According to the Legislative Budget Board (LBB), HB 3196 would have no fiscal impact on General Revenue-related funds during the 2026–2027 biennium. However, beginning in fiscal year 2028 and continuing for ten years, the bill would result in an estimated negative fiscal impact to the state due to the redirection of certain state tax revenues to the City of South Padre Island. The projected losses start at $557,000 in 2028, increasing to $579,000 in 2029 and $602,000 in 2030, as the city becomes eligible to retain a portion of the state’s sales and use tax and hotel occupancy tax revenues generated by a qualified hotel and convention center project.

The legislation anticipates that South Padre Island would receive these revenues from a qualified hotel project and associated businesses, including bars, restaurants, and retail stores located within or connected to the hotel or convention center facility. The city would be entitled to this revenue for up to 10 years from the date the hotel opens for occupancy. While South Padre currently does not have a qualified hotel project under development, this bill would enable the city to pursue such a project and utilize the tax incentive financing structure authorized in Chapter 351 of the Tax Code.

From a local perspective, the bill presents a potential financial boon for South Padre Island, allowing it to capture state tax revenues to help finance tourism-oriented infrastructure. However, from the state’s standpoint, the revenue redirected to the city represents a reduction in General Revenue funds that would otherwise support statewide services. The LBB bases its estimates on prior experiences with similar projects and assumes a hotel opening in September 2027, marking the beginning of the projected negative revenue impact.

HB 3196 proposes to expand eligibility under Section 351.152 of the Texas Tax Code, allowing certain municipalities, specifically including the City of South Padre Island, to redirect state hotel occupancy and sales tax revenues generated from future hotel and convention center developments. These funds can be pledged to pay off bonds or financial obligations associated with those projects for up to ten years. Although the bill is framed as a local economic development tool, several significant concerns call for a “No” vote grounded in the core principles of limited government, fiscal responsibility, and free enterprise.

One of the primary objections is that HB 3196 promotes the use of public funds for private benefit. It enables local governments to subsidize hotel and convention center developments by capturing tax revenues that would otherwise go to the state’s General Revenue Fund. This tax redirection functions as a selective benefit for a specific class of development projects and participants, effectively creating an uneven playing field. Businesses not connected to these designated developments are placed at a disadvantage, while politically favored projects benefit from government-backed financing mechanisms.

Additionally, the bill expands local government authority to pledge public revenues, specifically state-collected taxes, without a requirement for voter approval or rigorous fiscal oversight. This kind of public-private entanglement reduces accountability and increases the risk of financial mismanagement or project underperformance. It is not uncommon for convention center hotel projects to fail to meet revenue expectations, yet the public remains on the hook for debt repayment in those scenarios.

HB 3196 also represents a fiscal liability to the state. According to the Legislative Budget Board, the bill would result in a projected loss to the General Revenue Fund beginning in fiscal year 2028, with an estimated reduction of $557,000, increasing annually thereafter. At a time when budget pressures are mounting across key state services, diverting funds to support speculative development is not fiscally prudent.

Furthermore, for those who oppose the hotel occupancy tax itself, this bill entrenches and expands its role. Rather than curbing the use of this tax or redirecting it toward broad public benefit, HB 3196 treats it as a financing engine for targeted development projects, reinforcing its long-term political and fiscal entrenchment.

Taken together, these concerns reflect deep structural issues in how the bill functions and what it incentivizes. It prioritizes local political agendas and private development interests at the expense of taxpayers, fiscal equity, and free-market principles. Texas Policy Research recommends that lawmakers vote NO on HB 3196.

• Individual Liberty: While the bill does not directly infringe on personal freedoms, it facilitates a model of governance in which public revenues are pledged to support specific development projects, often without broad voter input or meaningful public oversight. This dilutes individual influence over how tax dollars are used, especially when state-collected funds are redirected for local use. In effect, individuals are taxed for purposes they neither approved nor benefit from equally, weakening the principle that government should be accountable to the people it serves.
• Personal Responsibility: The bill allows municipalities to reduce their financial risk in major development projects by using state hotel occupancy and sales tax revenues to backstop loans or bonds. This model incentivizes risk-taking by local governments while socializing the cost of potential failure. It undermines the principle of personal (or institutional) responsibility by shielding cities and developers from the full economic consequences of their choices. The use of tax subsidies instead of privately raised capital erodes the discipline that markets would otherwise impose.
• Free Enterprise: The bill distorts the competitive landscape by giving preferential treatment, through targeted tax rebates and revenue pledges, to certain hotel and convention center developments. This places unaided businesses at a disadvantage and injects government favoritism into what should be a level, competitive market. It allows government entities to indirectly “pick winners,” a clear deviation from the ideal of voluntary exchange and competition unimpeded by state favoritism.
• Private Property Rights: Although the bill does not explicitly alter or challenge private property rights, its implications deserve attention. Government-backed convention center and hotel developments often require rezoning, infrastructure expansions, or new public-private land use arrangements. These actions can indirectly pressure nearby property owners or increase the risk of eminent domain abuses. While not directly addressed in the bill, the infrastructure models it enables have historically raised private property concerns.
• Limited Government: This is where the bill most clearly violates liberty principles. The bill expands the scope of local government by granting municipalities greater authority to redirect state tax revenues toward development finance. This not only increases government involvement in private markets but does so without new checks or public accountability mechanisms. Rather than reducing the government’s footprint, the bill entrenches it, tying long-term fiscal policy to public-private development schemes with taxpayer-backed risk and minimal legislative guardrails.

• SB 1483 (Same As)