Alpine, Texas Meets the Hotel Occupancy Tax

May 20, 2022

Chris is joined by Justin Bragiel, lead counsel for the Texas Hotel and Lodging Association to talk about…hotel taxes! What?!? Taxes!?!? No, really – What are they for? How do they help the community? Why can’t we use the money to fill that pothole or fix the sewers? Find out how Alpine uses HOT funds, and you’ll even get to hear Justin say nice things about us!

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NOTE: This podcast episode mentions a presentation by Texas Hotel & Lodging Association Lead Counsel Justin Bragiel about the Hotel Occupancy Tax. You can view that workshop on YouTube here.

Transcript for “Alpine’s Music Scene”:

Intro
Welcome to the Heart of the Big Bend. It’s time to kick back, put your feet up, grab your favorite beverage or snack as we discuss, declare, proclaim, publicize, and articulate about the wonders, magic, beauty, music and happenings here in the area known as the Big Bend of Texas.

Chris Ruggia
Hello, welcome, and thank you for joining us again for Heart of the Big Bend. This is a podcast and radio show coming to you every other week about visiting the beautiful Big Bend of Texas. Specifically, we will cover what’s happening in Alpine, an incredibly friendly small town nestled in a desert mountain valley at the heart of the Big Bend region. With easy day trips from Alpine, you can take in everything this amazing region has to offer. I’m Chris Ruggia, director of tourism for the city of Alpine. And with me today is Justin Bragiel, the lead Council for the Texas Hotel and Lodging Association. Hey, Justin.

Justin Bragiel
Hey, Chris. How are you doing?

Chris R
I’m doing great. Thanks so much for joining me today.

Justin B
I appreciate it. Thank you. It’s a pleasure to be with you in Alpine.

Chris R
Excellent. So the reason I asked you to join us today is because you and I are actually going to be in Alpine next week, Wednesday, May 25, 5:30, at the Alpine City Council Chambers. And we’ll be having a workshop for the public and anyone who’s interested on the Texas Hotel Occupancy tax, of which, in my opinion, you are the expert.

Justin B
Well, you’re very kind. A lot of hotel tax work across the state of Texas. It is true.

Chris R
Yeah. Justin, tell me first off, for the listener, what is the Hotel Occupancy tax? Where did it come from? How did this thing start?

Justin B
Yeah, absolutely. Good question. I think oftentimes when people hear the word tax, say, their mind immediately goes a little numb. But this is an incredibly important tool, actually, for local communities. Like most States, Texas levies a tax on the rental of a hotel room. And to be clear, we’re talking about taxes, and this tax is for a hotel room. That’s the language of the law, but it actually includes everything that’s rented short term. So, it could be a short term vacation rental or a motel room, a hotel room or cabin. Any of those things are subject to a hotel tax. And that tax –there’s actually two: there’s a local hotel tax and then there’s a state hotel tax. The state hotel tax goes to fund the state of Texas to allow the state to do things like pay for public education and roads and all those wonderful things. But the local hotel tax is a bit different. It goes to making sure that the community is a vibrant tourism destination.

Chris R
Yeah. And so that’s something that I work on in my role as tourism director. And we broadcast this locally as well as share it on our podcast to folks who are interested in visiting. But we want to let people know how it is that we do what we do, and it’s all funded by the hotel occupancy tax, where our guests come in and they pay a little bit extra for that hotel room. And that funds the visitor center. It funds my activities. It funds the advertisements that we make. And it also funds a grants program primarily for events, but for other projects that could bring people to town. And so that’s one of the things that you and I will be talking about next week that primarily I’ve invited you to come because a lot of people, they just don’t really know – well, it’s a hotel tax. That’s money coming in. So that’s just money, right? We can do anything we want with it. Why don’t we fix the streets with this hotel money? That’s where you come in to explain to us, since, you know the law inside and out, you can tell us how are we allowed and not allowed to use the funds that are collected this way.

Justin B
Yeah, that’s correct. And I think we have to think back to the origins of the tax and why these rules and really laws actually are, how they are, and why they govern use of that tax revenue. And a lot of it has to do with the origin of the tax. It was originally designed to be a hotel tax on the local level to allow cities to build big convention centers. Over time it was expanded out. Yeah, the original hotel taxes for the city of Dallas to build their first convention center.

Chris R
I didn’t realize that.

Justin B
Over time, the uses of that local hotel tax have expanded a little bit. But the idea being that we’re levying a pretty significant tax. If you haven’t stayed in a hotel in a while, you get out there and do it. But you’ll notice that the rate you pay to stay at a hotel tax rate you pay is a lot higher than the sales tax rate. The state 6% hotel tax combined with the city 7% hotel tax equals a 13% tax rate. So that’s a pretty high rate to stay at a hotel. But that revenue, though, at least the local revenue, if it’s dedicated to really promoting tourism activity, these grant programs that are there in the tourism realm, advertising promoting the city as a tourism destination, making sure we keep our sites and attractions that are visited by tourists and hotel guests up to snuff and looking good. We know that that really encourages more of this economic activity long term. This thing is supposed to run like an economic engine, right? So we use the hotel tax dollars to promote the area as a tourism destination. More people come, they generate more hotel tax dollars, but of course, they’re spending in your community other things. Right. They’re going to eat at restaurants and visiting businesses and walking down Main Street and hopefully stopping in stores and buying things along the way. You’re bringing people to the area with the use of this hotel tax revenue. And that’s really the whole point here. So, yeah. Every dollar that’s spent at the local level has to comply with the language of Chapter 351 of the tax code. And that basically means that every expenditure must first directly promote and enhance tourism and the convention and hotel industry. And then two, it’s got to fit within one of these categories that’s available for the expenditure, just to name a few off. One would be visitor centers, and advertising, and promotion and funding for arts-related activities. You’ve got some great murals, for example, in downtown Alpine. And I know a lot of people like to stop and take a selfie in front of those murals and put it up on the (insta)gram and tag it. That’s something you can use hotel tax money to pay for the development of those murals or some of that historical restoration and preservation. You got a lot of great historical sites and attractions and even museums in the area that attract a lot of tourists. And you may pay for the costs associated with that. So those are the kind of things we can use hotel tax money on. The thing we couldn’t use hotel tax money on would be like general infrastructure. We couldn’t repave the city streets, for example, with hotel tax dollars. We use property tax revenues or some other source for those types of expenses.

Chris R
Yeah. And one thing that’s pretty interesting to me is that the rules are not the same for every community across the state, that there’s different buckets of communities that have different restrictions. Alpine, for one. And this is something that we’re often telling the people who apply for our grants, we have a requirement to, at minimum, spend 50% of the funds collected each year on advertising. So, when folks come asking for funds, we really want them to ask for advertising funds, and we really want them to promote because not only is it the law, but that’s also the primary method where we actually fulfill the intent of the law of the intent of the tax, where we bring people in.

Justin B
Yeah. And everything you said is true and important. And that’s exactly right. Different communities have slightly different rules. There’s sort of a general authority. And then certain communities like Alpine, for example, as you mentioned, does have very specific requirements for how that money is expended. And I’ll tell you, that advertising and promotional category, regardless of what community we’re talking about, really is so valuable because this is where we tend to see the greatest ROI, return on investment. Right. For hotel tax dollars spent, we’re so much more likely to see additional visitors and revenue generated from that expenditure than other categories. And so, it is vitally important. And it is something that we also encourage folks to really focus on when they’re applying for hotel tax loan.

Chris R
Yeah. One thing that’s interesting too, that we’ll see as the years go forward, I think, statewide. But we’re seeing it right now in South Brewster County around Big Bend National Park is we’re starting to see that impact of over-tourism. And so that’s something where Brewster county’s, they’re really having to look at how exactly are they going to use that advertising funds to kind of spread out the visitation through the year if they can. And I noticed that they’re moving some of those funds previously spent on advertising towards the visitor center side that they hadn’t done in the past because they just don’t think throwing it all into advertising in this specific situation is going to benefit the residents, because too many people come at the same time and then you’ve got trouble. So, it’s an interesting balance. We’ll see what happens.

Justin B
Yeah. No, it’s true. And that’s exactly right. It could be almost a chicken or egg problem. You’ve got to have the mechanisms to support the tourists, but at the same time, you need to attract the tourists there as well. How do you do it? How do you make it all happen? And that’s exactly right. And Brewster County has done a really fantastic job. I mean, Alpine and Brewster County both have done such a fantastic job of really marketing the area as a destination. In fact, I travel all over the state of Texas and advise a lot of communities on tourism promotions. And I’ll tell you, I’m not saying this for the podcast – we hold out Alpine and Brewster County as examples of really being effective with those dollars. It’s really amazing. Now, the pandemic really helped, too, in that regard. I know folks were staying away from bigger cities and bigger conferences and conventions for a little bit. Some of that’s coming back now, not as fast as we like but it’s coming back, but some of the areas that really benefited from that new leisure tourism, were areas just like yours.

Chris R
Yeah, no question. And just to follow up what you’re saying, I definitely want to shout out a bit to the Brewster County Tourism Council. They just had their 25th anniversary, and I was around in Alpine at the time just after they were founded. And they had a really clear vision. And that’s one thing; a lot of communities really spread their money pretty widely on a lot of different kinds of projects. But those guys, they said our mission is to bring people to the county line. We’re not going to fund events. We’re not going to fund infrastructure. We’re going to promote and bring people here and – single-minded focus for two and a half decades. And they definitely succeeded, perhaps better than they might have wanted to. But, yes, for sure, they’ve been very effective.

Justin B
Absolutely.

Chris R
One other thing I want to point out that Alpine encountered for the first time, in my experience, just this last year. There are a couple of the categories where unlike advertising, where we have a minimum that we have to spend every year, there are some others where there’s a maximum. So, for example, at least for Alpine and many other communities, promotion of the arts and the historic restoration and preservation, that’s capped at a maximum of 15% of what we bring in for the year. And this last year, for the first time, we had more requests for arts funds than we actually projected revenues. So, we often can give people, everyone, what they asked for. The committee reviews it, and we had the luxury of being able to say yes until this last year. So, what’s the thinking behind the different percentages, how those have shaken out?

Justin B
Yeah. It is a bit interesting. And I’ll tell you, Chris, the 15% cap for the arts is not unique to Alpine. That exists in local communities statewide. And the 15% cap on restoration and preservation, that one is unique to Alpine; it is not the only community, I guess, but it’s one of the very few. The thought being is that at least the Legislature, when they were directing the spending, they wanted to send a message that we think all these things are good uses of hotel tax, but maybe some are better than others, or maybe we should focus our efforts in certain other areas more than others. And so, the idea was with this new high tax rate, we want to make sure that this money is spent in a way that we think was going to really drive more hotel and tourism activity. So, while important, limiting the amount on the arts and historical restoration and preservation, the legislature felt that that was in the best interest of the area. And those all predate me by many years. I wasn’t around when that was actually debated at the legislature. But looking back at the transcripts and the hearings and whatnot, that was a discussion that was had at that time.

Chris R
Yeah. Well, one thing I have definitely noticed, especially for new events, that it’s a lot easier for somebody who’s never done an event before to spend money hiring a band than it is learning how to buy radio ads and buy TV ads and things like that. And so, in that sense, it’s not a bad idea because it could easily turn out where we have a bunch of great music and arts going on but we’re not telling very many people about it. That’s always a challenge for us to help teach, train, make those resources available to help people learn how to effectively promote the events that they’re getting the grants for.

Justin B
Right. That’s exactly right. We see that challenge communities across the state. Absolutely.

Chris R
Yeah. And speaking of the grants, I want to let the listeners know that for the 2022-2023 fiscal year, Alpine’s Hotel Occupancy tax grants are going to be open for applications starting May 23, and the deadline will be July 1. And so, one thing people need to know is that everything about these grants, everything spent, all the monetary activity we’re talking about has to happen in that fiscal year. So, it’s between October 1, 2022 through September 30, 2023. And so, with anybody who’s thinking about projects or events that are primarily focused on bringing people to town, bringing visitors in: One, come to our workshop on Wednesday, May 25, and talk to Justin. Bring him your questions. But also, you can go to cityofalpine.com and then in the menu up top, you look under “how do I” and then “apply for” and then ”hotel occupancy tax funding.” And there you can find the guidelines, all the rules, the application, a sample budget, things like that. And anybody who has any questions can just send me an email – that’s chris@visitalpinetx.com – and I can answer any questions about that grant. But then, of course, as I said, Justin’s going to be here in person on Wednesday. We’ll meet at the city Council Chambers at 05:30 p.m., and this is something I want to stress to anybody. Do you have any questions about how this law works and what’s allowed and what’s not? I’ve got a pretty good idea. I’ll field those questions all through the year, but we’ve got Justin coming, though, so he really knows the answers. And if he doesn’t know at the tip of the tongue, he knows the people who actually know.

Justin B
Oh, yeah, absolutely. I’m looking forward to that. Please do attend and bring your questions to the meeting and ask away. We really love it when folks are active at these meetings and involved and have their questions ready to go. And we will answer every one of them and make sure you leave with a little more knowledge of what you came with. And that’s our whole mission. When we come out to communities like Alpine, I’m looking forward to it. I haven’t been out there many years. Well, not many years, I guess about a year and a half, which is unusual for me. I’m usually usually there every year, but I’m looking forward to getting back to help. I get my boots on the ground.

Chris R
Yeah, Justin will kind of cover the rules of how the tax is spent. I’ll tell folks a little bit in general about how Alpine’s grant program works and we’ll record the program. If you can’t come in person, there is going to be a Zoom feed. You can find that also at cityofalpine.com, get the link and the passcode to get into the Zoom. But even if you can’t make it on the day, we’ll record the video and we’ll post it up on the website because that’s the sort of resource that folks can benefit anytime and even next year or the year after. So we’ll definitely be sharing that way. I guess I’ll shout out the city of Alpine is a member of the Texas Hotel Lodging Association. That’s kind of how I met you, Justin, when I started in this job of tourism director a little while ago and I’ve been very pleased to get to work with you over the years and really looking forward to getting to see you next week.

Justin B
Likewise, Chris, it’s a real pleasure. We love working with Alpine. I love working with you and I can’t wait to be out there.

Chris R
Excellent. Thanks again, Justin, for calling in and sharing a  little teaser for what we’ll talk about next week and for anybody listening.

Once again, thank you for joining us again for Heart of the Big Bend. You can get more information about our show at visitalpinetx.com/podcast or search for Heart of the Big Bend on Apple podcasts, Spotify. Most other podcast apps. And if you’re listening to us on KVLF and KALP Alpine, you can find us two weeks from today. Thanks, everybody.

Outro
You’ve been listening to The Heart of the Big Bend. Hope you liked what you heard and that you’ll find the time to experience all that the Big Ben has to offer. See you soon, partner. Bye.