Last week, the Kingsville City Commission took no action on a recommendation from its Hotel Occupancy Tax Advisory Board to make changes to a 40-year-old memorandum of understanding with the John E. Conner Museum that would modify the city’s fixed percentage contribution to a flat rate.
Conner Museum Director Jonathan Plant spoke out against the HOT Board recommendation during the commission meeting, saying that the museum depends heavily on the hotel occupancy tax revenues and it would be “severely hampered” without it.
In an interview last week, Tourism Director Janine Reyes said the recommendations were not about taking funding away from the museum, but rather to diversify the city’s arts spending as well as preserve the department’s remaining fund balance.
“There is no intent here to negatively impact the Conner Museum,” Reyes said. “And it’s not something that just sprung up all of the sudden. It’s been discussed since before I was even here.”
Under the current MOU between the City of Kingsville and Conner Museum, which has been in place since 1979, the city provides funding through monthly payments to the museum equal to 14.285 percent of its Hotel Occupancy Tax, or HOT, revenues.
That contribution could be as much as $90,000 in Fiscal Year 2018-19, Reyes said, based on anticipated HOT revenues possibly exceeding $600,000.
On May 16, the Hotel Occupancy Tax Advisory Board convened and recommended lowering the contribution to the Conner Museum to a flat rate of $30,000 per fiscal year contingent upon HOT revenues reaching $600,000.
If HOT revenues do not reach $600,000, then all non-personnel Tourism Department expenditures, including the museum contribution, would be reduced on a percentage basis.
In addition, the advisory board recommended reserving 5 percent of HOT revenues for art and historical funding requests by groups and organizations that contribute to increased hotel occupancy.
Plant, who serves on the HOT Advisory Board that made the recommendation to lower the contribution, did not attend the May meeting and did not vote on the proposal.
Reyes said the Conner Museum is one of only two percentage-based HOT revenue expenditures from the City of Kingsville. The other, where the tourism department must spend at least 15 percent of revenue in marketing, is required by state statute.
“So that’s 30 percent of the budget out the door off the top,” Reyes said. “There’s nowhere to make up that difference.”
Reyes said the percentage contributed to Conner Museum is classified under arts spending, which she said state statute allows for only 15 percent of HOT revenues to go toward.
“That leaves less than one percent for us to spend on festivals, live music and other arts events,” she said. “That’s not a lot of money. It’s about $3,800.”
To keep from exceeding the allotted amount, Reyes said the tourism department has been partnering with non-profit organizations for the annual Festival de la Loteria and Ranch Hand Festival.
“And that’s something that we will continue to do moving forward,” she said.
Reyes said in research she has done, most municipalities “only spend about 5 percent on the arts,” with the funds diversified between several facilities or entities that promote tourism into the cities.
“Events that will bring in people,” she said. “Film festivals, music festivals, anything like that where we can promote to people outside of our region to come in and stay in our hotels is really the best practice for those funds.”
While diversifying art funding is one reason for the proposed Conner Museum contribution changes, another concern is the department’s fund balance, which Reyes said has been “depleting at a pace of about $155,000 a year.”
Reyes said her department currently has $181,000 remaining in its fund balance, with one more fiscal year where it can afford to “run in the red to the amount that we do before we’re tapped out.”
“We can’t cover ourselves anymore,” she said. “And at that point, who’s going to cover the difference?”
In addition to its contribution to the Conner Museum, Reyes said the tourism department also funds operations at the 1904 Train Depot Museum, the Kingsville Visitors Center and the J.K. Northway Coliseum.
“The J.K. Northway is very expensive to maintain,” she said. “The utilities alone cost us $88,000 a year for that facility.”
Built in 1971, the J.K. Northway Coliseum is a multi-purpose event center that serves as the home of the annual Kleberg-Kenedy County Junior Livestock Show.
In 2014, the City of Kingsville took over from Kleberg County the management of five county-owned parks within the city limits, including Dick Kleberg Park which houses the J.K. Northway.
Since the city’s park takeover, the coliseum’s operation and budget has been under the city’s tourism department, which Reyes said has been “draining our funds.”
“It runs in the red,” she said. “And as long as the J.K. is under us, I don’t see a way for us to not run in the red to some degree.”
Reyes said convention centers “typically don’t make money,” but are meant to bring in events that will prompt economic development.
“To bring people into the city that will stay in our hotels and spend money in our restaurants and businesses,” she said. “That will then generate money through local taxing for the general fund. That’s the goal there.”
Last month, voters approved a 2 percent “venue tax” increase to the existing Hotel Occupancy Tax that will help fund future improvements and upgrades to the J.K. Northway.
“I’ll be the first to tell you that it’s not where it needs to be,” she said. “I think down the line, when we improve the facility, we will be able to bring in more.”
Reyes said she is currently in the process of budgeting for the next fiscal year and is looking into other ways to bring in revenue at the coliseum, including possibly making its recreational vehicle hook-ups available year-round.
“That would be another source of revenue for us that we haven’t typically tapped into,” she said. “We need to have a plan to take that hit for the long run, because it’s going to happen.”
The Conner Museum contribution change could come before the Kingsville City Commission during its next regular meeting scheduled for Monday, June 10.
Should the recommendations be approved, city administration would then draft a new memorandum of understanding between the two entities that would need to also be approved by the city commission. The new MOU would not go into effect until after 90 days notice of termination of the original agreement.
Anthony Ruiz can be contacted at email@example.com or (361) 221-0251.