According to the Legislative Budget Board (LBB), SB 2133 would have no immediate fiscal impact on General Revenue-related funds during the 2026–2027 biennium. However, beginning in fiscal year 2028, the bill is projected to generate negative revenue impacts for the state, with losses estimated at $685,000 in 2028, increasing annually to $740,000 by 2030. These losses stem from allowing a newly eligible municipality—specifically McAllen—to receive rebates of state sales and use taxes and state hotel occupancy taxes associated with a qualified hotel and convention center project.

The city of McAllen does not currently have a qualified hotel project, but would become eligible to receive state tax revenue under the terms of the bill. The bill entitles McAllen to capture the state sales tax and hotel occupancy tax revenue generated by the hotel and adjacent restaurants, bars, and retail businesses for up to ten years after the facility opens. The projected fiscal impact is based on assumptions that McAllen would construct such a facility and begin operations in fiscal year 2028.

While the bill would result in a loss of state tax revenue, it would not directly increase state spending. Instead, it reallocates existing tax collections to a municipality as an incentive mechanism. This could benefit McAllen's local economy by encouraging investment in hospitality infrastructure, but it also represents a fiscal tradeoff, diverting funds that would otherwise support general state functions. Over time, the policy may raise broader concerns regarding precedent, as more municipalities may seek similar treatment through bracketed legislation.

SB 2133 proposes to amend Section 351.152 of the Texas Tax Code to expand the list of municipalities eligible to use hotel occupancy tax (HOT) revenue in conjunction with state tax rebates for qualifying hotel and convention center projects. While framed broadly, the bill is tailored to apply only to the City of McAllen, which would gain access to a substantial state-funded incentive package. This includes a 10-year redirection of state sales and hotel occupancy tax revenue generated by the hotel and associated retail developments back to the city to finance its project costs.

This legislation represents a concerning expansion of state-local fiscal entanglements, undermining both tax policy uniformity and free enterprise. By channeling public funds into a specific city’s commercial project, SB 2133 selectively benefits one local economy at the expense of others and offers a clear advantage to the developers chosen to participate. Such market favoritism runs counter to free enterprise principles and opens the door to future competitive distortions as other cities seek similar carveouts.

The hotel occupancy tax itself is often criticized as a regressive and opaque funding source that empowers cities to expand their commercial reach into areas beyond core government services. SB 2133 reinforces and extends the use of HOT revenue as leverage to gain state subsidies. This enables what is effectively a backdoor tax-and-spend mechanism that lacks the transparency and oversight typically expected for large-scale, publicly supported infrastructure projects.

From a fiscal standpoint, the Legislative Budget Board projects that the bill will have no impact through 2027 but will begin costing the state hundreds of thousands of dollars annually starting in 2028, totaling $740,000 per year by 2030. These losses represent foregone general revenue that could otherwise support statewide obligations. There is also no requirement in the bill to demonstrate fiscal neutrality or return on investment, leaving taxpayers without a clear assurance of value.

Equally concerning is the structure of the bill as bracketed legislation. While not naming McAllen directly, the bill describes demographic and geographic conditions that only that city meets. This legislative approach skirts the Texas Constitution’s prohibition on special legislation and undermines the principle that laws should apply generally and transparently. It invites future requests for similar carveouts, potentially leading to a patchwork tax code responsive more to political negotiations than policy coherence.

For these reasons—market distortion, expansion of government scope, fiscal leakage, erosion of tax fairness, and the precedent of special-interest policymaking—Texas Policy Research recommends that lawmakers vote NO on SB 2133.

• Individual Liberty: The bill does not directly restrict or expand individual freedoms in the traditional civil-liberties sense (e.g., speech, religion, movement). However, by enabling municipal and state resources to be concentrated into specific public-private ventures, it risks displacing organic economic development and shaping the urban environment in ways not directly accountable to the public. When taxpayers’ money is used to subsidize development without voter approval or oversight, it subtly erodes their liberty to influence the use of public funds.
• Personal Responsibility: The bill neither incentivizes nor disincentivizes individual responsibility in a direct way. However, from a philosophical standpoint, when government assumes an active role in underwriting risk for private-sector developments, it shifts responsibility away from entrepreneurs and investors and onto the public. This blurs the line between public service and private profit, and reduces the accountability typically demanded of private ventures.
• Free Enterprise: This is the most compromised principle. The bill permits a municipality to capture and redirect state sales and hotel occupancy tax revenues to support a convention center development, giving a significant financial advantage to certain hotel operators and affiliated businesses. Such subsidies distort the competitive landscape and confer artificial advantages to favored entities—those who are either chosen by or closely aligned with city officials. This undermines a level playing field and allows the government to steer capital, not the market. It also sets a dangerous precedent: future developments may become dependent on lobbying for preferential tax treatment rather than outperforming competitors.
• Private Property Rights: Though the bill does not expand eminent domain authority or restrict landowner rights, it may contribute to indirect property pressure. Subsidized development can inflate surrounding land values, potentially spurring rezoning, increased assessments, or gentrification pressures. Additionally, when government-favored developments become centers of city planning and infrastructure spending, other private property owners may find themselves at a competitive or regulatory disadvantage.
• Limited Government: The bill expands the reach of both municipal and state governments into the commercial marketplace. It does so not by reducing regulation or promoting broad-based opportunity, but by authorizing the selective use of state tax dollars for local economic development. The use of “bracketed legislation” (i.e., bills that are tailored to one locality under the guise of general law) further dilutes the integrity of general lawmaking. This centralizes power in the hands of lawmakers who craft targeted exceptions, rather than adhering to rules that apply equitably across jurisdictions. It also deepens the reliance of local governments on state-level carve-outs and tax diversions, weakening budget discipline and legislative neutrality.

• HB 3715 (Same As)