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A REVIEW OF THE TEXAS ECONOMY FROM THE OFFICE OF GLENN HEGAR, TEXAS COMPTROLLER OF PUBLIC ACCOUNTS ALSO INSIDE THIS ISSUE: AUGUST 2018 SALES TAX HOLIDAYS 7 FISCAL NOTES STATE REVENUE WATCH 11 Paying for Texas Convention Centers By David Green and Bruce Wright IF YOU BUILD IT, WILL THEY COME? Clockwise from top: George R. Brown Convention Center, Houston; Henry B. González Convention Center, San Antonio; NRG Stadium, Houston; Kay Bailey Hutchison Convention Center, Dallas; Fort Worth Convention Center, Fort Worth Convention centers are a common if expensive strategy for local economic development. Once a feature of the largest cities, today convention centers are increasingly common across America, established in the hope of luring visitor traffic The sheer number of convention centers has made that can revitalize communities. They can help provide a sense of place, hosting annual events that come to the market highly competitive, bringing pressure characterize a city, such as South by Southwest in and to expand and add the latest innovations. around the Austin Convention Center or the Houston Livestock Show and Rodeo at the NRG Stadium. But the sheer number of convention centers has These incentives can be controversial, though. made the market highly competitive, putting pressure Convention centers are highly expensive operations, on these venues to expand and add the latest innova- and most don’t make a profit — particularly when tions to attract events. In Texas and elsewhere, state considering the debt service payments involved in their and local governments have responded by increasing construction. Private investors are reluctant to invest incentives and subsidies for the construction, renova- in such uncertain ventures, which leaves the tab with tion and maintenance of convention centers and their taxpayers. Advocates of convention centers argue that surrounding hotels and infrastructure. CONTINUED ON PAGE 3 GLENN HEGAR, TEXAS COMPTROLLER OF PUBLIC ACCOUNTS FISCAL NOTES, AUGUST 2018 | 1 A Message from the Comptroller TEXAS WOMEN IN Probably most of us, at one time or another, have been INFORMATION in a convention center for a T ocesses, ib conference, a garden show ar oducts. or dozens of other types of inf ib Texa y. W events. They’re big, glitzy . places that can anchor a downtown, surrounded by hotels, bars, restaurants and THIS INDUSTRY CONTRIBUTED shops catering to out-of- towners. What you may not have noticed, though, is just $55.3 BILLION how many of them there are — hundreds in the U.S. and more than 90 here in Texas. JOBS HELD BY TEXAS WOMEN IN THIS INDUSTRY A convention center is a big investment, with a T ener construction price tag that can run into the hundreds of b millions. They’re also expensive to staff and operate — suppor ly 1 75,000 industr Te y. and most of them never turn a profit. And in a highly Sources: BEA, Emsi, Texas Comptroller of Public Accounts competitive market, there’s constant pressure to keep convention centers up to date, with more exhibition TOP OCCUPATIONS WOMEN'S SHARE OF TOTAL JOBS space, more hotels and entertainment options, luxurious TELECOMMUNICATIONS EQUIPMENT INSTALLERS appointments and the latest electronic features. AND REPAIRERS, EXCEPT LINE INSTALLERS 11% Because of these characteristics, most private inves- CUSTOMER SERVICE REPRESENTATIVES 67% tors consider convention centers to be a bad bet. State SALES REPRESENTATIVES, SERVICES, ALL OTHER 36% and local governments generally foot the bill, despite SOFTWARE DEVELOPERS, APPLICATIONS 21% some indications that the market for these facilities may be saturated. In this issue, we discuss the complex COMPUTER USER SUPPORT SPECIALISTS 27% Source: Emsi economics of convention centers. 50% We also profile Texas’ sales tax holidays. Most Texans AVERAGE MONTHLY EARNINGS OF WOMEN know about our oldest holiday, the back-to-school event Fr verag held in August — and if you don’t, then mark your calen- cent, o dar for this year’s event, on Aug. 10 through 12! For that verag monthl weekend, Texans can purchase non-athletic clothing and INFORMATION +22% ear footwear costing less than $100, as well as many school Texa supplies, without sales tax, which can save about 8 cents ALL SECTORS 2010 +16% on the dollar. 2016 economy. But the Legislature has created several other sales $0 $1000 $2000 $3000 $4000 $5000 EARNINGS GROWTH tax events to further important public purposes, includ- Source: U.S. Census Bureau ing energy and water conservation and emergency preparation. In this article, we review the ins and outs of CONCLUSION these holidays and point you toward more information amatically, on what’s tax free during each. technologic v v gel As always, I hope you enjoy this issue! inter eferr Texa wor ener str throughou y. T orkforce, comptroller.texas.gov/economy/economic-data/women/ GLENN HEGAR If you would like to receive paper copies of Fiscal Notes, contact us at Texas Comptroller of Public Accounts [email protected] 2 | GLENN HEGAR, TEXAS COMPTROLLER OF PUBLIC ACCOUNTS Paying for Texas Convention Centers CONTINUED FROM PAGE 1 these operating losses are more than compensated by EXHIBIT 1 added jobs, investment and economic activity produced LARGEST CONVENTION CENTERS IN TEXAS by visitor spending. BY MEETING SPACE According to the Governor’s Economic Development CONFERENCE MEETING and Tourism office, Texas is home to more than 90 RANK FACILITY CITY SPACE (SQ. FT.) convention centers; Exhibit 1 shows the 10 largest. In KAY BAILEY HUTCHISON 1 DALLAS 1,035,945 all, these facilities have about 8 million square feet of CONVENTION CENTER GEORGE R. BROWN meeting space, enough room to cover more than 138 2 HOUSTON 869,581 CONVENTION CENTER football fields. Yet convention space continues to grow through- 3 NRG STADIUM HOUSTON 706,213 HENRY B. GONZALEZ out Texas and across the nation, despite at least some 4 SAN ANTONIO 514,000 CONVENTION CENTER indications that the market is saturated — and that AUSTIN 5 AUSTIN 370,967 conventions themselves are less popular. A 2012 report CONVENTION CENTER by Citylab, for instance, noted that U.S. convention space FORT WORTH 6 FORT WORTH 340,235 had risen by 50 percent in the preceding 20 years, yet CONVENTION CENTER AMARILLO CIVIC CENTER 7 AMARILLO 300,000 “attendance at the 200 largest conventions peaked at AND AUDITORIUM about 5 million in the mid-1990s,” and had declined DALLAS MARKET CENTER DALLAS 200,000 steadily since. 8 MCALLEN 9 MCALLEN 174,000 LOCAL SUPPORT FOR CONVENTION CENTER CONVENTION CENTERS 10 ALAMODOME SAN ANTONIO 160,000 Local governments have several economic development Source: Texas Oce of the Governor, Economic Development and Tourism tools and financial incentives available for the construc- tion and maintenance of convention center facilities. Photo courtesy of Austin Convention Center One key tool is the hotel occupancy tax (HOT). Texas has had a state hotel occupancy tax since 1959, CONFERENCE MEETING with a current rate of 6 percent of the cost of lodging. Its RANK FACILITY CITY SPACE (SQ. FT.) revenues are allocated primarily to the state’s General KAY BAILEY HUTCHISON 1 DALLAS 1,035,945 Revenue Fund, with the remainder supporting the CONVENTION CENTER GEORGE R. BROWN advertising and marketing activities of the Governor’s 2 HOUSTON 869,581 Economic Development and Tourism office. CONVENTION CENTER Texas cities first received authority to impose a 3 NRG CENTER HOUSTON 706,213 similar, local tax in the early 1970s; counties followed HENRY B. GONZALEZ in 1981. Local HOT revenue must be used to promote 4 SAN ANTONIO 514,000 CONVENTION CENTER tourism and the hotel and convention industry. Among the specific uses allowed in law is “acquisition of sites 5 AUSTIN CONVENTION CENTER AUSTIN 370,967 for and the construction, improvement, enlarging, FORT WORTH 6 FORT WORTH 340,235 equipping, repairing, operation and maintenance CONVENTION CENTER of convention center facilities or visitor information Austin ConventionAMARILLO CCenter,IVIC CEN AustinTER 7 AMARILLO 300,000 centers, or both.” AND AUDITORIUM In 1997, the Legislature approved an additional MUNICIPAL SUPPORT 8 DALLAS MARKET CENTER DALLAS 200,000 HOT that can be imposed by cities or counties specifically The municipal hotel occupancy tax is the most to support sports and community venue projects, important source of convention center funding. 9 MCALLEN CONVENTION CENTER MCALLEN 174,000 including convention centers. City HOTs generally are levied at a rate of 7 percent, although10 A theLAM LegislatureODOME has allowed someSAN AcitiesNTON ItoO 160,000 Convention space continues to grow levy the tax at up to 9 percent. In 2013, the Legislature stipulated that combined state and local hotel throughout Texas and across the nation, occupancy taxes cannot exceed 17 percent. despite some indications that the There is no definite count of jurisdictions levying hotel taxes. To increase transparency, however, legis- market is saturated. lation approved in 2017 now requires cities imposing a hotel tax to report to the Comptroller’s office their tax rates and the amount of taxes collected the preceding CONTINUED ON PAGE 4 FISCAL NOTES, AUGUST 2018 | 3 Paying for Texas Convention Centers Photo courtesy of Alamodome Alamodome, San Antonio fiscal year, as well as the amounts allocated for authorized Plano, Dallas and Austin devoted about two-thirds of expenditures. This information is self-reported and is their total HOT revenue to this purpose (Exhibit 2). not necessarily complete, but the reports do supply useful data. COUNTY SUPPORT According to these reports, at least 407 Texas cities County HOT rates can range from 2 to 9 percent, as levy a municipal HOT. Texas’ 10 largest cities allocated at specifically authorized by the Legislature; at present, least $182 million in HOT revenue to convention centers actual rates range from 2 to 7 percent. Counties are and visitor information services (a joint category) in 2017, not required to report HOT data to the Comptroller’s accounting for nearly half of all HOT revenue reported.

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