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Little tourism means Houston's theaters like the Alley are seeing a big drop in their share of Hotel Occupancy Tax money. Another loss because of COVID-19.
Little tourism means Houston's theaters like the Alley are seeing a big drop in their share of Hotel Occupancy Tax money. Another loss because of COVID-19.
Photo by Joe Aker

Funding Tied To Tourism Is Just Another Reason Houston Theaters Are Suffering Due To the Coronavirus

The bad news came on May 5 – an email from the Houston Arts Alliance informing theater companies that, due to the negative economic impact of COVID 19, the grant money they’d been promised would be reduced going forward. By 6 percent for the first quarter and a warning of “significant reduction” for the remaining quarters.

It was yet another blow to theaters, who are already struggling under the financial strain of canceled shows, shuttered facilities and an uncertain production resumption time frame.

A blow, but not necessarily a shock.

The grant money HAA administers comes from the state-mandated Hotel Occupancy Tax. The money is collected during a fiscal quarter and then one month later, the Houston First Corporation which operates performing arts and convention facilities in the city, collects the funds, sends them to the city, and, five days later the city sends HAA the portion that goes to fund the city’s arts organizations. Two weeks later, HAA distributes the money.

But in the midst of a pandemic, when hotels are reporting anywhere between a 70 -100 percent drop in business, there is little, if any money to collect and distribute. This means the largest, and in some cases, the only source of public funding that theaters receive may now be off the table.

The impact this will have on companies differs from organization to organization. Both Rec Room Arts and Catastrophic Theatre rely on HOT funds for approximately 10 percent  of their annual budget while the money represents around 6 percent of the Alley Theatre’s operating budget. Different percentages, but to put it in perspective, for all three companies, the HOT funding model subsidizes an entire production and is crucial to the financial health of a season.

With this model now presently broken, it’s left some wondering why Houston is beholden to this system of funding and questioning if there’s a better way to publicly support the arts in Houston.

“It’s a frustrating system for funding to be so contingent on something that’s kind of unrelated,” says Shayna Schlosberg, managing director of Catastrophic Theatre. “It’s really crushing for the community regardless of whether tourism is booming in the city or not. Houston should support its artists because Houstonians benefit just as much from our cultural community. So, what does it say about the way we value arts and the artists that live and contribute to the culture of the city to say, well, we’re not able to profit off you right now, so hang tight!”

Schlosberg points to Denver’s model of arts funding as a system that enables support to come from within the community, while better safeguarding the funds from emergency situations. Called The Scientific and Cultural Facilities District, this voter-approved public funding method applies a penny sales tax on every $10 purchase within the seven-county metro area, annually distributing about $50 million in operations funding to arts, culture and scientific organizations.

However, as anyone that lives in Texas knows, tax is a dirty word in this state.

Prior to becoming the Alley Managing Director, Dean Gladden was involved in establishing the public arts funding in Cleveland which levies a county-controlled sin tax on cigarettes that he estimates generates approximately $15 million a year to all the arts organizations in the county.

“I would love to see something like they did in Cleveland here,” says Gladden. “It would provide far more money than the HOT and absolutely would be beneficial for the city and all the arts organizations.” So, has he broached the subject with the powers that be? “In all my conversations that I’ve had with people in Austin, there’s been no appetite to do something like Cleveland,” says Gladden. “This is a state that doesn’t like to tax its citizens and has a long history of low taxes and that is completely different than Ohio or other states. The politics are the politics.”

Rec Room Artistic Director, Matt Hune agrees that increasing local taxes is a nonstarter. Instead, he's interested in exploring options within the present system. "We cringe when adding taxes so HOT has been an easy way to fund the arts in the past because it’s not our local people paying for it,” says Hune. “But Houston isn’t necessarily a tourism city. Even if we do keep the HOT, is there a different percentage we can look at, or a way to add an endowment so that if something like this virus happens, or another hurricane, it’s OK and the money still is there for the arts when we need it most?”

Something for example like San Francisco has done.

In a November 2018 ballot vote, the city approved a measure to shift 1.5 percent of hotel tax revenue to non-profit arts and cultural services. But what this measure also did was allocate a portion of the existing HOT into an Arts Impact Endowment – a rainy day fund if you will. It provides money to be held back for times of crises – like a pandemic.

On March 30, the Mayor of San Francisco announced that the city was releasing $1.5 million from the Endowment to be distributed among 527 individual artists and 65 arts organizations struggling to survive the coronavirus shutdown. For organizations, this meant funds could be used for staff salaries, artist payments, rent, and other operating costs.

When asked why Houston doesn’t have a similar safety net as part of its HOT funding model, Director of the Mayor’s Office for Cultural Affairs, Debbie McNulty, said that the City of Houston has, for 20 years, allocated the maximum percentage of HOT allowable to HAA for grants. “An emergency fund of any meaningful size significantly reduces funding available for annual grant allocations,” says McNulty. “Mayor Sylvester Turner has joined with other city mayors to call on federal legislators to provide relief for the arts and cultural community in the next COVID relief package.”

Houston Arts Alliance CEO John Abodeely acknowledges that our present mode of arts funding could use some work. “There are pros and cons to HOT,” says Abodeely. “There were elements where there were cracks in the system that this pandemic has split wide open. But in other ways, there is a commitment by our elected officials, written into law, that funds the arts. It is flawed and we can fix it, but it is not simply just terrible.”

That written into law and yearly commitment by politicians isn’t something Houston arts organizations should take lightly. “You’re not going to hear me complain about what we have,” says Gladden. “Because I know that could go away and then we have nothing.”

Abodeely brings up Kansas as a cautionary tale of ceased public funding. In 2011 Kansas became the first state in the nation to stop funding the arts when its governor vetoed $700,000 for the former arts commission and instead maintained that arts organizations should be funded by private dollars alone. Kansas has since reversed that decision, but many across the nation still believe that private funding exclusively is the way to go.

To that notion, Schlosberg responds, “We already operate under a model that is not reliant on public funding. In order to survive as a non-profit, an organization has to have a diversified mix of funding sources, and part of that is government funding.

"The answer to this crisis is not to move away entirely from public funding. In addition to providing much-needed funds, government support helps us attract other sources of funding. Individuals and foundations ask to see who our major funders are before deciding to support us. Government support provides a sort of ‘seal of approval’ to new, potential donors. It's not one or the other—in fact, one leads to the other in some cases.”

“We don’t have the privilege of optimism right now,” says Abodeely. “So, we’re gonna get up every day and break our ass to make this work.” What that means these days for HAA, in addition to raising money for economically affected artists and helping companies find creative ways to remain compliant with their grant requirements, is to look to cities like Phoenix and Seattle as inspiration.

In both those cities, a portion of CARES funds (payments to State, Local, and Tribal governments navigating the impact of the COVID-19 outbreak) has been allocated for arts organization recovery plans.

“HAA is in discussions with elected officials to advocate for a similar strategy for our arts,” says Abodeely. “How can existing pots of money, such as federal support for cities, be used to help the arts community participate in rebuilding from the social/economic issues this pandemic has caused? We’re knocking on the door of City Hall and the County to find out how the arts can be included in their spending recovery plans.”

“Is there money available not just for individual artists, but for arts organizations as well?” asks Hune who worries that many theater companies in Houston won’t exist after this is all over. “I’ve been talking to other companies and the feeling is mutual”, says Hune. “No one knows what to do, everyone is losing money and everyone is afraid for the future. If there’s a way to help companies survive, I think we should with all our might.”

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