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Travis County eyes hotel tax to renovate expo center

Friday, July 26, 2019 by Jack Craver

The Travis County Commissioners Court made a move Tuesday that could put it in direct competition with the city of Austin for millions of dollars of future revenue from hotel stays.

The three commissioners present voted unanimously to ask county staff to explore putting a referendum on the ballot this November that would commit a portion of the tax levied on local hotel guests to build a new Travis County Exposition Center.

The tax authority the county is targeting is currently being used by the city to pay off the debt associated with the expansion of the Austin Convention Center. That expansion (and the tax) was authorized by voters in 1998.

The debt is scheduled to be paid off in 2029, after which the tax would expire. County Judge Sarah Eckhardt said the referendum would authorize the county to impose the tax again once the debt is paid off.

City and county leaders have long envisioned renovating the expo center, an outdated space that is notable for hosting the annual Star of Texas Fair and Rodeo.

Chapter 334 of state law allows a county or a municipality within the county to impose a 2 percent “venue tax” on hotel visits that can be used to fund a wide range of public spaces, such as convention centers, sports arenas and performing arts centers. The tax must be approved by voters, however, and cannot be imposed by more than two local governments simultaneously (the city and county, for instance).

Austin hotel guests currently pay a 15 percent tax. Aside from the 2 percent venue tax, 6 percent goes to the state and 7 percent funds Austin Convention Center operations and other city tourism promotion efforts.

Mayor Steve Adler has been pushing for an additional 2 percent hotel occupancy tax – authorized by state Chapter 351 – to fund a new expansion of the convention center. Unlike the venue tax, that tax would not require voter approval but could likely only be used for a convention center.

If the new convention center expansion goes forward, city officials have floated the idea of using some of the revenue from the new tax to pay off the debt from the former expansion earlier – possibly as early as 2021.

While city leaders have not publicly discussed re-imposing the Chapter 334 tax to fund another city use, it’s a tempting option, particularly amidst the strict constraints the state recently put on local governments’ ability to raise property taxes.

In an interview with the Austin Monitor, Eckhardt said the county’s interest in taking over the tax could be a “possible point of leverage” in its negotiations with the city over the future of Palm School, a county-owned property that City Council is seeking to preserve and turn into a cultural center as part of a broader revitalization of the southeastern portion of downtown near the convention center.

Eckhardt hinted that the county might be more open to allowing the city to maintain control of the 334 tax if the city used some of the revenue to buy the Palm property from the county.

Council Member Kathie Tovo, who is championing the preservation of the Palm School, has said the entire property should stay in the public realm and that the city and the county should “partner” to preserve it. For one suggestion, the county could own it and the city could operate it and provide programming.

However, Eckhardt said that would conflict with the county’s long-standing philosophy toward its properties: that they should be used to provide county services or should generate revenue for county services. Providing a building for the city to use does neither.

Eckhardt supports preserving the Palm School building but not necessarily the entire surrounding property. She said neither the city nor the county has the money to keep the entire property public.

“There’s not going to be the money to do what the community wants to see done with Palm School,” she said, unless the county can “leverage the market value” of the surrounding property by selling it. Otherwise, she predicted, the building will sit vacant for years.

When asked for comment on the county’s interest in the tax, a spokesperson for the mayor said he was not familiar with the action the court had taken.

Photo courtesy of Travis County.

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