The consequences of the business closures, event cancellations and other disruptions that began in March will likely not be known for several months, but their effects will mean indefinitely pausing the process that could have led to a vote on incorporation this year, board Chair Gordy Bunch said.
“Our community is not just reeling from COVID-19 business closures, layoffs, event cancellations, stock market crashes, but also decade lows for oil and gas that creates a compounding impact on our local economy,” Bunch said of the decision.
As the number of confirmed coronavirus cases increased in Montgomery and Harris counties in March, county leaders increased restrictions on businesses and gatherings, effectively canceling all of the major events planned in The Woodlands this spring. That included the April 25 Memorial Hermann Ironman Texas North American Championship, which generated $13.5 million in revenue for the township last year, according to township information.
The effect of county-mandated closures and cancellations was also felt in the hospitality industry. Three major hotels in The Woodlands temporarily closed their doors in late March, and officials said they were doubtful about the industry’s prospects for the rest of the year.
“Like it or not, it’s going to be travel or hospitality that is going to take the brunt of the measures that are being implemented,” said township Director Bruce Rieser, who is also chairs the township’s convention and visitors bureau Visit the Woodlands. “We’re in for a rough ride for the balance of the year.”
Incorporation deferred
The chain of events that led to public life effectively shutting down in The Woodlands area this spring began March 10 when Montgomery County announced its first positive case of the coronavirus. By the end of the month, Montgomery and Harris counties had enacted stay-at-home orders, all upcoming township events had been canceled, and some area hotels had closed.Circumstances came to a head March 25 at The Woodlands Township board of directors’ meeting, held by teleconference, when Bunch read a statement proposing the incorporation study be deferred.
“The COVID-19 crisis is one of many burdens that alters the timing for governance transition options,” Bunch said at the meeting. “It’s time for the board to spend time focusing on the crisis at hand. Based on the uncertainties created by the current international health crisis, I recommend that the township board of directors defer the incorporation process at this time.”Several residents who called into the teleconference also supported the need to shift away from incorporation during the health emergency.
“We are now learning there are things far more important than incorporation,” said Claude Hunter, an Alden Bridge resident and former township director. “[Disasters] pay no attention to whether we’re incorporated or not.”
Bunch said the comprehensive incorporation planning study performed by The Novak Financial Group can be used by future boards, as much of the information will still be usable. The next step in the process will be a community engagement process if a future board picks up the study and updates the financial information, he said.
The township had budgeted $1.29 million for consulting services for the incorporation study through 2020, of which $1.13 million had been used as of April, according to township records.
Before the coronavirus outbreak hit the U.S., the township had approved a maximum initial property tax rate of $0.2862 per $100 valuation for incorporation. That represents the tax rate that would have been placed on the November ballot if the board had chosen to call an election this year.
Julia Novak, the president of The Novak Consulting Group, said it will continue to work with the township to keep the report relevant in light of changing circumstances.
“I don’t think anyone has ever been through anything like this, but what we’ve tried to do all along is to be walking alongside you and make modifications as things go along,” Novak said. Hotels, tourism shut down
Canceled conferences, events and travel in The Woodlands area are also shaping up to have potentially dire consequences for the area’s hospitality industry, officials said at a special meeting of the Visit the Woodlands board on March 18.
The three hotels in The Woodlands operated by the Howard Hughes Corp.—The Woodlands Resort, The Westin at The Woodlands and Embassy Suites by Hilton at Hughes Landing—suspended operations indefinitely March 22, according to a Howard Hughes news release.Meanwhile, the occupancy percentage at The Woodlands Waterway Marriott Hotel and Convention Center had dropped to the single digits in March, and layoffs were handed down to the hotel staff, said Fred Domenick, the hotel’s general manager and secretary and treasurer of the VTW board of directors.
As of early April, the hotel had an occupancy of about 5%-10% per day and was operating with only 15 employees, Domenick said.
Domenick said although it was not financially viable to remain open, he continued to do so as of early April because of the hotel’s position in the community as an event hub.
“I think it’s important that we stay open as long as we can,” he said.
Before the hotel closures took effect, fiscal year 2019-20 budget projections had indicated hotel occupancy taxes in the township could grow 0.2% from last year’s budgeted amount of $9.69 million to $9.71 million. Actual revenue collected last year totaled $9.22 million, according to township records. Hotel tax funds support the township’s tourism bureau.
Elsewhere in the township, other destinations closed as coronavirus cases climbed in the last week of March. The Woodlands Mall closed to the public March 27 except for a few exterior-facing restaurants offering pickup or delivery. Events at the Cynthia Woods Mitchell Pavilion were also canceled, postponed or rescheduled through the end of June.
Challenges ahead
The effects of closures in The Woodlands will not be known for at least several months, officials said, because sales and hotel occupancy tax collection lags two months.
“Our budget process starts in five months, and we’re not going to be in a position to project where the finances would be at the end of this year or future years,” Bunch said.
This affects not only planning on issues such as incorporation, but also will affect the township’s fiscal year 2020-21 plans, he said. A budget committee chaired by Rieser was formed at the March 25 board meeting to get an early start on evaluating flexibility in the upcoming year’s budget.
The FY 2019-20 budget was already projected to bring in less sales tax revenue than the previous year, according to the budget approved in August 2019.
The FY 2018-19 budget included $55.06 million in sales tax revenue, but the FY 2019-20 budget projected a 1% decrease to $54.49 million, according to township records. The actual, unaudited collections last year totaled $54.76 million, according to township records.
In light of sluggish sales tax revenue, a $2.5 million sales tax reserve was also created when the FY 2019-20 budget was adopted to account for the expected volatility of sales tax revenue, Community Impact Newspaper previously reported.
Most township businesses were closed in mid-March as part of Montgomery County Judge Mark Keough’s order, and a stay-at-home order was extended through April 30. Among the businesses permitted to stay open were those offering essential services, according to the county order. That includes restaurants offering delivery or pickup service, grocery stores and pharmacies. However, events also play a part in township revenue streams. The April 15 Ironman competition provided an economic benefit of about $13.5 million for The Woodlands last year, including nights in area hotels, township officials said. As of late March, officials said the event might be rescheduled in October.
The Woodlands Waterway Arts Festival in early April was rescheduled to Oct. 17-18, according to an announcement from The Woodlands Arts Council.
“No one knows what’s going to happen over the course of the next three months,” Rieser said. “Some events that are being postponed right now won’t come off this year.”
