Untitled Texas Attorney General Opinion
GA-0851
| Tex. Att'y Gen. | Jul 2, 2011Background
- Galveston, a home-rule city, asks whether surplus hotel occupancy tax funds from its convention center agreement may be used for general city purposes.
- The city’s hotel occupancy tax revenue is pledged to service convention center debt and flows through a complex arrangement with a third-party operator.
- Under the agreement, the surplus funds are split half to the operator and half to the City; the City seeks to know if those funds retain statutory restrictions.
- Chapter 351 of the Tax Code governs hotel occupancy taxes and restricts uses to tourism/convention/hotel purposes, not general city operations.
- The Attorney General concludes hotel occupancy tax funds, including surplus, cannot be expended for general city purposes, and the third-party arrangement does not alter the funds’ tax-revenue character.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| May surplus hotel tax funds be used for general city purposes? | Doe asserts funds can be used more broadly under the agreement. | Hodge concludes funds remain subject to Chapter 351 restrictions. | No; surplus funds must follow Chapter 351 limits. |
| Does a contract with a third party alter the funds’ tax-revenue character? | City contends funds are fungible with general funds via agreement. | Tax revenue remains governed by restrictions regardless of contract. | No; third-party arrangement cannot change tax-revenue character. |
| Are expenditures limited to tourism/convention purposes and not general governmental operations? | City would interpret expenditures under its discretion. | Statute restricts expenditures to §351.101(a)-(b). | Yes; expenditures must satisfy §351.101(a)-(b) restrictions. |
| Can set-aside reserve funds be used to support non-tourism purposes? | Reserve use might be broader under agreement. | Section 351.108(f) reserves limited to tourism/convention enhancement. | No; reserve funds limited to tourism/convention-related purposes. |
Key Cases Cited
- In re Sanchez, 81 S.W.3d 794 (Tex. 2002) (home-rule powers limited by Constitution and statutes)
- City of Galveston v. Hill, 519 S.W.2d 103 (Tex. 1975) (recognizes Galveston as a home-rule city)
- Proctor v. Andrews, 972 S.W.2d 729 (Tex. 1998) (home-rule authority constrained by general laws)
- Dallas Merchants & Concessionaire's Ass'n v. City of Dallas, 852 S.W.2d 489 (Tex. 1993) (limits on home-rule city powers and statutory compliance)