City braces for cuts to cultural arts funding, citing likely drastic hotel tax drop

The city has advised local artists and cultural contractors to hold off on submitting proposals for the next cycle of Cultural Arts project funding because of a likely drastic cut in arts money due to the impact of the Covid-19 pandemic.

At Monday’s meeting of the Arts Commission, city staff said that Hotel Occupancy Tax revenues, which are the major source of funding for cultural and tourism spending, are expected to fall sharply because of the effective shuttering of the hotel business in mid-March.

An exact calculation of the decline brought on by the cancellation of the South by Southwest festival is expected in the coming weeks, which will allow the Cultural Arts Division possibly to revise its application guidelines so artists can be more conservative and budget-conscious with their projects.

“We have urged all contractors to press pause on their applications until we have a better idea of what kind of estimates are coming in for the next fiscal year,” said Meghan Wells, manager of the Cultural Arts Division. “We have not received any firm estimates yet from the budget office and we hope to get those as soon as we can, because we hear the urgency and would very much like to continue our planning process as well.”

The uncertainty over future funding caused by the pandemic adds to a several-year trend of unpredictable levels of support for arts groups seeking city contracts. A series of cuts to long-established organizations implemented in 2018 to increase equity for new applicants brought widespread criticism and calls for the public or arts stakeholders to have a role in determining how applicants are evaluated.

Sylnovia Holt-Rabb, deputy director of the Economic Development Department, said current contracts that have been fulfilled by artists will be paid in full. The city is also working to relax some of the requirements of those contracts to accommodate social distancing and other precautionary measures, with live-streaming of planned events and performances taking the place of physical gatherings.

Commissioner Bears Rebecca Fonté said the wait to determine the exact level of cuts could be frustrating for artists who regularly receive city funding and had expected a roughly similar pool of funding available to compete for, pre-pandemic.

“The thing I’m most concerned about is, we’d already told everybody that the amounts of money they got last year was going to be the amount of money there would be for next year, and that you can count on that. Hearing what people are telling me that they want to know sooner than later, I feel like it’s worth telling people, hey, there probably will not be near as much money next year as this year and you’re probably going to get a reduction of 50 percent and just plan for that in your budget,” she said.

“You’re asking people to be rational. They’re never rational when it comes to how much money they’re going to get, and that’s especially so when they’re terrified.”

Wells and Holt-Rabb said preliminary research done for the city by economist Jon Hockenyos has already painted a dire picture for taxes levied on sales, alcohol and hotel stays, which are used to fund a variety of budgetary needs each year.

“Anyone who is relying on this money should be tracking hotel occupancy right now, which is about 5 percent, and their funding will be impacted to some extent,” Wells said. “I’m hesitant to put a number out there like 50 percent or 30 percent only because once you do that it does set an expectation and I’d hate to steer anyone too far down a road before we have something too concrete.”

Also related to funding, the city has extended until mid-2021 the contract for the consulting firm MJR Partners, which has been working to revise the guidelines for allocating Cultural Arts funding, to increase equity as a consideration in evaluating applicants. The firm will still deliver draft guidelines this summer in time to be implemented for the fiscal 2022 funding year, but the extension expands its scope to perform similar work for cultural tourism projects and expenditures from the live music fund that was created last year to benefit the local commercial music industry.

Photo courtesy of the city of Austin.

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