84(R) - 2015
House Ways & Means
House Ways & Means
Relating to a qualified hotel project.
A fiscal note dated May 7, 2015 anticipates a two-year net impact to General Revenue Related Funds from CSHB 1742 of $0 through the biennium ending August 31, 2017.
The fiscal note adds that the city of El Paso would be entitled to state sales tax and state hotel tax associated with a qualified hotel project. Such funds must be deposited in a suspense account outside the state treasury to be paid to the owner of the qualified hotel project.
House Bill 1742 would amend Chapter 351 of the Tax Code related to municipal hotel occupancy taxes.
The bill would change the definition of "convention center facilities" by removing " a hotel proposed to be constructed, remodeled, or rehabilitated by a municipality or a nonprofit municipally sponsored local government corporation created under Chapter 431, Transportation Code, that is within 3,000 feet of the property line of a convention center owned by a municipality having a population of more than 500,000 and that borders the United Mexican States."
It would change the definition of "eligible central municipality" to add a municipality with a population of 640,000 or more that is located on an international border and has adopted a capital improvement plan for the construction or expansion of a convention center facility.
House Bill 1742 would amend Section 351.102 of the Tax Code related to a pledge for bonds to remove from subsection 351.102(a) to remove a municipality having a population of more than 500,000 and that borders the United Mexican States for the purpose of the payment of principal of or interest on bonds or other obligations.
It would amend Section 351.1065 of the Tax Code related to the allocation of revenue for eligible central municipalities to add that an eligible central municipality, as newly added by this bill, that uses revenue derived from the tax imposed under chapter 351 or funds received under Section 351.102(c) for a hotel project described by Section 351.102(b) may not reduce the percentage of revenue from the tax imposed under this chapter and allocated for a purpose described by Section 351.101(a)(3) to a percentage that is less than the average percentage of that revenue allocated by the municipality for that purpose during the 36-month
period preceding the date the municipality begins using the revenue or funds for the hotel project.
House Bill 1742 would amend Subsection 151.429(h) related to certain tax refunds for enterprise projects by removing the mention that this subsection does not apply to a qualified hotel project described by Section 2303.003(8)(B), Government Code.
The bill would amend Subsection 2303.003(8) of the Government Code to change the definition of "qualified hotel project" to remove Subsubsection 2303.003(8)(B). It would also amend Subsection 2303.5055(b) of the Government Code to remove "a municipality having a population of more than 500,000 and that borders the United Mexican States."
Vote Recommendation Notes
House Bill 1742 seeks to extend certain state sales and hotel occupancy tax refunds, rebates or payments to the city of El Paso for a qualified hotel project.
While such rebates already exist, this is not the proper way to apply taxation. A tax should be low and broad-based enough that only necessary revenues are levied - and no more - and it doesn't impede private enterprise from starting new projects. If tax rebates are deemed necessary for some private projects to be started, maybe the tax is too high, or the project is not sustainable. In any case, the burden of paying the tax should not be placed on some to support others.
Additionally, tax privileges, because they favor some above others, distort the free market system and have the potential to create unintended consequences.
Additionally, as pointed out by the fiscal note, becoming an eligible central municipality would allow the city of El Paso to increase its hotel occupancy tax rate form 7% to 9%, leading the total hotel occupancy tax rate for the city of El Paso to increase from 17.5% to 19.5% (currently, the hotel occupancy tax rate for this city is composed as follows: 6.0 percent state, 2.5 percent county, 7.0 percent city, and 2.0 percent city sports venue).
The hotel occupancy tax rate for the city of El Paso is already one of the highest in the state of Texas. High rates of the hotel occupancy tax in the state can be a disincentive for tourists to come and stay longer in paid accommodations in Texas. Indeed, during the 83rd Legislature, a law imposing a 17 percent cap on the combined hotel occupancy tax imposed from all sources was passed out of concern that Texas hotel occupancy tax rates were “among the highest in the country, which impacts the state's ability to compete for group and convention business” (according to the bill analysis for House Bill 1908
, 83rd Legislature, regular session).
House Bill 1742 would not only increase the scope of government, it would also be bad for the free market. We oppose House Bill 1742.