Hotels nearing agreement on tax plan to provide homelessness services funding

City leaders expect a long-in-coming new hotel tax that could provide money for homelessness services to be ready for final City Council approval within the month.

On Monday, the Austin Business Journal reported that the proposed Tourism Public Improvement District tax levy has reached one of the needed thresholds with local hoteliers, with a second and final threshold expected to be completed soon.

Tom Noonan, CEO of Visit Austin, said hotels comprising 78 percent of the assessed value of the 150 eligible hotels have signed on to the agreement, far above the 60 percent needed. To reach the approval level needed for further city action, there needs to be agreement from 60 percent of the total square footage of candidate hotels or 60 percent of the total number of eligible hotels.

That number is currently reported to be just shy of 60 percent in both categories, with more signees expected soon.

If approved by the hotels and the city, the TPID would see hotels levy a new 2-percentage-point tax on room nights, with most of the funds used to market Austin hotels for new conferences and event bookings during the four-year teardown and reconstruction of the Austin Convention Center.

Via a routing of funding used to reimburse “buy down” discounts for those bookings, the city is forecast to receive an average of just over $7 million per year that could be used to provide services for those moved into permanent supportive housing after losing their homes. That complex arrangement is necessitated by a recent state law that limited how TPID funds could be directly spent, though city leaders have seen the hotel levy as a needed piece of funding for homelessness services for nearly a decade.

Last fall, Council members Ryan Alter and Vanessa Fuentes announced they’d helped broker an agreement on the proposed tax and its use to help the homeless.

Alter said he and other city leaders had initially expected the agreement to be back before Council by now, but getting all the needed signatures from the many ownership groups involved in the area hotel economy has taken longer than predicted.

With Council heavily debating homelessness services ahead of the passage of the next city budget, he said there should be easy consensus on passing the TPID, which is expected to begin generating revenue by early 2025.

“If I am looking at how this budget discussion just went, you saw a Council that was very focused on addressing homelessness issues. Particularly, I think a strong use of this money would be for permanent supportive housing services,” he said. “We made all these investments in the physical buildings, but didn’t plan out how we were going to pay for the services, which are going to add up to many millions per year. And we need the ongoing revenue stream. And this, to me, is a new revenue stream that could really be used well for this purpose.”

Alter said the city should use the rest of this year to confer with housing and service providers to determine how to best use the funds.

“Once we pass the item, hopefully in the next month or so, because the funds themselves do operate on a bit of a lag … I think that gives us this fall to have that discussion with the stakeholders about the amount of funds that are available and how we can best utilize them for the community.”

Walter Moreau, executive director of Foundation Communities, said his group is about $2 million short of the $7 million it has budgeted to provide support services to those living in the housing it provides. With costs ranging from $6,000 to $20,000 per client, he said the new funding would be a significant aid to his and other groups working to add permanent supportive housing around the city.

“We are really struggling to fund social services in our supportive housing, which is a crucial strategy to help reduce the number of folks who are homeless. I think homeless service funding was a major budget item debated by City Council this year, just a month ago,” he said. “I think the city is grappling with the reality that you can’t just build housing and not provide the services or only fund it for one year. It’s an ongoing public service that’s essential.”

Photo by Daderot, CC0, via Wikimedia Commons.

The Austin Monitor’s work is made possible by donations from the community. Though our reporting covers donors from time to time, we are careful to keep business and editorial efforts separate while maintaining transparency. A complete list of donors is available here, and our code of ethics is explained here.