According to the Legislative Budget Board (LBB), HB 4098 is projected to have no fiscal impact on General Revenue-related funds during the current biennium ending August 31, 2027. However, the bill is expected to generate a negative impact of approximately $3.1 million on the state’s General Revenue over the following biennium (2028–2029), with the loss beginning in fiscal year 2028 and continuing for ten years thereafter.

This fiscal impact stems from the bill’s provision enabling the city of Taylor to retain certain state tax revenues, including sales and use taxes and hotel occupancy taxes, derived from a designated hotel and convention center project. Taylor would be authorized to receive these revenues for up to ten years after the project's initial occupancy date. The state’s revenue loss corresponds to the redirection of these taxes from the state to the municipality for the duration of the project’s eligibility window.

The city of Taylor has prospective plans to build a qualified hotel project that would qualify under this bill. The estimated fiscal loss to the state is based on a projected opening date of January 1, 2028, and on a comparison of financial data from other cities with similar qualifying hotel projects. While the legislation would create a localized economic benefit by incentivizing development, it effectively reduces state revenue available for general use, reallocating it to fund municipal infrastructure through dedicated tax rebates.

In sum, while the bill supports economic development in targeted localities, it does so by diverting state tax revenue streams for extended periods. This approach may result in cumulative losses to the General Revenue Fund, depending on how many municipalities become eligible under the bill’s expanded criteria.

HB 4098 proposes to expand the authority of municipalities to use state hotel occupancy tax (HOT) revenue for hotel and convention center projects by adding new, narrowly defined eligibility criteria. While proponents frame the bill as a tool for local economic development, the legislation raises substantive concerns that justify a “No” vote under principles of limited government, fiscal responsibility, and free enterprise.

First, the bill represents a significant expansion of government involvement in commercial activity. By enabling municipalities to divert state tax revenue to support hotel and convention center developments, the legislation encourages public entities to function as quasi-developers or financiers—roles traditionally filled by private capital and market forces. This government intervention distorts competition, privileges politically connected developers, and undermines the natural risk-reward balance that keeps private enterprise accountable. These actions are inconsistent with the principle of free enterprise and set a precedent for government overreach into the private sector.

Second, the bill carries clear fiscal consequences for the state. According to the Legislative Budget Board, the bill will have no fiscal impact in the current biennium but will result in over $3 million in lost General Revenue beginning in FY 2028, with losses continuing for at least a decade. These funds would otherwise be available for essential statewide priorities such as education, public safety, or infrastructure. Allowing municipalities to divert state-level taxes into localized projects creates a patchwork of tax carve-outs that may multiply over time as other cities seek similar treatment, posing a risk to budget stability and equity across regions.

Third, HB 4098 relies on the continued use and expansion of the hotel occupancy tax—an instrument that is itself philosophically problematic. HOT is often described as a "tax on outsiders" because it falls on travelers and visitors who have no say in local elections or spending decisions. It is a regressive, non-transparent revenue stream frequently used to fund high-cost, low-return public projects. Expanding the eligible use of HOT further entrenches a tax mechanism that many view as fundamentally unfair and disconnected from core government responsibilities.

Fourth, the history of hotel and convention center development in Texas and across the country raises serious concerns about long-term risks. These projects often overpromise economic benefits and underperform in reality, leading to long-term maintenance costs, debt obligations, or the need for further public subsidies. The risk of public liability increases when cities take on speculative ventures based on projections that are sensitive to economic downturns, travel trends, or shifting event industry dynamics. Without strict performance metrics or clawback provisions, taxpayers could be left subsidizing underused facilities and failed developments.

Lastly, the bill’s design relies on bracketed, criteria-specific descriptions that narrowly apply to particular municipalities, potentially favoring certain jurisdictions at the expense of others. While technically legal, this practice can raise concerns about legislative equity, favoritism, and special-interest policymaking. It invites a piecemeal approach to tax and development policy, rather than applying consistent statewide standards rooted in sound governance principles.

In sum, while HB 4098 may be well-intentioned in its effort to empower local development, it ultimately expands the footprint of government, exposes state revenues to long-term erosion, perpetuates an unpopular and regressive tax, and invites taxpayer risk through speculative public projects. Texas Policy Research recommends that lawmakers vote NO on HB 4098.

• Individual Liberty: The bill does not directly affect individual civil liberties or create new restrictions on personal behavior. However, to the extent that larger government projects tend to result in more centralized control and regulation, there is a philosophical concern that growing government size and scope, even indirectly, erodes long-term individual autonomy by normalizing government intervention in sectors best left to voluntary exchange.
• Personal Responsibility: The bill diminishes personal and local fiscal responsibility by shifting financial risk from decision-makers to taxpayers. Municipalities are encouraged to pursue large, high-risk capital projects using future state tax rebates rather than their own upfront resources or voter-approved funding. This weakens the connection between local accountability and spending decisions. If revenue projections fall short—common in convention center financing—cities may be left with debts or maintenance costs that require additional taxes or spending cuts elsewhere. Personal responsibility in budgeting and governance is diluted when risk is masked by long-term entitlements to redirected tax revenue.
• Free Enterprise: The bill compromises the principle of free enterprise by placing the government in direct competition with private industry. When municipalities are granted the power to redirect state-level taxes to subsidize hotels and convention centers, they create an uneven playing field. Private developers—especially small businesses—cannot compete fairly with publicly funded or tax-incentivized counterparts that operate under fewer market pressures. This government favoritism, often masked as “economic development,” distorts market dynamics and invites cronyism. It may also discourage private investment if businesses fear their competitors will benefit from state-subsidized partnerships with city governments.
• Private Property Rights: Although the bill does not directly affect property rights, the projects it facilitates often trigger broader zoning changes, eminent domain risks, or infrastructure expansion that indirectly impact land use. The potential for public-private development to displace existing businesses or raise costs for adjacent landowners means the liberty to use and enjoy private property may be constrained by the indirect consequences of these subsidized projects.
• Limited Government: This bill undermines the principle of limited government by expanding the set of municipalities allowed to divert state tax revenue toward non-essential, speculative development. It gives local governments increased latitude to act as economic developers, borrowing or spending public funds on large-scale hospitality infrastructure. This role exceeds the core functions of government, such as public safety, transportation, and justice, and introduces long-term liabilities to taxpayers. Rather than limiting government scope, the bill deepens public-sector involvement in market-driven industries like tourism and real estate.

• SB 1517 (Same As)