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Report raises questions about convention center finances

Thursday, April 22, 2021 by Jo Clifton

In the wake of Covid-19, revenue at the Austin Convention Center dropped from more than $35.8 million in Fiscal Year 2019 to about $12.8 million in FY 2020, according to a special review of convention center finances conducted by the Office of the City Auditor, at the request of members of the City Council Audit & Finance Committee. As a result, the convention center ended the year with a deficit of more than $2.4 million.

Like similar facilities, the Austin Convention Center provides discounts to conventions, and conventiongoers frequently get discounted hotel room rates, which generate Hotel Occupancy Taxes. Those HOT funds, along with contractor and facility revenue and parking fees, keep the convention center afloat.

Council members Kathie Tovo and Leslie Pool both told the Austin Monitor that after reading the report they still have a number of questions about the convention center’s funding.

In the complex world of convention center funding, some funds are restricted to certain purposes and other funds are unrestricted. Restricted revenues can only be spent for specific purposes due to state law, city code or City Council direction.

Auditors noted that San Antonio, Fort Worth and Houston track use of restricted and unrestricted revenues separately. Austin does not. Also, once revenue is moved into an operating budget, the other cities track use of restricted and unrestricted revenues separately. Austin does not, auditors noted without explaining why.

Auditors also noted that Austin spends its unrestricted revenue before spending the restricted revenue. Both Pool and Tovo questioned why that should be the case and indicated that they may be asking that very question at next week’s Audit & Finance Committee meeting.

Tovo said, “I’m interested to hear their answers as to why we don’t track restricted and unrestricted revenue. … It would make sense to use those separately and use restricted funds first.”

Pool said, “We should spend the dedicated funds first … don’t know how that is that’s not happening here … the dedicated funds have to stay in the closed system.”

John Riedie, a member of the city’s Tourism Commission, pointed out a 2018 report from Texas Comptroller Glenn Hegar. That report notes that convention centers across the country are “highly expensive operations, and most don’t make a profit – particularly when considering the debt service payments involved in their construction. Private investors are reluctant to invest in such uncertain ventures, which leaves the tab with taxpayers.”

Riedie said Austin puts a greater percentage of its hotel tax into the convention center than any other city in the state, a situation Riedie said should be changed. “We need to cap that spending and divert it to other uses … the hotel industry has opposed that,” he said, because it’s easiest to spend the money on the convention center. Riedie suggests that Austin, as the Live Music Capital of the World, could spend the money on music venues and other entertainment to attract tourists.

Meanwhile, after finding that its funding is insufficient to buy land to the west, convention center staffers are looking for ways to expand/renovate with the funding they have.

Photo made available through a Creative Commons license.

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