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Glenn Hegar  ·  Texas Comptroller of Public Accounts

The rules of attraction: An overview of state events trust funds

Originally Published in Statewise Winter 2010

by Jennifer Paris

You may have heard about Central Texas’ winning bid to host Formula 1, the international auto racing series. The Comptroller’s office has a legislatively mandated role to provide economic development assistance to local governments, which includes maintaining trust funds to bring revenue-generating events to Texas that otherwise might not be located here.

Texas enjoys regular revenue brought by travelers into the state. The magnitude of that revenue is increased by the additional dollars and advertising that come with major events such as the Super Bowl, Formula 1 and major sports league All-Star games.

Cities and counties that regularly accommodate large conventions also help fill state coffers in continuing to host events. Even smaller events can bring localized revenue to an area — not only bringing in dollars, but also new visitors. To help lure various events to Texas and keep them coming here, the Legislature created the events trust funds.

Why events need trust funds

The Legislature believed it beneficial to provide financial assistance to cities and counties attempting to lure events to Texas. The statute stressed this in the “Findings of Fact”:

LEGISLATIVE FINDINGS. The conduct in this state of one or more games or events will:

  1. Provide invaluable public visibility throughout the nation or world for this state and the communities where the games or events are held;
  2. Encourage and provide major economic benefits to the communities where the games or events are held and to the entire state; and
  3. Provide opportunities for the creation of jobs by local and Texas businesses that pay a living wage.

Texas Revised Civil Statutes, Article 5190.014, Section 3

A little legislative history

1999: The 76th Legislature establishes two funds — the "Olympic Games Trust Fund" and the "Pan-American Games Trust Fund" — to assist the state in its site selection bid for those games.
2003: The 78th Legislature amends the statute to establish a fund now called the “Major Events Trust Fund” that assists the state in bidding to host other large events, including the Superbowl and major sports league All-Star events.
2005: The 79th Legislature establishes trust funds for motorsports racing (such as the Houston Grand Prix) and “Special Events” (such as world-renowned horse shows).
2007: The 80th Legislature establishes a fund for assisting Texas with hosting smaller sporting events (the “Sporting Events Trust Fund”).
2009: The 81st Legislature removes the “sporting” requirement from the type of events that could qualify for the trust fund. The “Sporting Events Trust Fund” becomes the “Events Trust Fund.” The fund may provide financing for both sporting and non-sporting events (such as an international conference).

Each fund was established under the premise that increased revenue coming to Texas from one or more taxes (such as hotel/motel, sales and use, mixed beverage and rental car tax) could be used to help fund the bidding and hosting of the events each fund covers.

In all cases, an event would have to show an estimate of incremental increase in the taxes from out-of-state travelers coming to the event before it can qualify for fund participation. In most cases, a city or county’s share of its increased local tax revenues must be deposited into the trust fund before the state contributes a proportional amount of general revenue to finance an event. For more information on the application process, see Event Trust Funds Programs on the Comptroller’s Texas Ahead website.

From advertising to security

For most events, the state contributes 6.25 times the amount cities or counties are required to contribute to a fund. Once a trust account is established and funded for an event, the funds are used to help pay for the costs of bidding on, planning for or conducting an event as authorized by law.

Frequently paid expenses from the funds include:

  • “Sanctioning” (or hosting) fees that a host community must pay when required by an event;
  • Security-related expenses, including increased police and traffic patrol costs;
  • Advertising, banners and signage for advertising events and their locations;
  • Improvements to real property or facilities for hosting the events;
  • Administrative and facility use costs of endorsing cities and counties, or their organizing committees, directly related to the event; and
  • Other costs of hosting events specified under Event Support Contracts — agreements between the event hosts (or their organizing committees) and event sponsors (or their site selection committees).

Regulating the funds

The Local Government Assistance and Economic Development Division of the Comptroller’s office is responsible for determining if an event qualifies under the statutes, and if so, the appropriate fund to be used. The division reviews the submitted revenue estimates for each event. Those figures are used to determine local and state contributions to the appropriate trust fund for each event.

The Fiscal Management (FM) Division of the Comptroller’s office manages the financial activity in the funds and determines disbursements eligibility. The same FM Division auditors who review state agency and institution of higher education compliance with purchase, travel and payroll expenditure laws also review all events trust funds disbursement requests. The auditors determine if event costs are required or supported by agreements among the local governments and parties who worked together to bring events to Texas, including the event owners. They also determine if sufficient documentation and explanation exists to support the public financing of the costs submitted for reimbursement.

Hay bales and buoy timers

All event costs must be directly associated with an event for which a trust fund account is established and must be related to or specifically referenced by an event support contract requirement. In addition to receipts, contracts and invoices, audit staff and the funds’ disbursement coordinator spend a fair amount of time learning about the events themselves.

In our role as accounts and disbursements coordinator for the funds, we also conduct online research during the review of reimbursement requests. I’ve looked up event dates and specific locations, event sponsorship and participation information and sports franchise involvement. Understanding each event allows us to understand the expenses and document the necessities of the costs paid out of an events trust fund if an expense is approved.

Without a doubt, why the state might help to pay for hay bales and drinking troughs at one event, and buoy timers and board wax at another, would be a documentation necessity.

The funding lowdown

For an event to be approved for the events trust funds, it must be shown to generate revenue in excess of what the state would normally expect to see. In other words, an event needs to display an incremental increase in tax revenues that can then be used in support of the event. So, the money used in the trust funds is unexpected money — money “not already baked into the pie.”

The Comptroller’s office, county and city staff, legislators and taxpayers will continue to carefully monitor the use of these trust funds so they may continue to serve and help Texas’ economy. Here is a partial glimpse of the line up for fiscal 2011.

Fiscal 2011 Events Approved for an Events Trust Fund*

Event Location Month
GameStop, Inc. Annual Convention San Antonio Aug./Sept. 2010
USA Cycling Masters Track National Championships Frisco Sept. 2010
Professional Anglers Association Bass Pro Shops Tournament Series Garland Sept. 2010
Emergency Nurses Association Annual Convention San Antonio Sept. 2010
American Miniature Horse Association World Championship Show Fort Worth Sept. 2010
Emerson Process Management Convention San Antonio Sept./Oct. 2010
American Public Transportation Association Annual Convention San Antonio Oct. 2010
World Waterpark Association Annual Symposium and Tradeshow San Antonio Oct. 2010
American College of Gastroenterology Annual Scientific Meeting and Postgraduate Course San Antonio Oct. 2010
USA Triathlon Ironman 70.3 Collegiate Championships Austin Oct. 2010
Appaloosa Horse Club World Championship Show Fort Worth Oct. 2010
Association of Corporate Counsel Annual Meeting San Antonio Oct. 2010
International Association of Emergency Managers 58th Annual Conference San Antonio Oct. 2010
Big 12 Conference Women's Soccer Championships San Antonio Nov. 2010
American Paint Horse Association Fall Championship Show Fort Worth Nov. 2010
United States Tennis Association National intersectional Men's Team Event Arlington Nov. 2010
Association for Financial Professionals Annual Conference San Antonio Nov. 2010
Rock & Roll Marathon San Antonio Nov. 2010
National Cutting Horse Association Futurity Fort Worth Nov./Dec. 2010
Southwestern Turkey Day Classic Football Tournament Austin Nov. 2010
NCAA Division III Soccer Championships San Antonio Dec. 2010
American Epilepsy Society Annual Meeting San Antonio Dec. 2010
NCAA Women's Volleyball Regional Championships Austin Dec. 2010
NCAA Division I Football Championship Subdivision Game Frisco Jan. 2011
AT&T Cotton Bowl Classic Arlington Jan. 2011
National Football League Super Bowl XLV Arlington Feb. 2011
National Cutting Horse Association Super Stakes Fort Worth March/April 2011
NCAA Men's Division I Final Four Basketball Tournament Harris County March/April 2011
National Cutting Horse Association Summer Spectacular Fort Worth July/Aug. 2010

*As of Sept. 27, 2010

Glenn Hegar
Texas Comptroller of Public Accounts
Questions? Contact statewide.accounting@cpa.texas.gov
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