City

Hotel Occupancy Taxes By The Numbers

In August of 2012, the City of El Paso adopted ordinance no: 017850 calling for a Quality of Life Bond Election to fund the Chihuahuas Ballpark. The bond funding called for using 2% of the Hotel Occupancy Tax (HOT) to help fund the baseball park. According to a fact sheet (June 26, 2012 version) provided by city staff to city council during the debate over the bond language, the HOT tax would increase from 15.5% to 17.5%.

Proponents of the HOT tax argued that visitors to the city and not the taxpayers would help pay for the ballpark.

Because of the controversy involving the proposal to build a ballpark, the original language of the ordinance that was adopted on August 14, 2012 was changed. The original language read:

“Authorizing the City of El Paso, Texas, to provide for the planning, acquisition, establishment, development, construction and financing of a baseball stadium project within the city and to impose a tax on the occupancy of a room in a hotel located within the city, at the maximum rate of two percent of the price paid for such a room, for the purpose of financing such project.”

City of El Paso

The language was changed on September 5, 2012 to:

“Authorizing the City of El Paso, Texas, to designate the minor league baseball stadium project as a sports and community venue project within the city in accordance with applicable law and to impose a tax on the occupancy of a room in a hotel located within the city, at the maximum rate of two percent (2%) of the price paid for such a room, for the purposes of financing such a venue project.”

City of El Paso

Although originally projected to cost $50 million, the ballpark ended up costing $64 million. However, by the time the bonds to fund the park went to market in 2013, adverse market conditions ballooned the city debt to $154 million. In 2016, the City refinanced the bonds, lowering the cost slightly to $143 million.

The City projected that it would have to help fund the ballpark project for about ten years from the onset. The additional funds would come from the city’s general budget, which is funded by sales and property taxes, among other taxes and fees collected by the city. City taxpayers have paid over $2 million to make debt service payments for the ballpark since it went online.

In addition to the City’s contributions, MountainStar Sports Group, the owners of the Chihuahuas were to pay rent for the use of the ballpark.

The City announced on December 9, 2019 that “reports show the Hotel Occupancy Tax and team revenues will be able to cover the ballpark debt in Fiscal Year 2020”. (City news release, December 9, 2019)

HOT Delinquencies in El Paso

Even before the Covid-19 pandemic, the City of El Paso has having trouble collecting HOT tax revenues from some of the city’s hotels.

In 2018, the City accepted a report from MuniServices analyzing 20 El Paso hotels who were delinquent on their HOT tax obligations to the City. The report, which reviewed hotels from October 1, 2013 through September 20, 2017 found 16 hotels with delinquent tax obligations to the City.

In total, the City was owed $89,076.04, according to the report.

The City again contracted MuniServices, now renamed Avenu to create another delinquency report. The second report covered the period between October 1, 2014 through September 30, 2018.

The 2019 report found 12 hotels were delinquent for a total of $45,007.27 in HOT taxes.

Covid-19

And then Covid-19 hit. The stay-at-home orders and cancelled public gatherings due to the Covid-19 pandemic has stalled businesses across the country. Minor League Baseball is yet to set a schedule for this season because of the pandemic. The El Paso Chihuahuas’ website shows all schedule games for June as postpone with no updates for July and August.

With the national emergency curtailing traffic across the U.S.-Mexico border, limiting national travel and prohibiting large outdoor gatherings it is likely that Chihuahuas games will not be played in any significant numbers. Will MountainStar negotiate a reduction in rental payments due to Covid-19?

Even if MountainStar were not to reduce rent payments to the City for the ballpark, the lack of games means that sales revenues from parking fees and food concessions will less this fiscal year.

The reduction in travel and business activity is also impacting hotel occupancy rates which will result in lowered HOT tax revenues for the City.

The Texas Comptroller of Public Accounts used to provide an online searchable database up until 2017. Revenue reports for a municipality could be generated online. But the Texas legislature (SB-1086) forced the comptroller to close its online database on September 1, 2017. To consult the latest HOT tax revenue reports, an open records requests must be filed.

The City received about $82 million in sales tax revenues according to the Texas State Comptroller in 2019. It remains unclear what the current state of revenues are for El Paso, Texas considering the Covid-19 pandemic.

Although the City was hopeful that it would stop contributing to the ballpark debt service this year, it is unlikely that its projection remains valid because of the national emergency.

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