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.”

Matt deGrood: 409-683-5230;


(5) comments

Lisa Blair

Good to see the POG rising to it's full potential under effective leadership by it's administration and board. Now let's keep the progress going by finding a consistent revenue stream for the future.

David Schuler

The port's financial condition is a direct result of years of neglect and "doing tomorrow what you should be doing today". I could support using HOT tax to help construct another cruise terminal, but to simply start diverting some (ever growing over time) hotel/motel tax money to the port as a 'revenue stream' is a money grab, pure and simple. If the port's lease payments won't cover operating expenses and a reasonable capital improvement plan, then it's time to renegotiate contracts based on the true value of best close proximity to blue water.

Lisa Blair

David, one of the places that HOT goes is to Arts & Preservation, local entities that have been around for a long, long time. You could argue that many of them should be able to exist without it, yet they may apply for up to 20% of their annual operating budget. Is that a “money grab”? Surely the port drives tourism as much as Arts & Preservation. IMO it’s every bit as worthy of HOT dollars.

David Schuler

Lisa, I am aware of how HOT tax is used and have written applications and made presentations to the committee on behalf of non-profits on multiple occasions. I still can't see how "Ships in Slips". is the same as "Heads in Beds". State law limits the use of HOT funds to promote tourism, and their use by the port would seem to be illegal unless the funds are directly tied to a specific project at the port that is tourism related (third cruise terminal, parking enhancements, etc). To suggest that an unpredictable HOT revenue stream could act as collateral for multi-million dollar capital improvement loans is both dangerous and reeks of the typical band-aid fix that got the Port into this mess in the first place. If approved, in a short time the port will be sucking up so much of the HOT money that the multitude of smaller non-profits that depend on HOT funds will disappear, along with much of the diversity that makes Galveston such an interesting place to visit.

Connie Patterson

I don't have as long a history in Galveston as some of you, but it seems to me that there is a sincere commitment on the part of City and Port leadership to make a step change in the direction of the Port. HOT funds are only one of the possibilities to give the Port a stream of revenue that they can leverage to acquire the capital funds needed for those improvements. For me, the argument that they should be able to find those monies within their existing operations is the same one that folks used against the recent GISD Bond issue.........neither the school district nor the Port got to their current situations overnight; it was the result of years of neglect and "doing the same old things". There is some risk in agreeing to give those entities additional funds, but there is also a risk in doing the same old things but somehow expecting different results. They are both very valuable assets to the community. With the right leadership, hard work, a solid plan, and a commitment for excellence, things can be changed. The voters were willing to give GISD that opportunity, and I believe there is a lot of positive momentum and ideas coming from the new leadership at the Port. Once they finish their work on the Master Plan they are developing, they deserve a fair listening from the taxpayers and the City, and if they have the necessary elements in place, then they deserve our support to move forward and implement that plan.

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