January 18, 2019 • Local News
Great Wolf convention center size may hurt El Paso's plan to get $40M in state tax rebates
City leaders may have a tough time getting state officials to approve their plan to get up to $40 million in state hotel and sales tax rebates to help Great Wolf Resorts pay for its proposed $150 million-plus hotel, convention center, and indoor water park resort complex in West El Paso.
The problem is the 12,000-square-foot convention center, which is to be part of the proposed Great Wolf Lodge resort in West El Paso, is too small to qualify as a convention center under the state convention center and hotel tax rebate program, said William Hamner, special counsel for tax administration at the Texas comptroller’s office in Austin, which administers the program.
It's likely the city's tax-rebate application would be turned down if the convention center is that size, he said.
Jessica Herrera, director of the city Economic and International Development Department, said in a statement that city officials are confident that the proposed Great Wolf project would qualify for state tax rebates under state law.
If the state doesn’t rebate up to $40 million worth of hotel and sales tax rebates over 10 years for the Great Wolf project, then the city would have to pick up the tab under the city’s economic development agreement with Great Wolf, which the El Paso City Council approved late last year.
The money would come mostly from the city economic impact fund, which is funded through El Paso Electric's city franchise fee, Herrera has said. That fee, which El Paso Electric pays to the city quarterly, is passed on to ratepayers who live inside El Paso city limits through electric rates and a separate surcharge.
The estimated $40 million would be in addition to millions of dollars of city tax rebates and other incentives put on the table by city officials to get Great Wolf to build its complex at Interstate 10 and Paseo del Norte Boulevard (Artcraft Road).
The city plans to swap 2,313 acres of city-owned land surrounding Painted Dunes golf course in Northeast El Paso for the 44-acre, West Side site, where Great Wolf would be located. El Paso billionaire Paul Foster owns the site.
Great Wolf would have the option to buy the 44 acres for $5,000 after leasing it from the city for $1,000 a year for 10 years.
Great Wolf has 18 months from last November, or almost the middle of 2020, to give the city a final decision on whether it will build the resort, according to the city's economic development agreement.
Square footage of Great Wolf Lodge convention center not large enough
Great Wolf plans to build a convention center, with about 12,000 square feet, in a separate building from its hotel and water park, said Jason Lasecki, Great Wolf’s director of corporate communications at the company’s Chicago headquarters. That's slightly larger than the 10,000-square-foot convention center required under the economic development agreement.
Under the plan, the city would own the convention center and Great Wolf would manage and operate it.
Hamner said 12,000 square feet is not large enough to be considered a convention center in the convention industry.
About 50,000 square feet of space is “what people in the convention center business view as a small convention center,” said Karey Barton, associate deputy comptroller for tax at the comptroller’s office.
The state hotel and sales tax rebates would come from the state convention center and hotel program administered by the Texas comptroller’s office.
To get the state tax rebates under the state convention center and hotel program, the Great Wolf Lodge resort must be within 1,000 feet of a city-owned convention center, according to guidelines for the rebate program.
Rejection of Texas tax rebates could be challenged
Jessica Herrera, in a statement, said, “The City of El Paso and Great Wolf Lodge are currently in an 18-month due diligence period. During this time, both parties are working with each other and the necessary state agencies to make this project viable for the Borderplex region.
“The City of El Paso directly and indirectly has communicated our intent to pursue programs within the Office of the Texas Comptroller and are convinced we meet the eligibility requirements set by Texas Statute” for the convention center and hotel tax-rebate program, she said.
Hamner, the comptroller office lawyer, conceded that rebate program rejections tied to a convention center size could be challenged in court until the comptroller’s office adopts a new rule on that issue.
City officials did not immediately respond to an El Paso Times question about whether they would consider challenging the comptroller's office if it rejected the city's attempt to get tax rebates for the Great Wolf project.
State rules don't specify convention center size
The comptroller’s office is in the midst of finalizing rule changes for administering the convention center and hotel tax rebate program. Officials are now reviewing public comments, which will be used in completing the final rules. The final rules are expected to take effect by late February.
The new rules do not specify a required convention center size because that was not an issue when comptroller office officials began the process of revising the rules, Hamner said.
Officials will do research on the convention size issue and likely amend the new rules in the future to address that issue, Hamner and Barton said.
State rebate law expanded to include El Paso, other cities
Meanwhile, the comptroller office staff has leeway to interpret the state law enacted in 1993 that first allowed Houston to use state tax revenues to pay bond debt and other obligations for hotel projects within 1,000 feet of its convention center.
The Legislature has since made 36 cities eligible for the convention center and hotel tax rebate program, according to information on the comptroller website. El Paso, and six other cities became eligible in 2015. Seventeen more cities were added in 2017.
The original concept was to help hotel projects around city convention centers, Barton noted.
If the Legislature determines that hotel projects around less traditional convention centers qualify for the rebates, then the comptroller office staff would have to "adjust our thinking on this," Barton said.
Under current guidelines and the still pending new rules, restaurants, stores, and various other eligible facilities built as part of the hotel project, and within 1,000 feet of the convention center, also could qualify for state tax rebates. That does not include existing facilities that were not built or remodeled as part of the hotel development, according to the new rules.
That means sales taxes generated in the existing West Town Marketplace, across the street from the proposed Great Wolf resort site, wouldn't fall within the rebate program, as city officials had indicated.
Revenues from a water park tied to a hotel project are specifically excluded from getting tax rebates under the pending new rules. Great Wolf officials have said admission into its water park would be included in room rental charges. Barton and Hamner said the comptroller's office would have to see details of the water park operation to determine how that would affect tax rebates. Revenues from beverages and other things sold within the water park would not qualify for rebates, they said.
El Paso hotels exceed Great Wolf convention space
The proposed 12,000-square-foot Great Wolf convention center would have much less meeting and event space than some El Paso hotels already have.
The El Paso Marriott Hotel, near the El Paso airport, has almost 23,000 square feet of meeting and event space, including an 8,350-square-foot ballroom; and the Wyndham El Paso Airport Hotel has 17,000 square feet of meeting space, including an 8,849-square-foot ballroom, according to information from Destination El Paso, the city’s convention recruiter.
The Hotel Paso Del Norte, now being renovated in Downtown, is expected to have 32,000 square feet of meeting and event space, including a 7,344-square-foot ballroom, when it reopens, according to Destination El Paso.
The city-owned Judson F. Williams Convention Center in Downtown is 133,000 square feet, including 94,900 square feet of meeting and exhibit space. It's managed by Destination El Paso.
City officials didn't discuss Great Wolf project with comptroller's staff
The city's Herrera said city officials have talked to comptroller office officials about their intent to pursue programs within the comptroller's office. However, Hamner and Barton said no El Paso official nor anyone representing the city have talked to comptroller officials specifically about the Great Wolf Lodge project.
Officials with Focused Advocacy, the city’s Austin lobbying firm, mentioned the firm was working on an El Paso project, said Chris Bryan, a spokesman for the comptroller’s office. And Comptroller Glenn Hegar, during an April lunch with El Paso Mayor Dee Margo, had a broad discussion about economic development in El Paso, but not about the Great Wolf Lodge project, Bryan said.
El Paso to seek 'private letter ruling' from comptroller's office
Focused Advocacy officials are in the process of seeking a "private letter ruling" for El Paso from the comptroller’s office about the Great Wolf Lodge project to determine how comptroller officials may respond to El Paso’s application for state tax rebates for the project, said Israel Irrobali, a spokesman for the city Economic and International Development Department.
The comptroller’s office issues “private letter rulings” when city officials seek to get an opinion on tax policy questions in advance of applying for a program, comptroller office officials said.
Hamner, the comptroller office lawyer, said the office will wait until its new convention center and hotel program rules become final before issuing new letter rulings.
Several private letter ruling requests are pending for other cities on the convention center and hotel tax rebates program, he said.
It takes 90 to 180 days for the comptroller's office to process an application for the convention and hotel tax-rebate program, Hamner said. However, a city wouldn't apply for the program until the project tied to the application is open or close to opening, he said.
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