Legislators file bills on use of HOT taxes, short-term rental regulations 

BIG BEND — Bills relating to Texas’ tourism industry, including one that would prevent local regulation of short-term rentals (STRs) and another, authored by Senator César Blanco, that would allow counties to levy hotel occupancy tax (HOT) for infrastructure improvements, have been recently filed in the Legislature. 

The new legislative efforts come at a time when Marfa, Presidio County and the surrounding region grapple with the impact of an influx of STRs and the collection of HOT taxes. Below, The Big Bend Sentinel provides an overview of each bill’s scope and potential impact on the region.

SB1208: HOT tax for infrastructure improvements 

SB1208, the bill authored by Sen. Blanco, seeks to give rural Far West Texas counties and municipalities the ability to use revenue generated from HOT taxes — paid by hotels and STR operators — to “plan, construct and maintain” broadband, water and transportation infrastructure projects. Current HOT tax laws restrict the use of HOT tax revenue to tourism promotion as well as arts and culture funding. 

Blanco argues the change is necessary so that tourism-heavy communities like Marfa can better accommodate the growth in visitors, and better serve its residents.

“Far West Texas’ rural communities have seen massive growth in tourism in recent years. For example, Marfa has hosted over 50,000 visitors per year, more than 25 times its population of 1,800 residents,” said Sen. Blanco in a statement to The Big Bend Sentinel. “However, these towns were not built for this kind of foot and human traffic. Additional funds are needed to develop infrastructure needs in these towns.” 

The bill is written in such a way that it only excludes El Paso County, confirmed Blanco’s office, but includes every other county in the senator’s jurisdiction. 

The law would apply to counties containing Big Bend National Park and the area’s historic sites. (There is a section of the bill that prohibits the law from applying to an area containing a “national recreation area,” but the park and the region’s historic sites do not meet that criteria, Blanco’s office confirmed.)

The bill differs from another previously filed HOT tax for infrastructure bill, HB550, in that it would allow for counties and municipalities to use HOT tax on infrastructure projects located anywhere in their jurisdiction, not just within a mile of a hotel. 

In Marfa, where officials are facing large-scale infrastructure challenges including costly street repairs and passed a narrowly balanced budget this year, the idea to use HOT tax funds more creatively has been a popular topic of discussion in the past. 

Over the last couple of years, the City of Marfa has budgeted and received around $700,000 in HOT taxes. City Manager Mandy Roane said the city will likely support SB1208 and a resolution supporting the bill is in the works, and may appear on the agenda this month. 

How arts and historic preservation funding would be impacted remains unclear. Last year, Marfa City Council awarded HOT tax grants to Ballroom Marfa, Marfa Invitational Art Fair, Agave Festival, Maintenant, Watershed Vol. 2, Marfa and Presidio County Museum and the Marfa Chamber of Commerce.  

Last year, the City of Alpine collected $784,500 in HOT taxes. Alpine City Manager Megan Antrim previously voiced support in a city council meeting for the idea of using HOT tax for infrastructure upgrades, including water and sewer systems. 

According to the Texas tax code, combined HOT tax levied by the state, counties and cities is not to exceed 15%. In the tri-county area, local governments vary on their tax rates. Marfa, for example, levies a 7% tax, which combined with the state’s 6% tax totals 13% — meaning if Presidio County were to choose to levy a HOT tax, which they currently do not, it could only be in the amount of 2%. 

Robert Alvarez, executive director of Visit Big Bend, a destination marketing organization (DMO) within the county government that receives his salary from HOT tax funds, said the organization opposes the use of HOT tax for infrastructure projects. He said the current HOT tax laws were essential to Visit Big Bend’s success. 

“It’s intended to be a self-fulfilling prophecy, so to speak, what comes in in tax you push back out in marketing — to what? Get more people to come.  And it’s a circular system of marketing. And it works,” said Alvarez. 

He suggested the local county and city leadership assess how to better funnel money generated from tourism, an estimated $30 million a year, according to Alvarez, towards infrastructure projects instead of relying on a change in HOT tax laws. 

“Perhaps the officials and people who are in charge should look at how to actually utilize that money to improve the infrastructure rather than looking at tourists to foot the bill for the people who actually live here,” said Alvarez. 

Last year, Brewster County brought in $1,834,907 in HOT taxes, according to Alvarez, and recently hired an outside firm to help with HOT tax enforcement after the county discovered some STR owners were skirting tax payments. 

In written comments made to The Big Bend Sentinel, Texas State Representative Eddie Morales showed support for SB1208, stating that border counties of West Texas often face unique challenges regarding funding for improving their communities, and the use of HOT tax towards longer-term infrastructure investments would help the often under-funded areas. 

“By empowering local municipalities and local officials, they can tailor their investments to meet the specific needs of their respective communities,” said Morales in a statement. “Supporting our counties in this matter is an important step to improve the quality of life and foster growth.” 

Legislators do anticipate some pushback from the hotel industry. The Texas Hotel Lodging Association (THLA), on the organization’s legislative priorities webpage, states its lobbyists intend to oppose “proposals to use local hotel tax for non-tourism purposes.” 

“We anticipate some concerns from the Texas Hotel and Lodge Association, but our focus remains on relieving the financial burden from taxpayers and giving our rural communities the resources needed to improve our infrastructure,” said Sen. Blanco.

HB2665: STR preemption bill

HB2665, authored by Texas State Representative Gary Gates, is an STR preemption bill — similar to legislation introduced in previous sessions but never adopted — that seeks to limit cities’ and counties’ local controls over short-term rentals. 

The bill states that cities and counties should be allowed to require STRs to register, pay a “reasonable” annual fee not to exceed $100,” designate a local responsible party, comply with noise, waste and parking ordinances and more. 

But the bill prohibits the adoption of any local law that would “expressly or effectively prohibit the use of a property as a short term rental property,” limit the duration or frequency of use of a property as an STR or limit the number of occupants at an STR. (Certain cities in Texas have regulated STRs through zoning ordinances, which would be prohibited under HB2665). 

The only current City of Marfa policy that violates the rules under the proposed bill is the $500 registration fee; all other proposed regulations would not impact the city. 

In February, the Marfa Chamber of Commerce board announced support for a letter penned by the Texas Neighborhood Coalition that sought to warn legislators to oppose such legislation upon filing. Since that time, the chamber has begun circulating a petition titled “Fair Regulations on Short Term Rentals in Marfa,” which urges City Council “to begin looking at options for short-term rental regulations in Marfa that balance the needs of residents and the tourism industry and ensure the sustainability of our community.” The chamber intends to present the petition to Marfa City Council sometime in April. 

“The residents most impacted by the negative effects of short-term rentals are those with infrastructural and service industry jobs. Our local economy cannot stand the continued increase in housing prices and lack of affordable long-term rentals,” the petition states. 

When asked what regulations they would like the city to explore, specifically, Marfa Chamber of Commerce Board President Abby Boyd said that course of action will fall to the city. “We want City Council to do the work of learning about the options, hearing community feedback, and finding the best solution for Marfa,” said Boyd. “It is not the Chamber’s place to make that decision. We will certainly participate in the conversation, but it isn’t up to the Chamber to dictate how this goes. This is Marfa’s decision.”

As of press time, the petition had garnered 68 signatures. Boyd said that rough statistics provided to her by Granicus — a software company which helps governments track STRs — revealed more than 20% of Marfa’s housing stock is STRs and that number is expected to grow 20 to 30% every year. “We don’t have time to wait on this. We need to get moving on this discussion now,” said Boyd. 

“We were warned about these proposed bills, and that’s why I decided to add my name to the letter sent by Texas Neighborhoods Coalition a few weeks back. We need to be able to come together as a community and make decisions about what is right for Marfa,” said Boyd. “These bills would take that right away. This town’s character and culture, and frankly, many of our livelihoods, depend on taking steps to slow the growth of STRs down.” 

City of Alpine Manager Antrim said the bill would not affect the city’s current laws but would restrict their options for regulation of the future, which she wasn’t in favor of. “I would prefer that the city has the availability to make necessary ordinances if needed, especially on occupancy,” said Antrim. 

Visit Big Bend Executive Director Robert Alvarez said that Brewster County has discussed implementing a registration fee for STRs in the past, but such a fee was not currently in place. As it stands, the county was having a hard enough time even locating all of its STRs, much less regulating them, he said. 

“It’s literally a physically impossible task to find all of these short-term rentals in our area, just because of the massive size,” said Alvarez. 

The deadline for representatives to file bills in the current 88th legislative session is March 10, with the session ending in May. The Big Bend Sentinel will continue to cover these bills as they make their way through the legislative process over the next few months.