HOT funds: Not your ordinary tax dollar


The Gonzales Convention and Visitors Bureau (CVB) is tasked with hearing requests from groups or individuals that are looking to tap into the city's hotel/motel occupancy tax (HOT) funds when they need an infusion of advertising cash. The CVB then has to decide if it is a worthy cause and approve the request or deny.

But what is a HOT tax, and who pays it?

According to the Texas comptroller's office, the tax has been around since 1959 when the Texas legislature enacted a 3 percent state hotel occupancy tax. It has been raised twice and currently sits at 6 percent. In 2015, the state collected $526 million from these taxes, with the majority going to the state's General Revenue Fund and the rest allocated to a state economic development account that supports tourism advertising and marketing of the governor's economic development and tourism office.

Since the early 1970s, the legislature has authorized local municipalities to collect HOT funds. Under law, local HOT revenues can be only used to directly promote tourism and the convention/hotel industry. Revenues generated from HOT funds can only be spent on projects or events that result in more visitors staying overnight in a community, generating more hotel occupancy taxes. This is what it means when you hear the phrase “heads in beds.”

This is not a tax on local citizens. Rather, it is a surcharge on hotel bills paid by visitors. Gonzales residents do not have to pay the tax unless they decide to stay overnight in a hotel here. Cities can charge a maximum of 9 percent on these surcharges.

Local HOT uses can be spent on a myriad of activities. Some are:

• construction, maintenance, and operation of a convention or visitors center;

• facilities and personnel for the registration of convention delegates;

• advertising and promotional programs to attract tourists;

• encouragement and promotion of the arts;

• historical restoration and preservation projects;

• signage to direct the public to sights and attractions;

• certain transportation systems serving tourists and hotel guests;

• sporting events from which the majority of participants come from out of town;

• coliseums or multi-use facilities.

Gonzales has seen the highs and lows of HOT funds generation lately. Such fluctuations can be attributed to the South Texas oilfield boom and bust periods. When oil prices are high, companies have their workers stay in local hotels for weeks at a time, leading to massive spikes in HOT revenue. When those oil prices fall, companies cut back and send their workers home, leading to empty hotels.

Sometimes cities get in a fix when they assume that the good times will stay forever and budget longterm to those extremes. When the oil patch packs up, new hotels and convention centers are often left empty for the burden of the local taxpayer to endure.

Gonzales CVB Director Clint Hille added to the conversation on what the dollars mean to Gonzales.

“Currently the [local] hoteliers are collecting 13 percent, of which 6 percent is remitted to the state and 7 percent is remitted to the city,” he said. “Increased tourism increases local hotel revenues in addition to sales tax revenues to the city from purchases of gas, food, and other goods and services purchased by tourists while here in Gonzales. Those tax dollars are used to run the city. One way I personally look at it is that every tax dollar a tourist spends in our town is one we do not have to collect from our citizens.”

Forms for HOT funds allocations can be found on the City of Gonzales website by clicking Departments and selecting Convention and Visitors Bureau. HOT funds forms are at the bottom of the page.