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Should hotel taxes and festival fees contribute to public safety coffers?

Thursday, September 12, 2019 by Jessi Devenyns

Austin’s festivals are most certainly a tourist attraction. But does that mean the public safety costs associated with those events should be financed through money earmarked for arts and tourism?

With Council’s vote to raise the Hotel Occupancy Tax by 2 cents on Aug. 8, this question returned for debate at the Public Safety Commission meeting Sept. 3.

The additional funding Council approved last month can be used only for the expansion of an existing convention center. However, according to Ed Van Eenoo, the city’s deputy chief financial officer, there have been some tactical maneuvers to allow a percentage of the revenue generated from these funds to go to cultural arts.

As the Austin Convention Center generates revenue from other sources, including retail and concessions, it is looking to put a portion of that money toward arts and historic preservation. This would add an additional $3.1 million to the coffers of city arts organizations, according to Van Eenoo.

Commissioners asked whether some of this money, particularly in the context of festivals, could be spent on public safety. Commissioner Rebecca Webber pointed out that there is a specific line item in the police budget for overtime for events and festivals.

“There is no definitive case that says the city could not spend HOT money on those costs,” she said. Nevertheless, current HOT revenue is not spent on public safety. “I’m going to keep beating this drum. I’m going to challenge that,” said Webber.

No language in the code specifically prohibits the use of these funds for public safety, said Van Eenoo, adding, “It would be hard to argue that public safety is not a General Fund (use).”

Commissioners noted that since property taxes, which are deposited into the General Fund, have also been capped by the state Legislature, it may be time to look more closely at alternative sources of revenue. Beyond repurposing local hotel taxes, the commission also scrutinized fee waivers for festivals, the largest of which is given to the annual South by Southwest.

SXSW was given $2,275,608 in fee waivers this year. The total amount of festival fee waivers that the city has issued for this fiscal year is $2,641,601. Of the fees that were waived, $1,982,353 were associated with public safety costs.

The Austin Police Department has a $1.5 million overtime budget for officers. Overtime is exclusively used for units at SXSW, according to the department.

Commission Chair Ed Scruggs said just considering staffing SXSW alone, “Boy, you’re going to be really pressed in that $1.5 million every time.” He asked if the department had ever considered the economic impact of removing the waiver from the festival.

Van Eenoo said those conversations had never occurred within his hearing.

“They make money hand over fist,” said Webber, noting that since SXSW is now an established festival, perhaps it is time to make it pull its full weight. She made a motion to recommend that the city end fee waivers for for-profit events. The commission unanimously voted in agreement with her motion.

“This for me is primarily almost 100 percent driven by the state caps that are coming,” said Scruggs.  “I guarantee we’re going to have this discussion later, so why not have it now?”

Photo by Mike made available through a Creative Commons license.

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