently being expended.

- The convention industry is an important part of our tourism funds, but it is still only a small piece of the puzzle. With the rate of growth in our HOT revenue, this plan will allow for significant investment in our convention center and visitors bureau, while also allowing room for funding for the things that make Austin unique, which will only enhance our city's attraction to tourists.

- Item #60 invests directly in our local businesses.

Responses to your 16 questions. I believe all deserve further attention.

1. Response provided above.

2. Music will have an immediate funding stream through convention revenue or marketing, and promotion funds.

3. If the City chooses to subsidize SxSW, it should do so with tourism tax considering SxSW is one of the largest tourism drivers in our City. It is unfair to continue to ask taxpayers to subsidize these costs. This plan will hold SxSW harmless while removing the expense from our general fund.

4. We hope the hotel community will continue to engage in those discussions.

5. The Convention Center has a more than $100m budget and significant reserves. A small investment and reallocation in tax revenues does not impact Convention Center employees.

6. This will not reallocate any funding away from the 2 cent venue tax which pays debt payment on the previous expansion. This funding source will actually increase in total revenue under our proposal.

7. We have not been provided with specific data or a schedule for repayment of existing bonds.

8. While this proposal will certainly have an impact on Visit Austin’s budget, through a TPID Visit Austin can supplement its budget. We hope that if the Council chooses to create a TPID that there will be additional investment in community priorities.

9. Yes. It invests significant tourist dollars into preservation and frees up revenue in the General Fund for new historic preservation projects.

10. This was posted on Friday of last week and the Visitor Impact Task Force is encouraged to review the allocations. It incorporates their recommendations with existing revenues.

11. All stakeholder and community groups are encouraged to review this proposal and provide feedback.

12. The proposal was submitted to City Staff last week. We will work closely with the budget office on this proposal.

13. If the City is unable to collect unremitted hotel taxes, the allocations for all buckets including the Cultural Arts, Convention Center, and Preservation would decrease.

14. All budget and allocation decisions are made before revenue is realized. The City experiences this every year with sales tax revenue. These budget decisions would be no different.

15. The State statute specifically provides authorization to spend 15% of hotel tax on historic projects. Our Parks Department, which many stakeholders believe is significantly underfunded, covers the full cost for many historic facilities that could be funded through hotel taxes. We have identified eligible existing city projects that would more than fulfill this funding limit. Additionally, our neighbor to the south, San Antonio, spends 15% of their hotel tax as a credit to the General Fund for operations and maintenance under this provision of the State statute.

16. City legal has reviewed the item and will be included in the ongoing discussions regarding this proposal.

I look forward to our continued deliberations on this important issue.

Thank you,
Ellen
Council Member District 8
Ellen Troxclair
 
Posts: 33
Joined: Tue Jan 13, 2015 2:26 pm


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