According to the Legislative Budget Board (LBB), the fiscal implications of SB 1071 are largely delayed but nonetheless significant. According to the Legislative Budget Board’s fiscal note, there is no projected impact to General Revenue-related funds for the current biennium ending in 2027. However, beginning in fiscal year 2030, the bill is expected to result in a negative revenue impact of approximately $1.155 million per year for a period of 10 years.

This fiscal effect stems from the bill’s provision allowing certain municipalities—specifically, the City of Pflugerville—to receive state sales and use tax revenue, as well as hotel occupancy tax revenue, generated by qualified hotel and convention center projects. Under Section 351.156 of the Tax Code, Pflugerville would be authorized to retain these state revenues from the associated hotel, restaurants, bars, and retail facilities connected to the convention center for up to ten years from the project’s opening date. The expected project launch in Pflugerville is forecasted for September 2029, which places the onset of fiscal impact squarely in 2030.

While there is no immediate cost to the state, the deferral of state tax revenue to a local jurisdiction over a decade represents a meaningful shift in fiscal responsibility. In effect, state-collected taxes that would typically support general revenue are instead pledged to support the financing and development of specific municipal economic projects. This poses long-term implications for state budget planning and may set a precedent for similar future projects, potentially broadening the fiscal exposure over time.

In terms of local government impact, the City of Pflugerville stands to gain substantially. The ability to recapture and reinvest state tax revenue provides a powerful development incentive, effectively reducing the city’s financial burden for the proposed hotel and convention center project. However, from a statewide fiscal policy perspective, this raises questions about the proliferation of tax carve-outs and their cumulative effects on General Revenue availability.

SB 1071 proposes to expand Section 351.152 of the Texas Tax Code to allow the City of Pflugerville to retain a portion of state hotel occupancy and sales tax revenue generated by a hotel and convention center project for a period of 10 years. While framed as a tool for local economic development and tourism promotion, the bill raises several substantive concerns that warrant opposition.

Fundamentally, the bill represents an expansion of a tax mechanism—the hotel occupancy tax (HOT)—that is increasingly used not merely for tourism promotion, but as a development subsidy for politically favored infrastructure. The bill goes beyond allowing cities to collect local HOT revenue; it enables the capture and use of state-collected tax revenues, including hotel occupancy taxes and sales and use taxes from establishments connected to the project. This diverts general revenue intended for statewide public services and shifts it to a single municipality for a localized development effort, creating a precedent that undermines equitable fiscal policy and the integrity of the General Revenue Fund.

The bill also employs bracketed language to narrowly tailor eligibility to a specific city (Pflugerville), a legislative drafting strategy that circumvents broader policy debate and creates preferential carve-outs. Such bracketed exceptions undermine the principle of uniform application of law and open the door to future demands from other municipalities seeking similar exceptions, resulting in cumulative strain on the state’s budget and growing administrative complexity.

From a fiscal perspective, the Legislative Budget Board projects no immediate impact through 2029, but estimates a $1.155 million annual loss to the state’s General Revenue Fund beginning in fiscal year 2030, continuing for 10 years. This revenue loss is not matched by any mandated public benefit or accountability standard. The bill lacks performance metrics, clawback provisions, or requirements for public transparency on how the retained revenue will be used or whether the project delivers its intended economic benefits.

More broadly, the policy encourages the use of public funds to support private development. By allowing cities to pledge tax revenue toward the financing of hotel and convention center projects, SB 1071 risks subsidizing private investors with public money. This distorts free market dynamics and places taxpayers, many of whom may never use the facilities, on the hook for potential underperformance or financial failure of these ventures.

Moreover, for those who fundamentally oppose the hotel occupancy tax as a tool of government growth, this bill represents an entrenchment and expansion of that tax. Rather than restraining or phasing out this often regressive levy, the bill uses it as a long-term funding mechanism for a politically favored project, solidifying its role in municipal finance and economic planning.

For all these reasons—its expansion of a distortionary tax mechanism, the redirection of state revenue, the reliance on bracketed carve-outs, the risk of subsidizing private interests, and the lack of accountability or transparency—Texas Policy Research recommends that lawmakers vote NO on SB 1071.

• Individual Liberty: While the bill does not restrict individual freedoms in a direct legal sense, it expands a system in which public resources are funneled into projects that may benefit a narrow segment of the population, primarily private developers and business interests connected to a qualified hotel and convention center. This kind of targeted policy can crowd out other uses of funds or policy choices that might reflect broader public needs or voter preferences. By using state-collected tax dollars for specific local projects, the bill reduces the public’s ability to influence how general revenue is spent, diminishing individual liberty in the civic and fiscal sense.
• Personal Responsibility: The bill erodes the principle of personal responsibility by shifting risk from private developers and local governments to the state. Instead of requiring that a private hotel and convention center succeed or fail based on its own merits and private capital, the bill allows a city to use public tax revenue to support and secure the project's obligations. This government backstop encourages dependency on public resources rather than market-driven accountability. It socializes the financial risk while privatizing the reward—an approach antithetical to the ethos of personal responsibility.
• Free Enterprise: This bill distorts the free market by using public funds to subsidize specific private ventures. When the government intervenes by granting select cities the power to capture and reinvest state taxes into private developments, it advantages politically connected projects and developers over competitors who must operate without such benefits. This tilts the playing field and undermines market competition. Rather than fostering a fair and open commercial environment, the bill reinforces a model where economic success is closely tied to public subsidies and legislative carve-outs.
• Private Property Rights: The bill does not directly affect private property rights—there is no change to eminent domain or land use regulations. However, any time municipal economic development tools are expanded, especially when public financing mechanisms are involved, there is a latent risk of future property-related overreach (e.g., zoning pressure, eminent domain claims, or restrictive agreements tied to convention center expansion). While not an explicit feature of the bill, these risks grow with the expansion of publicly supported development districts.
• Limited Government: SB 1071 expands the role of government in local economic development by granting cities the ability to retain and pledge state-level tax revenues for up to 10 years. This represents a clear increase in governmental reach, blurring the line between state and local fiscal authority, expanding the use of bracketed statutory privileges, and committing future state tax receipts to projects that may not undergo rigorous public or legislative scrutiny. It also perpetuates a broader trend of policy-by-exception, weakening statewide standards in favor of politically tailored carve-outs. Rather than containing the government’s role, the bill enables more intervention in the marketplace and public finance system.

• HB 3954 (Same As)