Overall Vote Recommendation

Yes

Principle Criteria

Free Enterprise

Property Rights

Personal Responsibility

Limited Government

Individual Liberty

Digest

SB 2779 amends Section 156.2511 of the Texas Tax Code to modify how certain hotel occupancy tax revenues are managed and allocated by eligible coastal municipalities. The bill requires that any municipality receiving a state-issued hotel tax warrant must transfer the full amount of the funds to the municipality's park board of trustees within one month of receipt. This transfer is mandatory and removes the municipality’s discretion over direct spending of these revenues.

The legislation establishes new conditions for a municipality to qualify for receiving state hotel tax funds. Specifically, the municipality must have already dedicated at least one percent of its local hotel occupancy tax collections to beach cleaning and maintenance efforts. Additionally, municipalities must either apply for beach-related funding under the Natural Resources Code or submit equivalent documentation to the Comptroller. Upon request, they must also provide financial data and a signed attestation confirming compliance with the new requirements.

Furthermore, SB 2779 amends Section 351.101 of the Tax Code to prohibit the use of hotel occupancy tax revenue for any programs or activities that discriminate or prioritize based on race, color, disability, sex, religion, age, or national origin. Its overall aim is to ensure that hotel tax revenues in coastal cities are used fairly, efficiently, and consistently with state standards for non-discrimination and beach maintenance priorities.

The originally filed version of SB 2779 proposed that the Texas Comptroller would directly issue a warrant for hotel occupancy tax funds to the park board of trustees of an eligible coastal municipality, rather than to the municipality itself. This version bypassed the municipality entirely, ensuring that the park board received funds without the municipality acting as an intermediary. In contrast, the Committee Substitute modified this structure: the funds are first issued to the municipality, which is then required to transfer the full amount to the park board within the following month. This adds a procedural step involving the municipality but still mandates the ultimate transfer to the park board.

The original version allowed the Comptroller to issue a warrant if the municipality had dedicated 1% of its local hotel occupancy taxes to beach maintenance and had either applied for state funds under Chapter 61 of the Natural Resources Code or submitted equivalent information. The Committee Substitute kept these requirements but added a further compliance mechanism: municipalities must now also submit financial data and a signed attestation to the Comptroller upon request to prove compliance. This represents a tightening of administrative controls.

Regarding the non-discrimination provision, both versions introduced a new Subsection (b-1) to Section 351.101 of the Tax Code, prohibiting hotel occupancy tax revenues from being used in a discriminatory manner. However, the Committee Substitute slightly expanded this provision by specifying that programs or activities cannot prioritize based on protected categories, either, not just "discriminate."

Finally, the Committee Substitute reflects a stronger emphasis on municipal compliance, accountability, and procedural oversight compared to the originally filed version, which was slightly simpler and more direct in its structure.

Author (1)

Brian Birdwell

Contact the Author

Sen. Brian Birdwell

Capitol Phone:

(512) 463-0122

E-Mail:

[email protected]

Visit Official Website

Fiscal Notes

According to the Legislative Budget Board (LBB), SB 2779 is expected to have no fiscal implication for the state. The bill alters the mechanism for distributing certain hotel occupancy tax revenues, requiring the Comptroller to issue warrants directly to the park board of trustees in eligible coastal municipalities, such as Galveston, provided they meet certain compliance conditions. These conditions include allocating at least one percent of their municipal hotel occupancy tax revenue to beach maintenance and submitting specific financial and application data to the Comptroller.

While the bill adds new administrative conditions for receiving funds, it does not authorize new expenditures or change the total amount of revenue allocated. The money directed to the park board under this bill is already earmarked for the city under existing law. Therefore, the bill simply shifts how the funds are disbursed and who controls them, without increasing state costs or altering revenue streams.

At the local level, the bill is expected to impact primarily the City of Galveston, the only municipality currently identified as eligible under the statute's criteria. However, the Comptroller's office notes it does not currently track how Galveston utilizes its municipal hotel tax revenue, meaning there is uncertainty about the city’s or its park board’s eligibility under the new provisions. Despite this uncertainty, there is no expected financial loss or gain for local governments from the state perspective; the key fiscal shift is in administrative responsibility and compliance requirements rather than in funding levels.

Vote Recommendation Notes

While the Hotel Occupancy Tax (HOT tax) itself is flawed and often overused by local governments, this bill does not create new taxes, raise rates, or expand spending. Instead, it corrects a misuse of existing HOT revenue, ensuring that funds collected for beach cleaning and maintenance are actually used for that purpose. It also adds an important protection by banning the use of these funds in any discriminatory or preferential manner based on race, color, sex, religion, disability, age, or national origin. In short, it strengthens oversight without burdening taxpayers or regulating private businesses.

Though the bill adds some additional administrative requirements for local governments, like financial reporting to the Comptroller, these measures are reasonable to guarantee compliance and protect the public’s money. The bill modestly grows the administrative role of the Comptroller, but it does not grow government spending, tax burdens, or regulatory pressure on individuals or businesses.

Given the importance of enforcing transparency, preventing misuse of public funds, and safeguarding against discriminatory practices, this bill is a clear step in the right direction. Even for those who oppose the existence of the HOT tax itself, this bill represents responsible, necessary fiscal management. Therefore, Texas Policy Research recommends that lawmakers vote YES on SB 2779.

Individual Liberty: The bill supports individual liberty by prohibiting government spending of hotel tax dollars in ways that discriminate or prioritize based on race, color, religion, sex, disability, age, or national origin. This ensures tax dollars aren’t used in a way that violates equality of opportunity or fundamental rights.
Personal Responsibility: The bill doesn’t directly affect personal responsibility — it’s aimed at municipal and park board financial management, not individuals' behavior. However, it does encourage greater governmental responsibility for the proper handling of taxpayer money.
Free Enterprise: By banning discriminatory use of HOT tax funds, the bill helps prevent unfair advantages in government-funded programs, which protects fair competition among private businesses and organizations.
Private Property Rights: The bill does not regulate or affect the ownership or use of private property.
Limited Government: On one hand, the bill enforces lawful and limited use of tax dollars, which is positive. On the other hand, it slightly expands the role of the Comptroller by imposing new compliance requirements and oversight procedures. However, the expansion is very targeted (administrative, not spending or taxation growth), and is justified to enforce statutory compliance.

References

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