Marble Falls grants hotel occupancy tax abatement for hotel-conference center
The Marble Falls City Council approved a $300,000 hotel occupancy tax abatement Monday, Oct. 19, for the Marble Falls Hotel Group LLC. The group will construct, own, and operate the Marble Falls hotel and conference center project. Illustration courtesy of Marble Falls EDC
Marble Falls City Council granted a $300,000 hotel tax abatement for the next 25 years for the Marble Falls Hotel and Conference Center project during its meeting Tuesday, Oct. 19. The abatement is one show of local support needed for the project, which will be funded, owned, and operated by Marble Falls Hotel Group LLC.
The project consists of a 123-room Tapestry by Hilton hotel and conference area to be built on roughly 3 acres of land along Yett Street and Lake Marble Falls. Moving the project along has been a main focus of the Marble Falls Economic Development Corp. since 2014. The hotel-conference center is expected to break ground in the first quarter of 2022 and be open for business by mid-2023.
“It’s almost emotional seeing this on the agenda,” Councilor Craig Magerkurth said during the meeting.
Hotels, motels, inns, and bed-and-breakfast establishments within city limits are required to pay a 7-percent hotel occupancy tax to the city each year. The revenue from these taxes are used to support qualified events, activities, and facilities that promote tourism and overnight stays in Marble Falls.
Several times throughout the meeting, Councilor Dee Haddock clarified that, outside of granting an abatement, the city will not be contributing taxpayer dollars to the project.
The abatement will reduce the hotel group’s annual payment by up to $300,000 throughout the length of the agreement, EDC Executive Director Christian Fletcher explained. Once expired, however, the city will begin receiving the full amount of tax revenue generated by the project, which is estimated to be about $614,000 by that time.
“This was the first thing (Marble Falls Hotel Group LLC) asked for,” Fletcher said. “This is a very customary revenue source to go to for these types of projects because it fits the statutory requirements of how you can spend hotel tax dollars.”
The hotel-conference center is expected to generate roughly $278,000 in hotel occupancy taxes during its first year of operation.
The group is also seeking a 10-year ad valorem tax abatement of 75 percent from Burnet County.
“We’ll go to work on a few things related to design and land closing, but we probably won’t finalize the lender situation until we have confirmation on the county’s involvement,” Fletcher said in a statement.
The Marble Falls Hotel Group LLC consists of Phoenix Hospitality Group, a hotel management and development group, and Hawkins Family Partners LP. The group is financing the project, which is estimated to cost $36 million upon completion, through a 50 percent loan and cash equity. Marble Falls EDC is also contributing $6.8 million, all of which comes from 2016 bond proceeds that were dedicated to the project.
While the EDC has helped facilitate the completion of the project throughout the years, it does not own or operate the hotel and conference center.
The council also approved a performance agreement and a nonexclusive lease and management agreement between Marble Falls EDC and the hotel group during the meeting. EDC directors previously gave preliminary approval to both agreements during a Sept. 27 special meeting.
2 thoughts on “Marble Falls grants hotel occupancy tax abatement for hotel-conference center”
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There is much to think about regarding hotel tax, how it is used, or abated. This is typically viewed as a slush fund, or free money, to be used as the city sees fit to ‘promote tourism.’ There is a great article on the topic by Texas Public Policy Foundation that explains the governing rules:
https://www.texaspolicy.com/the-hotel-occupancy-tax-in-texas/
The article was written in 2018 when the hospitality industry was strong. We all know that it is not now, so adjust your thinking accordingly. 6 large city examples are given for their hotel tax amounts, which could have changed since then, but doubtfully decreased.
In the article, some important thoughts:
‘How much of the HOT revenues end up being corporate welfare, where the government picks winners—and losers? In a free market, projects large and small would be able to obtain financing from private institutions because of the attraction they generate in visitors. Some private financing institutions might even be willing to take a risk and invest money on the assumption that certain attractions may make visitors come. But this risk would involve private funds, not taxpayer money. Why is government deciding for visitors what attractions are going to influence their decisions to come? Even if they could correctly assess visitors’ desiderata, research on the effect of the HOT—and travel taxes in general—suggests these taxes can quickly become a deterrent. More importantly, when government uses HOT revenues to promote the tourism industry, it lends the helping hand of government to one industry over others. When some hotel projects benefit from tax rebates, other industries lose revenue from visitors who were forced to pay taxes instead of using this money to shop, go to movies, and dine. Like any government intervention, the HOT distorts the market for the benefit of a few.
Follow the Texas model: cut or eliminate the hotel occupancy tax—and they will come. Texas continues to attract businesses and talent and to generate economic growth and create jobs thanks to a model of limited government that favors lower taxes and fewer regulations. The only way for a limited government to help business thrive is to impose as few burdens as possible. Eliminating the local HOTs would give the Lone Star State an additional and tremendous competitive advantage over other states: making it cheaper for tourists to visit Texas, and leaving them with more of their money to spend in the local Texan economies they would visit.’
Why should other accommodations be required to raise their room rate with the hotel occupancy tax? What if some of those accommodations are small, entrepreneurial, also struggling to start a business? Or they are established, hoping to remain in business? This is not FREE MARKET.
The ideal of which you speak isn’t the way that Texas actually operates, nor is it the way that any city with large businesses coming operates. Utopia sounds great!