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Dallas voters could raise hotel taxes in November. How much you pay depends where you stay

Dallas voters go to the polls in a few weeks to decide whether to increase the amount of taxes collected for hotel and other room rentals from 13% to 15% to pay for a new convention center and Fair Park venue renovations.

So why are some people saying the true tax rate would be 17%?

As usual, the devil is in the details: People who get rooms at Dallas’ larger hotels will indeed be forking over 17% of their bill to the government. But that extra 2% — called a fee or assessment — has been around for a while and is not called a tax.

The city collects hotel occupancy taxes on hotels, motels, short-term rentals and bed and breakfast properties in Dallas. The current rate is 13% of the cost of a room. Currently, seven of those percentage points go to the city and six to the state. Proposition A on the ballot for the Nov. 8 election suggests voters increase the city’s share to nine points. The new two percentage point tax increase could raise $1.5 billion over 30 years.

That hotel occupancy tax increase is to help pay for a new downtown convention center, currently estimated to cost $2 billion. It’s planned to be built adjacent to the Kay Bailey Hutchison Convention Center, which would be torn down.

And up to 20% of the $1.5 billion can also go toward renovating six venues about three miles away at Fair Park, including the Cotton Bowl and the Coliseum.

Early voting begins Oct. 24 and ends Nov. 4.

But what about this other 2% that people are already paying for hotel rooms?

Patrons of Dallas hotels with at least 100 rooms are now also charged a 2% assessment on room rentals. That fee comes from the city’s Tourism Public Improvement District, which since 2012 has generated cash to help market and promote Dallas as a tourism destination. It doesn’t apply to other room rentals like short-term rentals.

Technically, it is not a tax, so there’s no mention of it on the ballot. But if you stay at one of the larger hotels in Dallas, it certainly comes out of your wallet.

More than 130 hotels are part of the Tourism Public Improvement District. Fewer than 10 are located below Interstate 30, which is commonly viewed as the city’s midpoint that divides wealthier northern and less wealthy southern Dallas.

Here are some other facts about the hotel occupancy tax and Proposition A.

What the tax pays for

Around two-thirds of the hotel occupancy taxes received by the city currently go to paying for the operations and improvements for the Kay Bailey Hutchison Convention Center. Close to 25% goes to VisitDallas, a nonprofit contracted by the city to promote Dallas as a convention and visitor destination. The rest goes to the city’s arts and culture office.

What other cities collect

The 17% total that goes to the government for hotel room rentals would put Dallas in line with other major Texas cities. Houston, San Antonio, Austin, El Paso and Fort Worth have total rates around the same amount.

San Antonio, for example, has a total rate of up to 18%. That includes the 6% state cut, 9% city cut, 1.75% Bexar County cut and a 1.25% fee tied to the San Antonio Tourism Public Improvement District that applies for hotels with at least 100 rooms.

Austin, Fort Worth and El Paso also already keep 9% of their cities’ hotel occupancy tax, which is the amount Dallas would keep from most hotels, motels and all short-term rentals if voters approve the proposition.

Fair Park work

The hotel occupancy tax funding method is more commonly referred to as the Brimer Bill, after former state Rep. Kim Brimer, R-Arlington. It’s a state law that allows cities to use an increase in taxes on hotels and vehicle rentals to repay bonds to build venues like convention centers, sports arenas and entertainment districts. Voters have to approve its use beforehand.

Hotel occupancy taxes were similarly used only once before in Dallas, when voters in the late 1990s approved a 2% increase, as well as a 5% car rental fee increase, to help pay for building the American Airlines Center.

Dallas-area state legislators in 2021 filed bills seeking to remove an exclusion in the Brimer Bill that banned the money from being used in an area or facility that’s part of a city park and recreation system as a way to include Fair Park.

Gov. Greg Abbott signed a bill into law in 2021 allowing Dallas to use up to 20% of the revenue from the hotel occupancy tax rate increase on costs related to only an amphitheater, arena, exhibit hall, music hall or stadium located within a municipally owned park.

This would allow up to $300 million of the projected $1.5 billion from the new 2% tax increase to be used to renovate the Cotton Bowl, the Coliseum, the Automobile Building, Centennial Hall, Music Hall and the Band Shell.

If voters approve the proposition in November, the city would be banned from using general fund tax revenues and general obligation bonds for the six Fair Park venues.

There’s no guarantee that Fair Park will get the full 20% of funding over 30 years if the proposition passes in November. While the Dallas City Council in April approved allowing the six venues be eligible for money from the tax increase, the language in the resolution is nonbinding.

The resolution has a clause that orders the city, pending voter approval, to “use good faith efforts to spend 20% of the revenues derived from the new 2% hotel occupancy tax for the Fair Park facilities listed in the proposition.”

What supporters say

Proposition supporters say the venue revamps at both sites will help draw larger conventions and events to Dallas that will increase tourism, pave the way for the creation of a new entertainment district around the convention center and can create new jobs through the construction work and new amenities that are built.

A political action committee called the Transforming Dallas Committee has been created to support the proposition. No organized opposition against the ballot measure has been announced.

Not just tourists

Supporters of the November election proposition have referred to the hotel occupancy tax as a “tourism tax” that will be paid for by out-of-town visitors. But it can trickle down to city residents, too, particularly people looking for temporary shelter.

Hotels can also be used by people either without stable shelter or displaced from their homes, such as during the 2021 winter storm.

In August, Dallas’ Office of Homeless Solutions Director Christine Crossley told council members that homeless service providers pay for hotel rooms for people to stay when shelter spaces are full. She suggested the city consider a standardized grant to give groups to subsidize their funding.

“We confirm that it’s currently a successful model, and has been for quite some time,” Crossley said to council members when addressing whether expanding homeless shelter capacity via hotels was a viable option. “We don’t see that changing.”

The City Council in September approved shifting $1 million in federal grant money that was projected to go unused for rapid rehousing services to help pay for sheltering in hotels.

“A renewed and urgent need has been identified to expand shelter services, particularly overflow services, to hotels for individuals and families experiencing homelessness due to the recent loss of pandemic protections, rise in inflation, and scarcity of rental units,” the resolution said.

Some who should pay might not

Dallas requires short-term rental properties listed on platforms like Airbnb and Vrbo to register with the city and charge hotel occupancy taxes that are funneled to the government. But the city has no rules overseeing how short-term rentals are run and no regulations that lead to penalties for property owners who don’t register.

The city in June reported having almost 1,300 active and registered short-term rental properties, but also estimated about the same amount of other properties that are unregistered. Other sources, such as data analytics website AirDNA, have claimed there are more than 5,000 active rentals in Dallas.

That June, the city estimated receiving close to $2.6 million in hotel occupancy tax money from short-term rentals, compared to about $65 million from other hotel tax revenue and close to $16.6 million from the city’s tourism public improvement district.

The city is currently considering zoning and registration changes to regulate short-term rentals.

This isn’t the only way the city plans to pay for a new convention center

The city also has a separate funding method for the new convention center. The state last year approved the city’s request to keep a portion of the state’s percentage of hotel sales taxes, hotel mixed-beverage taxes and hotel occupancy taxes collected from businesses within a three-mile radius of the Kay Bailey Hutchison Convention Center. It will last for 30 years — until 2051 — and is expected to bring in $2.2 billion.

The state allows that money to be used for a convention center, and also for a multipurpose arena or a venue that includes a livestock facility.

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