According to the Legislative Budget Board (LBB), HB 1186 is expected to have no fiscal impact on General Revenue-related funds during the current biennium ending August 31, 2027. However, beginning with fiscal year 2028, the bill is projected to cause a negative fiscal impact on the General Revenue Fund totaling approximately $797,000 through the biennium ending August 31, 2029. Similar negative impacts are anticipated to continue for up to ten years after the date of entitlement, reflecting the expected lifespan of the related hotel and convention center project.

The fiscal effect stems from allowing the City of Midland—identified as the beneficiary municipality—to retain revenues from the state sales and use taxes, state hotel occupancy taxes, and local mixed beverage taxes generated by businesses located within 1,000 feet of a qualified hotel or convention center project. Specifically, the fiscal note estimates losses of $342,000 in 2028, $355,000 in 2029, and $370,000 in 2030, with ongoing losses thereafter.

This redirection of state tax revenue to the City of Midland is intended to help finance hotel and convention center development. The methodology for these estimates is based on comparisons with revenue flows from similar existing qualified projects elsewhere in Texas, coupled with the assumption that Midland’s new facility will open around August 31, 2027.

Although this bill does not impact state funds immediately, over time, it represents a significant shift of state tax revenue to local government use, tied directly to economic development purposes under the hotel and convention center provisions of the Tax Code.

HB 1186 seeks to amend Section 351.157 of the Texas Tax Code to expand the class of municipalities eligible to redirect state tax revenues, specifically sales taxes and hotel occupancy taxes, to fund hotel and convention center projects. While the bill is presented as a way to help fast-growing cities like Midland preserve eligibility for an economic development program, it ultimately represents an expansion of government reach, a deeper entrenchment of problematic taxes, and a greater burden on Texas taxpayers.

First, HB 1186 grows the size and scope of government by expanding the Texas Qualified Hotel Project and Convention Center Program to include additional municipalities based on population growth. Instead of limiting the government's economic footprint, the bill enlarges it by granting more local governments special access to state-controlled revenue streams, reinforcing the pattern of government involvement in private-sector business ventures. This expansion runs counter to conservative principles favoring smaller, more limited government.

Second, HB 1186 increases the burden on taxpayers, even though it does not explicitly raise tax rates. The Legislative Budget Board projects that the bill will cause a $797,000 negative impact on the state’s General Revenue Fund during the 2028–2029 biennium, with similar impacts projected for years afterward. Money diverted to these local projects could otherwise be used for statewide priorities like public safety, infrastructure, and property tax relief. Over time, this diversion of resources shifts hidden costs onto all Texas taxpayers or forces spending cuts in other areas.

Third, the bill reinforces and entrenches reliance on the hotel occupancy tax, a tax that conservatives often oppose. The hotel occupancy tax is a hidden tax primarily borne by travelers, many of whom have no voice in the localities imposing and benefiting from it. Rather than moving toward reforming or reducing this tax burden, HB 1186 cements it further into the structure of state-local finance. It allows local governments to become even more dependent on extracting revenue from non-residents to finance politically driven projects.

Fourth, HB 1186 distorts the free market by channeling financial benefits toward businesses that happen to be located within 1,000 feet of certain government-favored hotel and convention center projects. This government favoritism disadvantages independent businesses outside the favored zones and disrupts natural competition, creating winners and losers determined by legislative lines rather than by merit or consumer choice. True free enterprise is undermined when government intervention steers economic outcomes.

Finally, although the bill does not directly impose new regulatory burdens on individuals or businesses, its overall effect is to expand economic intervention, increase hidden costs, and entrench bad tax policy — all of which move Texas further away from the principles of limited government, fiscal responsibility, taxpayer protection, and free markets.

For all these reasons — the growth of government, the hidden burden on taxpayers, the reinforcement of an unjust tax, the distortion of free markets, and the inappropriate expansion of a special-interest subsidy — Texas Policy Research recommends that lawmakers vote NO on HB 1186.

• Individual Liberty: The bill redirects public tax money toward selected private-sector developments, meaning citizens have less control over how their taxes are spent. It favors government-directed economic outcomes over the free choices of individuals and consumers.
• Personal Responsibility: The bill does not directly promote or discourage personal responsibility. However, by shifting financial resources to favored local projects, it could encourage reliance on government funding rather than market-driven business success.
• Free Enterprise: The bill distorts market competition by giving tax advantages to businesses near qualified projects, thereby favoring government-selected winners over others competing in the open market. True free enterprise requires government neutrality, which this bill undermines.
• Private Property Rights: The bill does not directly affect private property ownership or usage rights. However, the economic favoritism could indirectly influence property values and market dynamics near qualifying projects.
• Limited Government: The bill expands an existing government subsidy program, increases government influence in local economic development, and perpetuates reliance on hotel occupancy and sales taxes to finance projects. It enlarges the scope of government activity rather than restraining it.

• SB 529 (Same As)