The Legislative Budget Board (LBB) projects that SB 1556 would result in a negative impact to General Revenue-related funds of $446,000 over the 2026–2027 biennium, with that negative fiscal effect continuing annually for ten years. The fiscal note attributes this impact to the inclusion of Marble Falls as a qualifying municipality authorized to receive certain state tax revenues related to hotel and convention center projects.

Specifically, Marble Falls would be entitled to retain state sales and use tax and state hotel occupancy tax revenues generated by a "qualified hotel" and associated restaurants, bars, and retail establishments within or connected to the proposed convention center development. These entitlements would be valid for up to 10 years from the facility's opening. The LBB estimates the fiscal impact beginning in FY 2027, assuming an opening date of September 1, 2026, based on comparisons with similar existing projects and the city's current development plans.

This approach effectively redirects a portion of state tax revenues to support local development, functioning as a form of state subsidy for targeted municipal infrastructure. While the bill may stimulate local economic activity and tourism, the state’s general fund experiences a corresponding reduction in revenue collection. The projected five-year cumulative loss exceeds $2.3 million, with annual losses increasing incrementally each year, reaching $501,000 by FY 2030.

Although the fiscal impact is relatively modest in the context of the state budget, the precedent of expanding eligibility to municipalities via narrowly tailored brackets raises long-term concerns about erosion of the state tax base if more localities seek similar treatment. The bill shifts financial risk and reward toward local governments while reducing state discretion over targeted economic development subsidies.

SB 1556, as substituted in committee, would authorize additional municipalities—most notably Marble Falls—to receive rebates of state hotel occupancy and sales taxes to finance hotel and convention center projects. While the bill aims to spur local tourism and economic development, it does so by diverting state-collected revenues toward narrowly defined local infrastructure investments. After detailed review of the bill text, fiscal note, and supporting materials, this legislation raises multiple structural and principled concerns that merit a firm “NO” recommendation.

First and foremost, the bill directly undermines the principle of limited government. SB 1556 expands local governments’ ability to engage in development subsidies that reach beyond core public functions. By using state tax revenue to support hotel and convention center construction, the bill invites mission creep into areas typically better served by private enterprise. Such economic development programs often lack sufficient guardrails and accountability mechanisms, exposing public funds to risk without guaranteeing return.

Second, the bill weakens free enterprise by creating market distortions. Private hospitality and event venue developers must operate without access to rebated tax revenue. When municipalities leverage HOT (hotel occupancy tax) and state sales taxes to finance convention hotels, it unfairly advantages publicly supported projects, disrupting competition and incentivizing political connections over business merit. This amounts to a subsidy to select industries or developers, inviting concerns about crony capitalism.

Third, SB 1556 contributes to fiscal fragmentation at the state level. The Legislative Budget Board estimates a negative impact to the General Revenue Fund of $446,000 over the next biennium, growing annually through at least FY 2030. If more municipalities follow suit by seeking eligibility through similar “bracket bills,” the cumulative cost to state taxpayers could be significant. Statewide revenue should be managed in service to all Texans—not parceled out through special exemptions for politically favored local projects.

Fourth, the mechanism of bracketed legislation used here (defining eligible cities by highly specific combinations of population and geography) undermines transparency and equity in lawmaking. It encourages a piecemeal approach to tax policy, where cities lobby for bespoke eligibility rather than the legislature establishing uniform standards applicable to all. This trend erodes trust in legislative consistency and favors municipalities with greater political leverage.

Fifth, there is no performance accountability built into the bill. There are no clear benchmarks, reporting requirements, or clawback provisions if projects underperform. Cities can receive up to 10 years of rebated tax revenue with minimal demonstration of long-term public benefit. Without enforceable metrics, the risk of fiscal waste or under-delivery is high.

Finally, for those who oppose hotel occupancy taxes on principle—as regressive, distortionary, and non-transparent revenue tools—this bill compounds the issue. It uses those same taxes not just to fund local infrastructure but to facilitate further public spending on non-essential economic development projects. Rather than restricting or reforming HOT usage, SB 1556 deepens reliance on them and extends their fiscal footprint.

In conclusion, SB 1556 advances a flawed model of economic development that relies on tax diversions, public subsidies, and selective legislative treatment. It undermines core liberty principles—including limited government, free markets, and fiscal restraint—and raises long-term structural concerns about equity and transparency in state policymaking. For these reasons, Texas Policy Research recommends that lawmakers vote NO on SB 1556.

• Individual Liberty: While SB 1556 does not directly curtail personal freedoms such as speech, association, or movement, it does raise indirect liberty concerns by using public funds to underwrite projects that may not serve the entire local population. When tax revenues (even those collected from hotel guests) are earmarked for politically favored development projects without full democratic accountability, it diminishes individuals’ control over how collective resources are used. This undermines the principle that people—not governments—should ultimately decide how their money is spent.
• Personal Responsibility: The bill incentivizes cities to rely on state tax rebates to finance economic development rather than exercising financial discipline or relying on private-sector capital. When cities offload the financial risk of convention center and hotel development onto the state, they evade responsibility for the success or failure of their local projects. This creates a moral hazard: local governments benefit from the rewards of development (if successful), while the costs are shared by all Texas taxpayers. True personal (or institutional) responsibility requires that risk-takers bear the full consequences of their decisions.
• Free Enterprise: SB 1556 directly harms the principle of free enterprise by distorting the hospitality and tourism markets. When governments use public funds or tax rebates to finance hotels or convention centers, they create an uneven playing field. Private developers must compete against publicly subsidized projects with lower capital costs and greater political support. This government interference undermines voluntary market competition and substitutes political influence for entrepreneurial merit—precisely what free enterprise aims to avoid.
• Private Property Rights: The bill does not directly infringe on private property rights through mechanisms like eminent domain. However, public investment in large-scale tourism infrastructure can lead to increased regulation, zoning changes, or the displacement of existing local businesses and residents through indirect means. Moreover, taxpayers—including hotel guests—are being compelled to fund projects they may not support, raising questions about consent in the use of private economic resources for public-private ventures.
• Limited Government: This is where SB 1556 most clearly violates liberty principles. The bill expands the scope of local governments to act as developers, financiers, and economic engineers—roles that extend well beyond the core functions of protecting rights, enforcing contracts, and maintaining public order. By expanding bracket-based eligibility for tax rebates, the bill continues a trend of special-interest policymaking, growing the complexity and reach of state economic policy. This undermines the constitutional vision of a government with defined, limited powers.

• HB 3117 (Same As)