Port of Galveston leaders are discussing the possibility of using tax revenues traditionally set aside for tourism efforts to pay for infrastructure improvements at the public docks, which have been long hampered by a lack of taxing authority and limited revenues.
“There has been a feeling that maybe the port, because we do bring tourists in through cruises, could possibly share in some of that,” Port Director Rodger Rees said.
Addressing dilapidated facilities at the island’s public docks could cost as much as $250 million — a problematic number for a port that generates much of its income from lease agreements with maritime tenants and fees related to ship calls.
Port officials began the year projecting operating revenues of about $37.4 million against operating expenditures of $37.2 million.
But if the port had a steady stream of revenue, whether it be through partnerships or taxes, that would help increase its borrowing power, Rees said.
The city and state collect a 9 percent and 6 percent tax, respectively, each month from hotels, motels and short-term rentals as part of the hotel occupancy tax, or HOT.
Every expenditure via that tax must go toward enhancing tourism and the hotel industry, according to the Texas Hotel & Lodging Association.
But the port might qualify for the funding because it does bring millions of tourists to the island each year as cruise customers, said Ted O’Rourke, chairman of the port’s governing board.
“The conversation at this point is to see if the port could be reimbursed for infrastructure or marketing costs,” Rees said.
City officials were discussing different possibilities, but said it was very early in the conversation, Mayor Jim Yarbrough, who also is a trustee on the port’s governing board, said Friday.
“I’ve always felt that when the port got its act together and came up with a reasonable plan, we’d see what type of money it could generate as an entity and then I’d be supportive of looking for ways to increase transfer of money to the port,” Yarbrough said.
Using the hotel occupancy tax collections isn’t the only possibility, Yarbrough said.
“We might see if ad valorem taxes are something the community would see as appropriate,” Yarbrough said.
But there is room to increase the amount entities collect in hotel occupancy taxes, O’Rourke said.
State legislation limits the maximum combined hotel occupancy tax rate to 17 percent, according to the Texas Hotel & Lodging Association.
The city council could potentially increase the rate by 2 percent and dedicate funding to the port, O’Rourke said.
Each penny, or percentage, of hotel occupancy tax is roughly equal to about $2 million, Rees said.
“In my mind, every $1 million will help us,” Rees said. “If I can start developing a consistent cash flow, over a 20- or 30-year borrowing period, that could get you an $80 million loan.”