According to the Legislative Budget Board (LBB), HB 2370 is not expected to have any fiscal impact on the state budget. The bill authorizes certain municipalities—those with a population between 70,000 and 180,000, located in a county bordering the United Mexican States and the Gulf of Mexico—to use hotel occupancy tax revenue specifically to finance a convention center constructed before January 1, 2023.

The bill’s fiscal impact is primarily local rather than state-level. It grants qualifying municipalities the option to impose a hotel occupancy tax, but it does not mandate the tax or specify the rate. The potential increase in local revenue would depend on the municipality’s decision to adopt the tax and the volume of hotel business within its jurisdiction. As the revenue generated would be used solely for repaying the debt associated with pre-existing convention centers, the impact on local budgets would vary based on each municipality's current financial obligations and hotel activity.

In summary, while the bill provides local governments with an additional funding mechanism for venue projects, it does not impose any financial obligation on the state. The overall fiscal effect will be determined by how many eligible municipalities choose to implement the tax and the subsequent revenue generated.

HB 2370 authorizes certain municipalities, specifically those with a population between 70,000 and 180,000 located in a county bordering both the United Mexican States and the Gulf of Mexico (such as the City of Harlingen), to use hotel occupancy tax revenue to finance debt related to convention centers constructed before January 1, 2023. While the bill seeks to provide financial flexibility to local governments, several concerns regarding taxation, economic impact, government overreach, accountability, and long-term fiscal planning make a No vote more appropriate.

The primary reason for opposing HB 2370 is that it extends or repurposes a hotel occupancy tax, creating a new avenue for local governments to continue taxing visitors without necessarily addressing the root cause of fiscal challenges. Although the bill does not impose a new tax outright, it grants municipalities the authority to use existing hotel taxes to pay off old debts. Lawmakers who prioritize Limited Government may view this as an unnecessary expansion of local taxing power that sets a precedent for future tax extensions. Allowing a municipality to continue relying on an occupancy tax rather than seeking alternative revenue solutions could reflect poor fiscal management rather than responsible governance.

Allowing municipalities to impose or extend hotel occupancy taxes could negatively affect local tourism, particularly in cities like Harlingen that are economically dependent on visitors. By increasing the overall cost of lodging, the bill could make local hotels less competitive compared to nearby areas without such a tax. As a result, hotels might experience decreased occupancy rates, leading to a reduction in revenue not only for the hospitality sector but also for local businesses that benefit from tourism. Lawmakers who prioritize Free Enterprise may argue that HB 2370 could harm the local economy by discouraging travel and diminishing the city's appeal as a tourist destination.

Another issue with HB 2370 is its narrow applicability. The bill specifically targets municipalities that fit a very precise demographic and geographic profile, such as the City of Harlingen. This narrow scope raises questions of fairness and equity, as it may appear to grant preferential treatment to one city while other municipalities facing similar financial challenges do not receive the same authority. Lawmakers may be concerned that the bill was tailored too specifically, which could undermine legislative consistency and fairness across the state.

While HB 2370 aims to free up city funds for essential services by shifting convention center debt payments to hotel tax revenue, this approach could be seen as circumventing sound fiscal planning. Relying on hotel taxes to pay down long-term debt risks creating a dependency on fluctuating tourism revenue, which may not be reliable or sustainable. Additionally, the bill permits the tax to remain in place until the debt is paid off or until January 1, 2054, whichever comes first. This long-term commitment could lead to complacency in municipal budgeting, as it does not encourage proactive financial management or debt reduction strategies. Lawmakers who value Personal Responsibility may argue that cities should manage their debts more efficiently rather than leaning on extended tax authority.

Although the bill requires an election to approve the use of hotel occupancy tax revenue for debt servicing, some lawmakers may question the effectiveness of this approach. Voters are often presented with numerous local ballot measures, leading to voter fatigue or uninformed decisions. Additionally, some may see this as a way for local governments to sidestep direct accountability by framing the tax as a continuation rather than a new financial obligation. Lawmakers may feel that more transparent, long-term financial planning would be preferable to maintaining an indirect tax burden on visitors.

The bill fundamentally conflicts with the principle of Limited Government by allowing local entities to continue using tax revenue in a way that extends beyond its original intent. Instead of imposing or extending taxes, municipalities should first explore ways to reduce expenses, optimize existing revenue, or enhance budgetary efficiency. Extending taxing authority for decades without requiring a reassessment contradicts the goal of maintaining minimal government interference in the local economy.

In summary, a No vote on HB 2370 is recommended. While the bill’s goal of enhancing municipal financial flexibility is understandable, the potential negative economic impact, concerns over prolonged taxation, issues with fairness, and the risk of fiscal complacency outweigh the intended benefits. Lawmakers committed to maintaining economic freedom, responsible governance, and limited taxation should oppose this measure. Instead, encouraging municipalities to adopt more disciplined financial practices without relying on prolonged tax extensions would better align with conservative fiscal principles. Texas Policy Research recommends that lawmakers vote NO on HB 2370.

• Individual Liberty: HB 2370 indirectly impacts individual liberty by potentially increasing the financial burden on individuals who stay in hotels within affected municipalities. By allowing the continued imposition of hotel occupancy taxes, the bill could lead to higher accommodation costs for travelers and tourists. Although this impact is indirect, it could limit the freedom of individuals to choose affordable lodging options when visiting cities like Harlingen. Those who prioritize minimizing financial constraints on personal choices may see this bill as encroaching on individual liberty.
• Personal Responsibility: The bill potentially undermines the principle of personal responsibility from a governmental perspective. Instead of encouraging municipalities to manage their budgets effectively and reduce debt through efficient use of existing resources, the bill enables local governments to shift financial responsibility onto hotel guests—many of whom may not be local residents. By allowing cities to use hotel occupancy tax revenue to pay down debt, the bill could discourage more prudent financial planning and debt management practices within local governments.
• Free Enterprise: The bill negatively impacts free enterprise by increasing the cost of doing business for local hotels. Imposing or extending a hotel occupancy tax can make local hotels less competitive compared to those in nearby areas without the tax. This could reduce business for smaller, locally-owned hotels that are more sensitive to changes in customer demand and price competitiveness. By creating a less favorable economic environment for the hospitality industry, the bill indirectly discourages business growth and tourism-related economic activity.
• Private Property Rights: HB 2370 does not directly infringe upon private property rights, as it specifically targets revenue generated from hotel stays rather than property ownership or use. However, from a broader perspective, the financial impact on hotel owners—who may experience reduced patronage due to increased lodging costs—could indirectly affect the profitability and sustainability of their businesses.
• Limited Government: The bill conflicts with the principle of limited government by expanding local taxing authority. Instead of phasing out taxes or reducing financial burdens, it allows municipalities to continue levying a hotel occupancy tax for decades, potentially until January 1, 2054. This extension of governmental power to impose and utilize taxes for prolonged periods without re-evaluation runs counter to the principle of minimizing government intervention and maintaining financial accountability. It essentially allows local governments to maintain an extended revenue stream without sufficient incentive to explore more sustainable, efficient financial strategies.