Texas bill could give honky-tonks, live music venues a boost from alcohol tax dollars

Austin

AUSTIN (KXAN) — A bill that would offer a funding boost to small live music venues in Texas has progressed in the Texas legislature, but it now faces crunch time in the final days of the Texas legislative session. 

Update: as of Wednesday morning, the bill has been placed on the Senate intent calendar. 

HB 2806, authored by Representative Geanie Morrison (R-Victoria), would set up the Texas Music Incubator rebate program, which would offer tax relief for certain small, live music venues and music festivals.

The funding would come in the form of rebates using funds collected in a Texas Music Incubator account, which would be fueled by state mixed beverage taxes — taxes collected from the sale of liquor, wine, and beer. Music venues already are paying into these mixed beverage state taxes. 

The bill states this program would be established and run through the Music, Film, Television and Multimedia Division of Governor Greg Abbott’s office. 

This fund would be housed in a dedicated account in the state’s general revenue fund where the comptroller would deposit $10 million each year of revenue from alcohol taxes. Grants and donations can also go toward this fund. 

Live music venues that serve fewer than 3,000 people or music festivals that take place in counties with fewer than 100,000 people will be eligible to apply for the rebate (Austin City Limits Music Festival, for example, would not qualify). Both live music venues and music festivals would be able to apply for up to $100,000 in tax rebates through this program. 

The expectation is that these businesses would have contracts with performance artists and that those artists would be receiving a percentage of ticket sales from the performances. In order to be eligible, venues and festivals need to have been in existence for at least two years and permitted by the state to sell alcohol during that time. 

The bill also would make exceptions on these requirements for venues and festivals in areas that have been impacted by natural disasters in the past two years. Disaster-impacted areas will be eligible to have their applications for rebates sped up.

The bill states that the goal is to “continue to bring to local communities in this state live musical performances.” 

Notably, successful Texas Country artist Pat Green testified at a Texas Senate Committee in favor of this bill.

He spoke to the unique nature of the Texas music scene. 

“I think if you pay attention to what’s out there, you don’t hear much about the Iowa music scene or the Delaware music scene it just doesn’t exist like it does here,” Green told the committee, adding that when he got into the music business 25 years ago, Texans purchased over 30 percent of all country music merchandise — from T-shirts to CD’s. 

“We had a very nurturing environment in places like Luckenbach, Gruene Hall, Johnny’s in Salado, the Backyard — the backyard in Austin and the Backyard in Waco — that would really foster this business and create more not only tax revenue, but more people like me to come along behind,” Green said. 

It’s that nurturing environment built in small, independent music venues, that Green believes allowed people like Eli Young, Randy Rogers, and Wade Bowen to blossom in the Texas music scene. 

While music has the potential to bring in revenue, Green said it’s also difficult for small venues to “compete against  the large venues and the conglomerates that come around.”

Green explained that he’s felt that burden firsthand, he’s working on a music venue in Pharr, Texas near McAllen which involves a lot of investment and a lot of risk. 

“We’re rolling the dice to see if that one’s gonna work,” Green said of the Pharr venue. 

Where the bill stands

The bill has already passed in the Texas House and has received a first hearing in the Texas Senate. 

Just before midnight on May 20, the Senate Business and Commerce committee passed the bill, with all voting in favor except Senator Angela Paxton (R-Allen) who voted against it. 

There is no word yet on when this bill would be scheduled for a vote on the Senate floor. 

Reactions to the bill 

The Senate sponsor for the bill, Senator Carol Alvarado (D- Houston) called this Texas Music Incubator program “critical small business tax relief” at a recent committee hearing. 

“Unfortunately, Texas music venues are now disappearing due to increasing operating costs, and more recently in some areas, the difficulties of picking back up after suffering a disaster like Hurricane Harvey,” Alvarado said. 

Just this past fall, Austin had to say goodbye to Threadgill’s World Headquarters at the Riverside location, which closed citing increasing property taxes and business costs. Threadgill’s existed in that spot in Austin since the 1930s, and it’s owner Eddie Wilson also owned the historic Austin music venue Armadillo World Headquarters. 

Rebecca Reynolds, an attorney and the president of the Music Venue Alliance of Austin, testified before the Senate committee that many of these small music venues in Texas are often family owned and operated. 

“They also serve as an essential entry point into professional songwriting and performance, every Texas musician that we know and love began on a stage in one of these businesses,” Reynolds said. 

But she acknowledged that with business booming in Texas and with so many people moving to the state, it may be difficult to see how these music venues might be hurting.  

“These businesses have not historically been organized or funded at a level that would make their plight well known to you or the community, so their crisis level today may come as a surprise to some,” she said. 

“We are here now because, due to the success of Texas as a state, we have seen exponential growth in our cities, which is a very good thing, however that means a loss of audiences for our venues in rural areas,” Reynolds said. “In city venues, the sudden drastic increase in property values in Texas is an expense that’s too big to be passed on to patrons.”

Representative Morrison’s office got the idea for this bill from the Music Venue Alliance and heard from music venues across the state while putting it together. 

The owner of Club Westerner, a venue which has been in Morrison’s district since 1956, testified in support of the bill.

“The dance halls and music venues this program could help the most are not the ones you see in downtown Austin and Dallas, but the ones in our rural communities that have been a central part of that communities social scene for decades,” her office told KXAN. “At the end of the day, the rebate is from taxes these very same venues are paying themselves when it could be better served keeping their doors open for future generations to enjoy Texas culture the way their communities have for decades.”

Morrison said she is happy to see the Senate committee voted in favor of the bill and that it is her hope that “the Senate sides with the small business owners in their district, the Texas House and our Texas music heritage by passing this bill.”

The Texas Public Policy Foundation, a right-leaning Austin-based think tank, opposes the bill. 

Carine Martinez, a senior policy analyst with TPPF, noted that during House and Senate committee hearings support for the bill was because of rising rents and property taxes. 

Martinez suggested that the answer to those problems “is not to divert other tax revenues to help some businesses while others—and individual taxpayers—continue to bear the full burden.”

She expressed worry that the more business tax incentives are given, the less individual Texans can see a decrease in their taxes. 

“Any program that would use taxpayer money to favor some businesses over others—regardless of the industry or type of business—would distort the market, benefiting connected businesses at the expense of all other taxpayers,” Martinez said. 

Central Texas music venues feeling the pinch

Independent music venues around Central Texas have made it clear that the rise in cost and taxes have made it harder for them to stay afloat. 

Joe Ables, who has owned the Saxon Pub in Austin for 29 years, said he supports HB 2806 and has been following it since before ti was introduced. 

“It is a critical bill for all music venues in Texas,” Ables said. 

He explained that the Saxon Pub tries to give everything they can to the music artists who play there (and many artists in already Austin face significant financial pressures with the work they do). 

If the bill passes and the Saxon Pub received more rebate dollars, Ables said that money would go toward paying his electric bill or “helping artists get more money in their pockets.”

“With the property tax situation, we are all getting clobbered,” Ables said. 

He explained that unlike bars, music venues have additional costs of security, sound mixing, equipment handling, and show advertising — which leaves music venues with less money to work with. 

“All of our costs are rising,” Ables said.  

“My job is to get brand new artists breaks,” he added, noting that groups like Los Lonely Boys have gotten their start at the Saxon Pub. 

But those efforts to get new artists to catch on take time, and Ables often loses money in the process before the artists’ popularity starts to rise.  

He is concerned that HB 2806 will be stalled in the legislature. He can’t understand why lawmakers wouldn’t support it. 

“It’s all about keeping our culture in our industry thriving, and it’s not asking for a whole lot of money,” he said. 

At the Broken Spoke, the iconic honky-tonk in Austin, owner James White said he hadn’t heard of the bill. He hasn’t been following Texas politics as he’s got some significant hurdles on his plate to deal with. 

His daughter, Ginny White Peacock, was hospitalized for several months last year after a serious case of Toxic Shock Syndrome. In recovery, she has needed partial amputations to her fingers and is unable to walk as of now. Besides the emotional toll of worrying about his daughter’s health, James White, who is 80-years-old, has had to pick up the jobs she used to do around their family-run business. 

“There’s so much work people never see,”  White explained. “It’s all day, you wake up in the morning, you think about it, you go to sleep at night, you think about it.”

On top of his normal work, White also trying to raise money to support his daughter’s medical needs and to have handicap accessible resources. 

Though he wasn’t familiar with HB 2806, he told KXAN,  “if you save me tax dollars, I’m all for it.”

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