Austin Mayor Proposes Hotel Tax Increase to Raise $30m for Homeless Housing

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Austin Mayor Proposes Hotel Tax Increase to Raise $30m for Homeless Housing

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AUSTIN, TX — The mayor on Monday outlined a method of creating bolstered homeless shelters in the downtown area by harnessing revenue driven by economic activity to raise $30 million.

The proposal by Mayor Steve Adler furthers to advance the solving of what he calls the “Downtown Puzzle,” a term coined to describe the interconnected and geographically contiguous challenges found in the eastern part of downtown Austin.

During a Monday press conference, Adler proposed harnessing downtown economic activity, including an expansion of the convention center, to raise $30 million for permanent supportive housing for the homeless and create an ongoing funding stream to address homelessness that starts at about $4 million a year until 2021 when it doubles.

The mayor’s proposal, which requires action by city council, does not include any residential property tax increase, he noted.

“By making tourists pay to house the homeless, we can harnessing the power of Austin to benefit all Austinites,” Adler said. “This plan won’t raise your property taxes, will expand our tax base, and makes a big payment toward the moral imperative to house the homeless.”

The elements of the plan begin with establishing a Tourism Public Improvement District (in which hotels tax themselves voluntarily) to create a revenue stream for homelessness, he said. At first, this will yield about $4 million a year for homelessness, rising to approximately $8 million beginning in 2021, the mayor added.

Local hoteliers would only voluntarily do this if the city expanded the convention center, the mayor noted. Implementing the plan would require increasing the local hotel occupancy tax, or bed tax, to 17 percent, the maximum allowed under state law. Expanding the convention center is required by state law to increase the local bed tax, he noted But doing so would help achieve a number of goals:

15% of the local portion of the bed tax is dedicated to the arts, which means an increase in bed tax revenues caused by the convention center expansion will accordingly increase funding for the local arts community.The local bed tax revenues will provide funding for preservation for the entertainment districts on East Sixth Street and Red River and funding for the local music industry.The bonding resulting from expanding the convention center will pay off the debt from the existing convention center ahead of schedule, freeing up 2 cents under the cap in 2021, and create capital funding to preserve the Palm School and to complete the Mexican-American Cultural Center.

The mayor highlighted differences in the current convention center and the proposed expansion that would result in expanding the property tax base. The first and second floors of the expansion could be reserved for retail and restaurants, opening up a part of downtown to the public. Additionally, it’s envisioned that two towers will be built on top of the expansion, one for office use and one for affordable housing at 30 percent MFI, he said.

“We are literally creating affordable housing out of thin air,” the mayor said. “I want this housing to be affordable to the people who work in the bars and restaurants downtown so we can better serve those who serve us.”

Because expanding the convention center will increase economic activity, the “Downtown Puzzle” envisions using a tool called Tax Increment Financing to capture the taxes generated downtown to finance improvements that benefit downtown, the mayor explained. Implementing this measure would yield $30 million to build permanent supportive housing for an estimated quarter of those experiencing homelessness downtown.

“The ARCH is an intake facility with no outflow,” the mayor said in referencing the Austin Resource Center for the Homeless. “We need housing for the homeless, and tourists are paying for it.”

Housing the downtown homeless will increase the viability to build the Waller Creek chain of parks, the mayor added. To realize the vision of creating a world-class public park system on par with Manhattan’s High Line or Houston’s Discovery Green, the city could extend the Waller Creek TIF, bringing in an estimated $100 million that private philanthropists and investors would match, he said. Creating an additional assessment for Waller Creek would provide for ongoing park maintenance, he added.

Adler recognized the contributions of those helping to solve the Downtown Puzzle, including the homeless service provider community (notably ECHO, Caritas, Salvation Army, Front Steps), the Greater Austin Restaurant Association, the Downtown Austin Alliance, the Waller Creek Conservancy, parks and trails advocates, Palm School advocates, historic preservation advocates, Mexican-American Cultural Center supporters and board members, the live music community, members of the Cultural Arts Commission, Music Commission, and Quality of Life commissions, the Pecan Street Association, the Red River Merchants Association, arts advocates, SXSW, workforce advocates, the Hotel and Lodging Association, Austin Travis County Integral Care, Austin Police Department, and EMS.

Adler introduced the concept of the Downtown Puzzle in a Dec. 22, 2016 post on the Austin City Council Message Board in which he outlined a “comprehensive, integrated vision of one possible way to approach the future of a part of the downtown core and how it might serve as a major engine for preservation and progress. We’ve been considering these various issues separately for some time, but like a puzzle, maybe the pieces make the most sense when you see how they all could fit together.”

In May, 2017, the citizen-led Visitor Impact Task Force culminated six months of deliberation and formally adopted a recommendation that the city council finance the expansion of the task force by increasing the city hotel occupancy tax without any impact on Austin’s general fund.

>>> Official photo of Austin Mayor Steve Adler via City of Austin

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