Austin City Council approves using new Hotel Tax dollars to fund live music

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AUSTIN (KXAN) — In a vote Thursday, Austin City Council unanimously approved an ordinance that would allocate new Hotel Occupancy Tax (HOT) dollars towards live music in the city. 

The ordinance that would add a new section to city code that would allocate additional funding for local music and historic preservation under the Texas Tax Code. That funding would come from the revenue generated by the recent 2% increase in the local HOT, which is allowed under state tax code with convention center expansion.

Sponsors for this ordinance included Mayor Steve Adler and Council Members Jimmy Flannigan, Paige Ellis, Natasha Harper-Madison, and Greg Casar.

Leading up to the vote

On May 24, Council voted unanimously to approve the Pam District Master Plan that includes beginning the process of expanding the Austin Convention Center. That tipped off a larger conversation about increasing local hotel taxes, as is allowed by state law with a convention center expansion.

From all the revenue generated for the city by hotel tax dollars, the city allocates the state maximum of 15% going towards cultural arts and another 15% going toward historic preservation.

On August 8, Council passed an emergency ordinance for a capital improvement plan for the convention center, which enabled the city under state tax code to also increase the local portion of the Hotel Occupancy Tax from 7% to 9%.

The August vote increased Austin’s total HOT to 17% — the highest allowed under state law by raising the local hotel tax. The state collects another 6% and there’s a 2% venue tax voters approved back in 1998. When you add those amounts to the 9% local tax, you get the state maximum of 17%.

The revenues from that August increase will go towards expanding the convention center with a 15% allocation of those dollars, (the maximum allowed by the state) going to cultural arts and another 15% (the maximum allowed by the state) going to historic preservation. The actual number of dollars going to cultural arts and historic preservation will be greater than before, with the 2% increase in the local hotel tax, the 15% slices will be made bigger.

The cultural arts slice can go toward any number of arts, including music, dance, drama, folk art, creative writing, architecture, design and allied fields, photography, graphic/craft arts, motion pictures, radio, television, and other arts-related to the presentation, performance, execution, and exhibition of a major art form.

The Live Music fund

The ordinance approved on Thursday calls for 15% of the revenue created by the additional 2% added to the local HOT rate in August to go toward the creation”Live Music Fund” specifically for local music.

“By this act I think we are speaking to the importance of [live music] in our community,” Mayor Adler said just before the vote on this ordinance.

“We have a great opportunity to make big investments in our local culture,” said Council Member Harper-Madison. She added that this fund can be used to address equity in the music community so that Austin prioritizes working-class musicians just as much as it prioritizes big music festivals.

Austin Tourism Commission Chair Catlin Whittington explained to the council that those dollars in the Live Music Fund could be used for programs like a live music rebate program for local musicians.

City staff explained during the meeting that the funds from the 2% increase allow the city to put more funds into other areas. Austin’s city staff will be determining how this funding works and who will be eligible for it.

Council Member Jimmy Flannigan acknowledged at the meeting that the state law around this is tough to understand.

“The only way to put more money into the areas classified at 15% — the music bucket, art bucket, historic preservation bucket — the only way to add money to that within hotel tax authority is by doing this additional 2%?” Flannigan asked a city staffer to clarify for the council.

“That’s my understanding,” the staffer responded.

“So we could not find other ways to add more money into those buckets?” Flannigan asked.

“Not that I know of,” the staffer replied. “I know that there are many discussions that are happening so I don’t want to get in front of those conversations. “

A group representing thousands of musicians, music groups and dozens of venues showed up at an Austin City Council meeting Thursday to express their support for convention center expansion and for an ordinance that would designate a portion of Hotel Occupancy Tax (HOT) dollars generated by this expansion for local live music and historic preservation.

This group includes representatives from the Music Venue Alliance of Austin — an advocacy organization of more than 40 independent venues — , the Red River Cultural Alliance, the Austin Music Movement, and Austin Texas Musicians group — a new nonprofit that has more than 4,000 musician members.

“Austin’s musicians and venues support the ordinance as a vital and integral piece to sustain and grow Austin’s musicians, venues, and businesses long-term,” this group said in a statement.

They say that previously, cultural arts funding from the city could only go to nonprofits or musicians associated with nonprofits, not commercial musicians.

“When we’re talking about these musicians, we’re talking about a group of individuals who feel somewhat left out in the cold by the very tourism economy that they helped to build,” said Patrick Buchta, Executive Director of the newly formed Austin Texas Musicians nonprofit. “And so we want [musicians] to know and we want the rest of Austin to know that musicians have a very powerful voice at city hall.”

Buchta explained that Austin Texas Musicians represents what had previously been just a Facebook community of more than 4,000 local musicians. The board of this group, Buchta explained, supports convention center expansion and is opposed to Proposition B which would challenge that expansion.

He said that in 10 years time this new local fund for live music could generate up to $40 million.

“What we’re talking about [in the ordinance] is in the new 2% that’s being added on to the hotel occupancy tax, we have the potential to unlock 15% to go directly to support commercial music,” Buchta explained. “But to really improve equity and diversity and inclusion across Austin’s music community it’s gonna take time, it’s just gonna take a lot of solutions with a lot of the stakeholders having a seat at the table.”

Austin artist Jonathan “Chaka” Mahone, who is an Austin Music Commissioner, believes the city has a long way to go before everyone in Austin’s music community truly has a seat at the table.

Austin’s Music Commission recently voted to recommend this ordinance, however, but Mahone voted against it.

“None of these so-called leaders represent me, and I’m talking about the music leadership, ” Mahone said.

He expressed frustration about being the only black person on the Visit Impact Taskforce and for not being able to help pen the taskforce’s recommendations that ultimately went to council.

Mahone said he doesn’t have confidence that the results of this funding stream will go back to benefit artists of color like him.

“I don’t see it panning out for folks like me and the folks I represent, and if it’s not already panning out for folks like me who are constantly involved, how is it going to pan out for the people who aren’t?” he said.

The brewing debate over hotel tax dollars

Unconventional Austin, the PAC opposing Convention Center expansion has also claimed that their efforts would benefit Austin’s music community. They have suggested that the convention center expansion would benefit “multinational hotels” and they propose instead another allocation of HOT dollars which they suggest will leave “more for live music.”

Unconventional Austin was also successfully able to gather enough petition signatures to bring an ordinance to the ballot in November — Proposition B — which could challenge convention center expansion.

The ordinance, which came from their PAC’s petition, would limit the convention center to receiving 34% of the total annual HOT revenue.

It would also require that 15% or more of that revenue go to a historic preservation fund, and 15% or more go to the cultural arts fund, with the remaining dollars going to enhance Austin’s “cultural tourism industry.”

PHAM PAC, a separate PAC formed to oppose Unconventional Austin, has said what Unconventional Austin is doing would jeopardize funds the city has already approved and vetted. They also question whether the HOT dollar allocations Unconventional is calling for would be legal under the Texas Tax Code.

While the music groups present at the council meeting Thursday said they are opposed to Proposition B, a statement from Unconventional Austin suggested the group feels this new ordinance bolsters their rationale for the proposition.

“We support what council did today,” said Austin Tourism Commissioner John Riedie, a supporter of Proposition B and Unconventional Austin. “It’s a good start toward balancing and diversifying Austin’s tourism investments.

Riedie explained that Unconventional has offered an alternative plan for tourism investments.

“This ordinance validates Prop B’s proposal to move money from the convention center to invest in other things, like live music, film, and small business marketing to tourists,” Riedie said.

However, Jim Wick, a political consultant and leader of PHAM PAC thinks what Riedie is suggesting isn’t possible under state law.

“The vote today was only possible because of the previous vote to expand the tax from 7 to 9 %,” Wick said. “The tax could only be increased because of expansion, so today’s vote is only owed directly to expansion, and without that, there would be no dedicated funding stream for commercial music.”

Wick also has worked as Mayor Steve Adler’s former campaign manager.

PHAM PAC supports the ordinance passed Thursday.

“This really represents kind of a coming together of all of the cultural arts community, to support growing the pie instead of fighting over and trying to cut the exiting pie into smaller pieces,” Wick said of the ordinance.

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