Area: City of Austin
Population: 656,562
Tax: City Lodging Tax - 7% of price of hotel room
Use: Cultural Contracts Granting Program

Lodging taxes, such as those that apply to hotel and motel stays, are a popular source of support for many public programs including: sports, tourism, and the arts. Lodging taxes are often administered at the county or state level where restrictions on how revenues are spent are passed down to municipalities. This is the case in Austin, Texas where the "bed tax" is collected by the state. At the end of each year the state returns a portion of the revenue to the municipality where it was generated. The law in Texas allows for cities to decide how much of those revenues can be spent on the arts, capping the amount at 15%. Austin city leaders have approved utilizing the full 15% to support arts and culture in the city. For Vincent Kitch and the Cultural Arts Division, the bed tax revenues make up the largest source of funds for municipal support for the arts. The cultural contracts program awards grants to arts organizations in Austin, and is mostly funded by bed tax revenues. For many organizations in the city the cultural contracts program represents the largest source of government funds, and among the largest sources of contributed revenue each year.

Arts and city leaders have been working together over the past few years to strengthen the Cultural Contracts Program. As is the case in many cities, when the economy weakens, or tourism slows, it can have a significant impact on lodging tax revenues. An economic downturn is especially hard on arts organizations that look to tourism tax revenues for support. The Cultural Arts Division in Austin has been working in full collaboration with the arts community to expand revenue sources for the cultural contracts program. Without the ability to alter state law governing the use of lodging tax revenues, the city is looking to other sources of support. Currently, city leaders are examining cooperative fundraising and corporate partnerships to help make the Cultural Contracts Program more stable during lean times. As the city looks to expand revenues, it is also making changes to the granting process itself; placing more emphasis on organizations' accountability and sustainability.

The effort to strengthen the cultural assets of the city of Austin has also been reflected in how the city administers the Cultural Arts Division. Reflecting a mayoral shift in priority, the Cultural Arts Division, which oversees granting, public art, international programs, and the local filming industry, was moved from the Parks and Recreation Department to the Department of Economic Development. While such a transition was applauded by arts organizations, there have been added difficulties in meeting the department's expectations for quantifiable community impact data.

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