According to the Legislative Budget Board (LBB), HB 2313 is projected to have a negative fiscal impact on the state’s General Revenue Related Funds, with an estimated loss of $900,000 through the biennium ending August 31, 2027. The financial loss will increase significantly in subsequent years, reaching $2 million annually by 2030. The cumulative loss is estimated to total $121.7 million by fiscal year 2055, the last year the entitlement for the project finance zones would be in effect.

The bill authorizes the creation of a project finance zone for the city of Lubbock, allowing the city to receive incremental hotel-associated revenue from all hotels within the zone's boundaries for up to 30 years. This revenue includes state sales tax, state hotel occupancy tax, state mixed beverage sales tax, and state mixed beverage gross receipts tax collected from hotels and related businesses within the zone. The incremental revenue calculation is based on the difference between the current revenue from hotels and the revenue collected in the base year when the zone is designated.

Financially, the state will begin incurring revenue losses starting in fiscal year 2026, with an initial negative impact of $300,000, increasing to $600,000 in 2027, $1.1 million in 2028, $1.5 million in 2029, and $2 million in 2030. The projected losses are based on the assumption that Lubbock will designate the project finance zone in 2025 and that tax revenue from existing hotels within the zone will continue to grow at an average annual rate of 6.5%, consistent with pre-pandemic hotel tax growth rates.

While the bill provides financial benefits to the city of Lubbock by funding infrastructure improvements tied to hotel development, the long-term revenue loss to the state poses a significant fiscal challenge. Additionally, the estimate does not account for potential revenue gains if the improved infrastructure attracts new tourism from out-of-state visitors, which could partially offset losses. However, such outcomes are speculative and not factored into the projected figures.

Local government impacts are primarily positive for Lubbock, as the city gains a dedicated funding stream to support hotel and convention center development, potentially spurring economic growth. Nonetheless, the significant revenue loss to the state may raise concerns about the broader fiscal implications and the precedent set by diverting state tax revenues to fund local projects.

HB 2313 should be opposed due to its substantial negative fiscal impact on state revenue, concerns regarding fiscal responsibility, and the precedent it sets for preferential municipal funding. While the bill aims to support economic development in the City of Lubbock by allowing it to designate a project financing zone (PFZ) and capture incremental hotel-associated tax revenues, the long-term financial risks and potential inequities outweigh the intended benefits.

One of the primary reasons to oppose this bill is the significant loss to General Revenue Related Funds, projected at $900,000 by the end of the 2027 biennium, escalating to $2 million annually by 2030. Over the life of the PFZ (up to 30 years), the state could forgo approximately $121.7 million by 2055. This long-term diversion of public funds undermines fiscal responsibility, as it effectively reallocates state tax dollars to support a single municipality’s project rather than funding broader state needs. Fiscal responsibility mandates that the state protect taxpayer resources from being concentrated into local economic ventures, especially when those ventures benefit a specific locality rather than the state as a whole.

The bill specifically targets Lubbock, a municipality with a population of more than 250,000 but less than 300,000 that contains a component of the Texas Tech University System. While Lubbock’s growth and tourism potential are clear, granting it unique financial privileges through state revenue raises concerns of preferential treatment. Other cities facing similar economic challenges may not receive comparable benefits, leading to inequitable distribution of state funds. Additionally, raising the minimum population threshold from 200,000 to 250,000 in the committee substitute version further narrows eligibility, making the bill more exclusive and limiting opportunities for other similarly situated municipalities.

The bill allows Lubbock to pledge revenue from hotel-associated taxes to finance a wide range of infrastructure projects, including acquisition, construction, and improvement of facilities within the PFZ. This could lead to long-term financial commitments that are heavily reliant on sustained economic performance from the hotel sector. Should the anticipated revenue not materialize due to economic downturns or decreased tourism, Lubbock could face budgetary shortfalls, ultimately placing financial burdens on local taxpayers. Legislators committed to protecting taxpayer interests should be cautious about endorsing policies that gamble on speculative revenue projections.

By allowing Lubbock to use public funds to support specific economic projects, the bill challenges the principle of free enterprise. Rather than fostering an open and competitive marketplace, it creates an environment where government intervention shapes which businesses thrive, particularly those within the designated PFZ. This market distortion could disadvantage businesses outside the zone, limiting fair competition and hindering organic economic growth driven by private investment rather than public subsidies.

Supporting HB 2313 would compromise fiscal responsibility by reallocating taxpayer funds away from broader public use and concentrating them in a local development project. It would also set a precedent for other municipalities to seek similar financial privileges, further straining state resources. While economic development is important, it should not come at the cost of taxpayer protection, equitable policy, and fair market practices. Therefore, a No vote on HB 2313 is warranted to uphold the principles of responsible governance, limited government, and free enterprise. Texas Policy Research recommends that lawmakers vote NO on HB 2313.

• Individual Liberty: The bill’s impact on individual liberty is indirect but concerning from a taxpayer perspective. By allowing the City of Lubbock to capture incremental hotel-associated tax revenues within a designated Project Financing Zone (PFZ), the bill diverts state funds away from broader public services. This can be seen as an infringement on taxpayers' rights, as public resources that could serve the entire state are allocated to a single municipality’s economic projects. This raises questions about the fair use of taxpayer dollars and the collective right to benefit from state-generated revenue.
• Personal Responsibility: The principle of personal responsibility is challenged by the bill because it allows the City of Lubbock to rely on state tax revenue rather than fully leveraging local funds or private investment for economic development. Instead of encouraging the municipality to generate local solutions or seek private partnerships, the bill incentivizes dependency on state-generated funds. This approach could foster a mindset where municipalities expect state intervention rather than taking proactive steps to fund their own projects, undermining the concept of local financial responsibility.
• Free Enterprise: The bill negatively impacts free enterprise by allowing government intervention in local economic development through targeted financial support. By capturing tax revenues specifically from hotels and related businesses within the PFZ, the state effectively picks economic winners and losers. This preferential treatment disrupts the competitive balance by giving certain businesses an advantage over others not located within the zone. Additionally, it could discourage private investment in areas that do not receive similar state backing, undermining the free market principle that success should be driven by consumer demand, not government subsidy.
• Private Property Rights: The bill does not directly affect private property rights, as it primarily involves the allocation of tax revenue rather than property ownership or regulation. However, the indirect economic consequences could still impact property values if the city’s financial strategy leads to economic instability or if the designated zone results in unequal development patterns within the municipality. In essence, while the bill does not infringe directly on property rights, its economic ramifications could influence property-related financial stability in the area.
• Limited Government: The bill fundamentally conflicts with the principle of limited government by expanding municipal authority to collect and use state-generated tax revenues. Instead of promoting local autonomy and self-sufficiency, it increases governmental involvement in local economic projects, essentially using state power to subsidize local development. This expansion of government scope goes against the ideal of minimal state intervention, where municipalities should independently manage their own economic growth without relying on state-allocated funds. Additionally, by setting a precedent, it opens the door for more municipalities to seek similar privileges, increasing the scope and size of government intervention in local projects.