Honorable Dennis Bonnen, Chair, House Committee on Ways & Means
FROM:
Ursula Parks, Director, Legislative Budget Board
IN RE:
HB3692 by Landgraf (relating to the financing of convention center hotels in certain municipalities.), Committee Report 1st House, Substituted
Estimated Two-year Net Impact to General Revenue Related Funds for HB3692, Committee Report 1st House, Substituted: a negative impact of ($170,000) through the biennium ending August 31, 2017.
Fiscal Year
Probable Net Positive/(Negative) Impact to General Revenue Related Funds
2016
$0
2017
($170,000)
2018
($670,000)
2019
($1,100,000)
2020
($1,160,000)
Fiscal Year
Probable Revenue Gain/(Loss) from General Revenue Fund 1
2016
$0
2017
($170,000)
2018
($670,000)
2019
($1,100,000)
2020
($1,160,000)
Fiscal Analysis
The bill would amend Section 2303.003, Government Code, to include within the definition of qualified hotel project a hotel to be constructed within 1,000 feet of a municipally owned convention center in a municipality with a population of at least 99,900 but not more than 112,000 that is located in a county that has a population of at least 135,000 but not more than 200,000.
The bill would add new Section 351.1078 to the Tax Code which limits the uses by certain municipalities of hotel tax revenue for a qualified hotel project. The new section would also entitle the subject municipalities to receive state hotel occupancy tax revenue from a qualified hotel project that an owner of the project may receive under Section 151.429(h), Tax Code, and to receive local hotel occupancy tax revenue that an owner may receive under Section 2303.5055, Government Code, for the first 20 years after the qualified hotel project is open.
The bill would take effect immediately assuming that it received the requisite two-thirds majority votes in both houses. Otherwise, it would take effect September 1, 2015.
Methodology
The City of Midland has currently pending a development agreement regarding a mixed use facility that would be a qualified hotel project to be built on city-owned property. The planned hotel would include 120 rooms and is to be operational by the end of August, 2018. Consequently, the owner of the qualified hotel project and the municipality would be entitled to receive state hotel tax and state sales tax revenue under Section 151.429(h), Tax Code, beginning in fiscal 2019.
The City of Odessa has purchased a site and expects to enter a development agreement regarding a downtown hotel and convention center later in 2015. The hotel would include 200 or more rooms and may be operational sometime in 2017. Consequently the owner of the qualified hotel project and the municipality would be entitled to receive state hotel tax and state sales tax revenue under Section 151.429(h), Tax Code, beginning late in fiscal 2017.
In fiscal 2014, a total of $11,308,406 in state tax revenue was allocated for qualified hotel projects. Currently, the cities of Dallas, Fort Worth and San Antonio receive allocations of state sales and use tax and state hotel tax associated with qualified hotel projects.
This estimate is based on the planned room size for the prospective convention center hotels, an assumed average nightly room rate and annual average occupancy rate, an incremental gain in room nights sold in the state, and the ratio of state sales tax to state hotel tax revenues paid to the owners of the extant qualified hotel projects.
Local Government Impact
The owner of the qualified hotel project and the cities of Midland and Odessa would be entitled to receive state hotel tax and state sales tax revenue associated with qualified hotel projects.