A Dragon in Petition's Clothing

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In the early days, before the kingdoms were unified*, the fight for local business was righteous and passionate without needing anyone on an Iron Throne. But since that time, something has gone awry in the world of local business advocacy.

Rebecca Melançon, executive director of the "Austin Independent Business Alliance (AIBA)" is pushing a petition that would require a public vote (among other things) related to the recent unanimously-approved expansion of the Austin Convention Center. Despite using AIBA resources, member lists, and logos, she bizarrely states that the organization doesn't actually have a formal position, admitting "AIBA has members who would like to see the Convention Center expanded."

Let's break down their misleading press release:

More than a year ago AIBA became involved with the Tourism Task Force in working to reallocate some of the Hotel Occupancy Tax (HOT) to promoting local business to tourists. ... Unfortunately, we weren't successful.

On December 7, 2017, the council amended the budget of Visit Austin (the non-profit responsible primarily for tourism marketing using hotel occupancy taxes) by mandating that "$200,000 shall be allocated to a third-party organization that supports local business and local business districts, to be approved by the City Council for scope and oversight, for promotion of local business to tourists." That contract was awarded to the winning bidder by council on June 28, 2018.

Notably, AIBA's bid (under the name Local Economies Council) was the lowest scoring bid among 6 responding groups. So in fact, Council did reallocate HOT monies to promote local business to tourists... it just didn't go to AIBA.

The Convention Center produces only 4% of Austin's tourists but garners more than 70% of all public tourism finding[sic]

Lots to unpack here... when you look at the actual data, that 4% is way off. Checking the state report on tourism, which was presented to the Council and the Tourism Commission, it breaks down the reasons why people visit (pg 17, 19, & 21). Of note, more than half of all visitors don't even get a hotel room (day trip only). Almost 30% are visiting a friend or relative (likely no hotel stay, and not something that is impacted by tourism marketing). Another 12% are here on non-convention or meeting business, which would generate hotel taxes but is not something impacted by tourism marketing. Of the remaining 30% of travelers that can be grown through spending HOT (vacation overnights, non-vacation conventions, meetings), 54.3% is related to the convention and meeting business.

On the amount of HOT funding that is spent, the presentation given to the Tourism Commission in February shows that 52% of funds are allocated to the convention center, not 70% as asserted above, which is lower than the average 57% allocation in peer cities. That means the Convention Center is responsible for a greater percentage of the impact than is actually spent in the budget.

Visit Austin wants to expand the Convention Center to the (now estimated) $1.2 Billion

First, the Council approved the expansion, not Visit Austin. But this oft-misreported $1.2 billion figure comes from a mis-read of page 186 of the UT study related to the convention center and "Scenario 5". There are multiple scenarios presented, and while council directed staff to explore Scenario 5, the actual details are not finalized nor should be considered an estimate. New private development options (the UT study says upwards of $500 million) will generate additional tax dollars for AISD, Travis County, ACC, and Central Health. The UT study also did not contemplate changes in the land development code, which could further expand taxable private development opportunities on the site above the Convention Center building (which is extremely valuable since it is not constrained by capital view corridors).

The convention industry is flat. Even if the Convention Center saw a 50% increase in business (extremely unlikely, when did you last see a 50% increase in business?), that's only a 2% increase in visitors. 

Convention business is only flat when you don't expand your space for conventions. News story after news story after news story shows that cities that don't meet the market demand for convention space are losing even the conventions they currently host. And the only "academic" that is ever cited to say convention centers do not work has been thoroughly debunked by the UT study (page 84)

All this led me to ask "If Austin has $1.2 Billion to invest in attracting tourists, how could that money be better spent?"... The possibilities are almost endless.

Hotel Occupancy Taxes are strictly regulated by the state. They are paid by tourists, not by local taxpayers and the monies collected cannot be treated like general fund revenues. Austin already allocates the state-allowed maximum of 15% for cultural arts and 15% for heritage (historic) tourism grants — spending a greater amount in these categories, as the petition requires, would violate state law. The remaining funds must be spent in very specific ways allowed by the state. (351.101 sets the uses, 351.103 (c) sets the 15% limits, 351.1065 sets what you can do if HOT is more than 7%). 

Furthermore, the contemplated 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. Opting out of this expansion, or attempting a limited venue tax under a separate chapter of state law (334) does not allow that 30% carve-out. Expanding the convention center is the best way to increase support for our culturally important industries and assets.

And on top of that, under convention center expansion, the hotel industry is stepping up by creating a Tourism Public Improvement District (TPID), which will add an additional self-imposed hotel tax on tourists. These TPID funds are not restricted by the state laws that apply to cities, but are under the management of the hotel industry. 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.

~~~~~

The bottom line is this: convention center expansion creates new money for music, art, and historic preservation; related new private development generates additional property tax revenue for AISD, Travis County, ACC, and Central Health; generates increased sales tax collections for the city; revitalizes and reconnects the southeast corner of downtown including new public spaces that connect with the future Waller Creek; generates millions in new dollars to help address homelessness; supports an expanding job market related to tourism and conventions; and does it all without spending any new taxpayer money.

So why is AIBA... or at least its leader opposing expansion? Unlike Deanerys controlling Drogon, is it possible that a dragon is controlling AIBA? Austin has been through this before... with prior petition efforts involving shady dark-money fundraising, deceptive petition practices, and ultimately failing at the ballot box. In fact, some of the same dark money players are involved and even sit on AIBA's board

Given all of that, one has to wonder... is the queen directing the dragon, or is she just along for the ride? And more importantly, why do they want to burn down the city?

 

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* I was one of the founding members of Choose Austin First but was not involved with its decision to merge with AIBA back in 2009. 


Have you read a published work that feels off or just not right? Email it to jimmy@jimmyflannigan.com for review and possible inclusion in a future post in The Clawback.

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