SXSW cancellation puts Austin’s cultural arts funding in question

No sooner had Austin Mayor Steve Adler announced the cancellation of this year’s South by Southwest festival (SXSW), than chatter began about what local economic fallout would come from shutting down the mega-festival that last year counted 417,400 participants.

It’s an unprecedented move, after all. Since its 1987 founding SXSW has only mushroomed, extending an ever-larger impact and influence on Austin. Financially, SXSW had an estimated local economic impact of $355.9 million in 2019, according to an analysis conducted by Greyhill Advisors.

Adler made the announcement at a March 6 press conference, after issuing a state of emergency over concerns surrounding the novel coronavirus COVID-19. Though as of yet there are no confirmed cases of the virus in Austin, the news came on the heels of a week filled with high-profile SXSW participant cancellations including Facebook, Twitter, Netflix and Amazon.

While scores of local businesses and hospitality and entertainment workers will see an immediate impact, Austin arts organizations can expect a hit too.

The city’s Cultural Funding program comes from Hotel Occupancy Tax (HOT), with cultural arts receiving 15% of the roughly $100 million generated annually in the last few years.

Yet even before the cancellation of the city’s largest event, Austin has seen its HOT funds level off in the last few years, likely because of a surplus of hotel rooms, the city’s Tourism Commission concluded last year. (The city’s Tourism Commission is chaired by Catlin Whitington, previously a SXSW executive, now on the staff of the Long Center.)

In its last round of funding, the Cultural Arts Division (CAD) awarded $12.4 million in cultural contracts to 421 Austin arts organizations and artist projects. And any further drop in HOT taxes will put more pressure on a culture funding system already in disarray.

How much the SXSW cancellation affects HOT receipts won’t be known until figures are reported later this year.

In January, the Cultural Arts Division (CAD) announced that the cultural arts funding process would be put in a holding pattern for a year while new guidelines and requirements are developed. The move comes as a result of two years of contention over the last round cultural funding when many long-time arts groups saw a big drop in their city funding.

In 2018, an increase in the number of applicants saw CAD funding 98.5 percent, or 421 of 427 applications. That caused some long-standing arts organization to see an 11 percent drop in their city funding while many new groups and individual artist projects were funded.

Related: Austin Arts Groups Angered As City Announces Cuts to Funding

Complaints poured in about the sky-high ratio of applicants to funded projects as well as an opaque and overly bureaucratic arts funding process. The $12.4 million that was ultimately distributed came only after CAD added $1 million from a contingency fund to meet.

(City of Austin cultural contracts are awarded in two-year cycles. New applications are accepted every other year and scored by a peer panel. In the interim year, funded projects must re-apply, but their scores are retained from the first year. The last award cycle came in 2018 for FY2019.)

Related: Arts Commission Approves New Cultural Funding Plan

HOT monies are a hot issue city-wide. Last year, the Austin City Council voted to approve a 2 percent increase in the city’s Hotel Occupancy Tax, bringing the city’s hotel tax to 17 percent, the maximum allowable under state law. The change raises the amount paid per dollar spent on hotel rooms and registered short-term rentals from 9 cents to 11 cents.

At the same time the Austin City Council — on the Tourism Commission’s recommendation — voted unanimously to contribute 15% of that increase to support musicians and for-profit live music businesses. Original estimates were that would generate $3.6 million for a yet-to-be-determined music fund. Another 15% of new HOT revenue is dedicated to historic preservation.

“Austin is the live music capital of the world,” Tourism Commission chair Whitington told the American-Statesman last year. “It’s not the chamber capital, visual arts capital, performing arts capital, historic preservation capital or the convention center capital of the world.”

Disclosure: Sightlines receives support from the city’s Cultural Arts core funding program.