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Response to Council Member Flannigan: No Flames Here

Unconventional Austin, June 4, 2019

 

 

On Sunday night, Council Member Jimmy Flannigan posted a blog on his website titled, A Dragon in Petition’s Clothing. Despite our shared love for GoT, we don’t plan to continue the analogy but rather stick to facts and respond to misleading and unfounded statements made in the post.

 

First, it’s sad that a sitting City Council Member would devolve to personal attacks simply because somebody holds a different opinion than he does. Calling someone a “dragon” and attributing intent to “burn the city down” is a hilarious overstatement.

 

Second, Mr. Flannigan made his position on the Convention Center clear when he appointed the chief lobbyist for the Texas hotel industry, Scott Joslove, to the City’s Citizen Commission on Tourism. It’s not a surprise that Jimmy Flannigan favors corporate hotel interests over local businesses. But as a Council Member, he has a responsibility to truth and accuracy. So let’s go through his statements and the facts. (Flannigan statements are in blue):

 

“So in fact, Council did reallocate [Hotel Tax] monies to promote local business to tourists…”

 

He is correct on this: City Council, in 2017, for the first time ever, allocated $200,000 to promote local businesses to tourists. This is one of the many allowable uses for the city to fund under Chapter 351.101.a.3 (“tourism and promotion”). Once you realize that Austin spends almost $70 million annually on the Convention Center and only $200,000 promoting local businesses to tourists, you can understand why community members have begun a petition to balance and diversify Austin’s tourism investment.

Our petition, if passed, would do more to promote local businesses to tourists. Those businesses are struggling to keep their doors open due to rapidly rising property taxes and rents and would benefit from robust tourism marketing. This is an allowable use of the hotel occupancy taxes under 351.101.a.3.

 

“When you look at the actual data, that [the convention center is] 4% [of all tourism] is way off.”

 

Flannigan claims this but doesn’t actually dispute the figures here. That’s because he can’t. The facts are that less than 2% of all visitors to Austin are attendees at the Convention Center and that events at the Convention Center generate less than 4% of all hotel room nights.

 

According to the Visit Austin Marketing Plan for 2017/18 fiscal year (page 7), 27.4 million people visited Austin. Additionally, according to the recent UT Study (page 260), the Convention Center total estimated attendance in 2017 was 546,385. That is 1.99% of all tourists. Moreover, the Convention Center only estimates attendance and does not distinguish between local attendees and tourists. South by Southwest attendance estimates are 150,000 of that 546,385. We know that many locals attend that conference, so the 1.99% figure is likely a bit on the high end. KXAN covered these figures in a story last year.

 

For the percentage of all room nights booked directly for events at the Convention Center, the data is based on this presentation given to the Tourism Commission by Visit Austin:

 

 

Total Hotel Room Night Availability

(page 17)

14,472,980 room nights in Austin

Total Hotel Room Nights Booked

(page 9)   

10,377,127 room nights booked

Convention Center room nights booked

(page 14)

253,747 CC room nights booked

That data shows that the Convention Center room nights booked account for 2.5% of all room nights booked in Austin. However, the Convention Center staff noted that 1 out of every 3 rooms nights is booked on platforms like hotels.com or AirBnB.com. If you add those figures in, total hotel room nights booked for events at the Convention Center are 380,621, or 3.7% of all room nights.    

Flannigan states that “54.3%” is related to the convention and meeting business, yet he does not cite a single source for that figure. What he does do, which is common sleight of hand by those supporting corporate hotel interests, is make no distinction between conventions held at the Convention Center and total business travel. This is a common mischaracterization. Conventions held at the Convention Center are only a small portion of the total convention industry in Austin. Conventions are held all over town—AT&T Conference Center at UT, the Norris Center, the area hotels including the JW Marriott and Fairmont, etc. And further, the total convention industry is only a small portion of total business travel.

 

“52% of funds are allocated to the Convention Center, not 70%”

 

Here are the hotel occupancy tax allocations from the City of Austin Approved FY 2018/19 Budget (p. 426)

 

 

Total Hotel Occupancy Taxes

$95,790,687

Convention Center Fund   

$48,012,241

Convention Center Debt Fund

$21,338,774

Total Convention Center Allocation

$69,351,015 (72.4%)

“Convention Center is responsible for a greater percentage of the impact than is actually spent in the budget.”

 

What does it mean for the Center to be responsible for a greater percentage of the impact than is actually spent? Who knows, but here the actual numbers from Visit Austin in the same presentation made to the Tourism Commission as above.

 

Convention Center room nights (see above)

380,621

Average Daily Rate (page 11)

$139.91

Hotel Revenue produced

$53,252,684

   

Total Convention Center Allocation

$69,351,015

 The City of Austin is spending almost $70 million annually to produce $4.8m in public revenue from Convention Center generated room nights, while generating $53 million in hotel revenue for multinational corporations. That’s sometimes called corporate welfare. Also important to note here is that Convention Center only generates $560,000 for the arts.

 

“Convention business is only flat when you don’t expand your space for conventions.”

 

The news stories Mr. Flannigan cites call expansions an “arms race” and all recognize that expansions are intended to compete for existing business, not a growing industry. This results in a race to the bottom, spending more and more to chase a declining market. Here are the national statistics of total convention industry growth (sources: Center for Exhibition Institute Research, American Express, and Exhibitions.com)  versus inflation (souce: US Bureau of Labor Statistics) for the last 3 years:

 

Convention Attendance growth

2016:

1.6%   

2017:

0.8%   

2018:

1.8%

Inflation

2016:

2.1%   

2017:

2.1%   

2018:

1.9%

 

The convention industry is not even growing at the rate of inflation over the last 3 years despite expansions being constructed all across the country. And prior to that, as noted by CityLab and Convention Center Follies and any other studies of the national trends, “U.S. convention space had risen by 50 percent in the preceding 20 years [prior to 2012}, yet attendance at the 200 largest conventions peaked at about 5 million in the mid-1990s, and had declined steadily since.”

 

To further highlight this decline, Austin’s previous Convention Center expansion, approved by voters in 1998, was at the time projected to host 813,000 attendees and 98 events. As of 2016, it hosted an estimated 500,000 attendees, including local residents, and only 43 events. Regardless of the fact that the previous expansion did not meet its projections—by as many as 300,000 people per year—Mr. Flannigan would have you to believe, despite evidence across the country of expansions not meeting projections and without corroborating data, that yet more space for attendees will, this time, bring in the promised business.

 

Convention Centers made sense as public investments in the 1960s, when tourism largely consisted of packing the family in the station wagon and heading to a national park. Since that time, tourism has changed, with robust growth in inter-city tourism (business and leisure) and a strong desire by tourists to experience the unique culture of a city (“ heritage tourism”). This makes growing public investment in the convention industry an outdated model.

 

“Hotel Occupancy Taxes are strictly regulated by the state.”

 

Section 351.101.a.3 (tourism and promotion), which Austin currently uses to promote local businesses and also funds the Film Commission, the Music Office at VisitAustin, and formerly funded the Heritage Grants program, is not limited by State Law. The City could use additional hotel taxes under that law to more vigorously promote and market local music, film, and businesses which fuel Austin’s culture and heritage.

 

Further, if you review the Attorney General Opinions on the matter of local hotel tax expenditures, they reaffirm repeatedly that: “It is for a municipal governing body to determine in the first instance whether an expenditure of hotel occupancy tax revenue is proper under section 351.101.” So it is not the State but City Council which has the authority to allow or limit certain tourism expenditures.

 

The cities of Houston, San Antonio, and Dallas all use the tourism and promotion authorization to promote the things that make their cities unique. Our petition simply proposes that we do the same. Houston provides marketing grants to cultural, musical and other community events through its Tourism Incentive Program, which is funded under Section 351.101.a.3.

 

“Increase to go from our current 7% to 9% hotel tax through Convention Center expansion is the only way to further increase arts, music, and historic funding.”

 

There are two reasons this statement is not accurate. First, under Chapter 334 of the Texas Local Government Code, the city could use the entire new taxing authority and bond capacity they are proposing to use for the expansion on a series of projects for arts, music, heritage and culture. Or the city could use a significant portion of the bond capacity for those things and some for the Convention Center. Those options simply have never been fully explored..

 

Further, Chapter 351.1065, which is what Council is proposing to use, states very clearly: “(a) An eligible central municipality shall use the amount of revenue from the tax that is derived from the application of the tax at a rate of more than seven percent of the cost of a room ONLY for:(1) the construction of an expansion of an existing Convention Center facility;”

 

That means that the revenue generated from the increase of the tax from 7 to 9 cents, can only be used for expansion. The implication is that if there is going to be any money for other uses—as Mr. Flannigan puts it, “to further increase arts, music, and historic preservation”—it must come from the existing uses. That means reducing the percentage that goes to operate the Convention Center, which is not likely with a much larger facility and the bonds being pledged to that revenue. The only option is to reduce Visit Austin’s share, the Cultural Arts share or the Historic Preservation share. And this does not take into account any construction cost overruns or if the center does not meet projections.

 

“The hotel industry is stepping up by creating a Tourism Public Improvement District (TPID)…They have agreed to dedicate $4-10 million a year to help address homelessness issues if the Convention Center is expanded. Those funds will not be available if not for expansion.”

 

Buried in that statement is the key point. The hotels will only agree to help the city with homelessness issues if they get their expansion. That means the city must expand the Convention Center, spending billions of public funds to do so in exchange for $4 million or, at best, $10 million a year in homelessness funding. The hotels could step up and help with homelessness right now. Nothing prohibits them from creating the TPID today. So why don’t they?

 

 

 

 

 

 

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