City to use half of hotel occupancy tax revenue for construction of Lakeway convention center
More than six months after Lakeway City Council unanimously approved a hotel occupancy tax, often referred to as a HOT, the council passed a budget for use of the funds.
The newly assembled Lakeway Visitors Commission proposed a budget to the council at the Nov. 19 meeting and the budget expected to be passed by Council in the near future.
How the HOT works
The tax is levied on guests of hotels, motels and other overnight stays in the Lakeway city limits and is in addition to the 6 percent tax that hotels already pay to the State of Texas.
The tax is being implemented on a gradual scale, beginning with 3 percent the first fiscal year, 5 percent the second fiscal year and 7 percent the third fiscal and following years.
Using HOT dollars
HOT money can only be used for a finite number of purposes— including promoting the city as both a convention and visitors destination, and for events, activities and facilities that directly enhance and promote the city.
The purpose must fall in line with the mission statement LVC board member Leonard Johnson pitched to the council.
"Our objectives are to define and promote Lakeway as a brand, to develop measures of success, and to act as a catalyst for activities among key players," Johnson said.
The LVC also hopes to promote the development of a convention center for the city in order to draw both visitors and conventions to the area, he said.
The idea is that the money taken from guests of the hotels and motels is then spent on advertising to bring more guests to the hotels, Johnson said.
"This is huge for the Chamber of Commerce," said Steve Zbranek, commission member and Lake Travis chamber member. "We don't have a line item for this yet, but we now have a revenue stream."
HOT budget
The HOT budget is being used primarily to raise funds for the construction and maintenance of convention center facilities for the city, as half the money is designated for construction.
The other half of the money is divided among a number of programs, all of which are designed to make Lakeway more attractive to conventions and visitors.
A large chunk, 38 percent of the total amount, is set aside for advertising and conducting solicitations and promotional programs for the city, while the rest is split among promotion of the arts, historical restoration and preservation projects or activities, discretionary funds, and HOT administration fees for hotel, motel and leasing agents.
The discretionary funds work both as a reserve and as a floating amount that can be used for things such as transportation, Johnson said.
"If there were a golf tournament in Lakeway, but the parking was in Bee Cave, part of that money could be used to hire buses to shuttle people back and forth," he said.
The HOT money can also be used to inform potential guests that hotels are open despite the currently low lake levels.
"Unfortunately, there is no current mechanism to inform potential visitors that Lakeway and Lake Travis are and will always be open for business," said Laura Mitchell, Lake Travis Chamber of Commerce president. "The use of the hotel occupancy tax may be used to reach those potential visitors to draw them into Lakeway."
Julie Oakley, a member of the LVC, projected in September that the city will receive $433,000 during the 2012–13 fiscal year, and that number will increase throughout the coming years.
"It is going to be a sizable amount of money," Johnson said.
The City of Lakeway only has a few hotels from which to collect the HOT, but two more hotels are in the works, Zbranek said.
The budget allotment of 50 percent for the convention center along with the projected incoming dollars leads to a pot of $224,000 reserved for the center by the end of 2013, Johnson said. The rest of the money is intended to be spent on different projects every year, he said.
Convention center
Construction of the convention center will begin prior to LVC acquiring all of the money, Zbranek said.
"What they are going to do is like a toll road: build the infrastructure and let the tolls pay it off," Zbranek said. "I would guess that in a year or so the city is going to find a place [to build] and use it to attract visitors to the area."
Applying for HOT funds
People and organizations that intend to apply for HOT money to promote an event or have a project in mind will need to fill out a funding request and go before the commission, Johnson said. Advertising will be a large factor in requests.
"The funds should be used to promote tourism, and a big part of that is advertising," Johnson said.
Advertising also overlaps with a number of other segments of the budget, said Alan Tye, a Lakeway councilman and a member of the LVC.
"You might be advertising a specific event in Lakeway, vis-a-vis an art event or other things," Tye said.
Not all applicants need to have businesses or even be residents of Lakeway to receive HOT funds.
"It can be anyone; it can be a business that wants to bring something to Lakeway," Johnson said. "The criteria is that they need to bring overnight guests to Lakeway. So if an event promoter filled out a packet and met all the criteria, we will ask them to give us an estimate of guests they plan on bringing [and] then have them prove that the number was close to what they expected."
Not every event would automatically receive money from the HOT funds, as the members of the LVC would vote on approval.
"To me it depends on how the event is handled and who is putting it on," Johnson said. "If it doesn't benefit the citizens of Lakeway somehow, my vote would probably be no."
