City, County Clash Over Future Hotel Tax

The city's "Palm District" vs. the county's Expo Center

Sarah Eckhardt (Photo by Jana Birchum)

On Monday, Aug. 19, Travis County Commissioners Court is expected to add an item to the November 2019 election ballot to seek approval for a countywide 2% Hotel Occupancy Tax, on top of the HOT levied currently by the state and city, to help finance a massive redevelopment of the Travis County Exposition Center in East Austin. But in the early hours this past Friday, as part of its lengthy first meeting after its summer break, City Council voted unanimously to raise its HOT rate, citywide, by 2% to fund an expansion of the Neal Kocurek Memorial Austin Convention Center.

That Council action means the combined HOT within the city limits is at the maximum level allowed by state law, so even if the November measure prevails, the county would be left empty-handed. But by 2021, the city is projected to pay off the debt from the prior Convention Center expansion approved by voters in 2002, also funded by an earmarked 2% HOT rate increase. If the city does pay off that debt early (it's not due in full until 2029), then the county would be able to collect HOT revenues from the Downtown Austin hotels that generate the most tax revenue. (The city expects to take in $20 million annually from its 2% increase.) But if the city doesn't pay off the debt by 2021, or decides to continue raking in that cash for its own projects, then Travis County would still miss out.

The city’s unwillingness to commit to a 2021 milestone has fueled escalating tension between the city and county.

It's the city's unwillingness to commit to that 2021 milestone that has fueled the escalating tension between City Hall and 700 Lavaca; if Travis County leaders had that assurance, it would be easier to pitch Expo Center expansion to voters. Calling that vision (announced in 2017) "massive" is almost an understatement. It would include building a new 40,000-seat, open-air stadium and an adjacent 15,000-seat arena, room for retail space, multiple courtyards, and thousands more square feet for conventions at the site. Rodeo Austin, the center's main current tenant, is eager for a ­public-private partnership to pull off the plan, which nicely complements the city's own recently released long-term plan for the adjacent Walter E. Long Park.

The city's plans for the Convention Center are embedded in its much larger vision for the "Palm District" in Downtown's southeast quadrant. An omnibus resolution approved by Council in May directed City Manager Spencer Cronk to consider Waller Creek, Palm School, the Emma S. Barri­entos Mexican American Cultural Center, and Rainey Street as interconnected components of that vision. It also called on Cronk to perform due diligence on behalf of the city, including "an evaluation of what might happen if pledged HOT revenues are insufficient to cover the 30-year bond obligations" that would be incurred with a new Convention Center expansion – regardless of how the city intends to pay off that debt. County leaders have interpreted that language as leaving the door open for the city to fully utilize all available HOT revenue and thus deprive the Expo Center of that funding stream.

Alison Alter (Photo by John Anderson)

This conflict was reflected at the Aug. 8 Council meeting in an exchange between County Judge Sarah Eckhardt and CM Alison Alter, who helped draft the language in question. Alter asserted the resolution should not be read to imply the city was considering keeping for itself all the HOT revenue in play for 30 years. But Eckhardt disagreed, noting, "there is no commitment in that [resolution], and indeed an inference in the opposite direction, to pay down" the city's Convention Center debt by 2021.

The rather remarkable appearance by Eckhardt and a quorum of her court at City Hall to challenge Council illustrated the frustration clearly rising on both sides – each feeling they've received mixed signals from the other, each feeling that they've consistently communicated their own intentions regarding the HOT rate. Both Mayor Steve Adler and Eckhardt have suggested as much in conversations with the Chronicle, and the county judge cited numerous instances in her exchange with Alter that, she believed, showed a tacit agreement had been reached on a 2021 payoff. But when asked directly by Eckhardt to make that commitment, Alter demurred pending more financial analysis by staff. "I don't know what the Convention Center is going to cost," she said, "and I can't commit today to 2021 when, maybe, if we did it in 2023, it would be overall better for the city." Cronk and the county are expected to meet soon to hash out a workable solution; if that doesn't happen, expect the tension to rise.

Council doesn't meet today (Aug. 15), but will return next week (Aug. 22) with a 112-item agenda. Some items we'll be watching: the potential climax of the controversial 4700 Riverside zoning case; the establishment of a Rainey Street Public Improve­ment District to collect development fees for use on projects in the neighborhood (a move Council asked for years ago that was never actually implemented); approving the increase of towing fees for parking on private property without consent from $150 to $185; and a follow-up on the gun violence resolution passed last week, to establish a task force to identify actions the city could take at the local level.

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