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Arts, music commissions to renew push for short-term rental tax collections

Tuesday, April 11, 2023 by Chad Swiatecki

It appears arts and music advocates will likely ask City Council to reach an agreement with short-term rental platforms such as Airbnb and begin receiving millions of dollars in uncollected hotel taxes that could in part benefit the local creative community.

Both the Music Commission and Arts Commission have in the past year asked the city to move on from the regulatory impasse it has reached with short-term rental platforms that prevents the collection of Hotel Occupancy Tax receipts that by some estimates could total more than $20 million per year. Based on state law, a portion of that money would be available to fund music and cultural arts programs along with some renovations of historic sites.

At a combined meeting of the arts and music commissions on Saturday, leaders of both groups said the city is losing out on the ability to collect needed arts funding.

“This is an issue because there is money being left on the table and there needs to be a resolution, even if it’s just a request that goes up the chain,” Arts Commissioner Celina Zisman said. “It’s worth having that instead of throwing our hands up in the air … it’s not our problem to fix but we’re allowed to have an opinion on it when we’re talking about an ecosystem that isn’t being served by the amount of (hotel) taxes that we’re collecting.”

While Austin has become a popular tourist destination and short-term rental (STR) market over the past decade-plus, the city has failed to reach an agreement with the tech companies that support it because the city wants to have full transparency into what homes are listed for each company, as well as how often they are rented and at what rates.

The STR companies have generally balked at those demands in order to protect their customers’ information, which prevents them from remitting local hotel taxes even though they have agreements with the state that are more lax.

In presentations to both commissions made last year, an Airbnb representative said the company is willing to collect and remit the city’s share of HOT funds – as it does in many other cities across Texas – but that Austin’s desire for site-specific information is a nonstarter.

By some estimates, there are 11,000 homes operating as one of three types of STRs recognized by the city, but less than 2,000 of them are registered and paying the necessary fees and taxes.

A February presentation to the Tourism Commission by the Financial Services Department showed registered STRs generated $7.2 million in HOT revenues in 2022, representing only 6 percent of the more than $108 million in hotel tax-funded expenditures in the 2023 city budget.

The most recent action by the city related to STRs was a resolution passed in December that directed the city manager to change city code to bring the platform companies into compliance. It also called for the creation of an online database of licensed STR sites.

A 2019 memo said that most of the STR sites found to be in violation of city codes were unlicensed, with a February story in Texas Monthly capturing the frustration of city code enforcement officers who have few regulatory options to penalize properties that often host disruptive parties thrown by tourists.

Arts Commissioner Acia Gray said STRs quickly grew from a novel way for homeowners to make extra money into a thriving economy that is transforming neighborhoods while the city loses out on needed tax revenue.

“There needs to be a group of us that take it to the levels of people who need to hear about it, instead of thinking somebody else is taking care of it,” she said. “We may not be the ones to solve this, but if we don’t go into the nest of questions around this we’ll never find out.”

Photo by Open Grid Scheduler / Scalable Grid Engine, CC0, via Wikimedia Commons.

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