Page 128 - CityofColleyvilleFY23AdoptedBudget

In 1998, Colleyville City Council passed an ordinance establishing a hotel
occupancy tax equal to 7 percent of the lodging cost of a hotel room within city
limits. Texas state law mandates that the revenue derived from this tax must only
be used for expenses that promote the tourism industry, including (but not
limited to) convention/civic center facilities, general promotional and tourist
advertising for the City, and the encouragement, promotion, improvement and
application of the arts. Although authorized in 1998, the City did not have a hotel
within its boundaries until 2017. Since that time, all revenue derived from the tax
has been used on non-recurring expenses relating to special events. However,
beginning in scal year 2021 the City allocated operating costs to this fund as
authorized by state law. This includes a signi cant portion of the City’s advertising
expenses as well as personnel costs for Colleyville’s Community Relations
Specialist and partial personnel costs for the Colleyville Center Manager and its
Sales and Event Specialist. Because all or part of these positions are dedicated to
advertising the City and bringing guests in from out of town, they meet the
state’s tourism requirement for hotel taxes, allowing the City to shift the costs
away from the General Fund. This reliance on restricted revenue sources for
operational costs is part of the City’s ongoing initiative to keep its property tax
rate as low as possible.

This fund is budgeted to bring in $275,000 in anticipated revenue while spending
$273,569. A full, 5-year forecast of this fund is as follows:

Hotel Tax
Fund

The ve-year forecast (shown above) was prepared and presented to the City Council
to guide decision making during the budget process and ensure that long-term
implications are considered. Shifting operating costs away from the General Fund
and into the Hotel Occupancy Tax Fund played a major part in maintaining the City’s
low tax rate for the last three scal years.

Economic restrictions brought on by COVID-19 drastically affected revenues, as hotel
bookings throughout the spring and summer months waned. Staff anticipated the
fund earning signi cantly less than its budgeted FY 2022 revenue, followed by a
relatively quick turnaround once travel-related activities resumed in full force. This
appears to be in process, as the last two quarters’ worth of revenue have shown sharp
increases. Staff predicts a return to normal for FY23, with the remainder of the
forecast conservatively projecting approximately 3% increases annually.

Costs in the Hotel Tax Fund for FY 2023 include personnel expenses dedicated to
marketing the City, non-recurring improvements at the City’s event center,
marketing materials, and special event funding. With hotel tax revenue having
accumulated over the past several years, staff is planning on drawing down this

City of Colleyville | Budget Book 2023 Page 128