Galveston, park board move toward new interlocal, but HOT fee and reserves remain unresolved

City staff and Park Board trustees presented a draft interlocal agreement and the Park Board's proposed FY2026 budget to the Galveston City Council on Aug. 14, laying out how the city will collect hotel-occupancy tax (HOT) starting Oct. 1 and how Seawall-area parks and related services will transfer from the Park Board to city management.

City Finance Director Sheila Laddani said the Park Board's FY26 HOT revenue projection is $19.2 million and the city is budgeting additional non-HOT payments to the Park Board of about $2.3 million for services such as seawall maintenance. Laddani said those figures and a recent recalculation of the certified property tax roll produced an unexpected $449,340 drop in general‑fund property‑tax revenue, leaving a roughly $513,000 gap between the Park Board budget and the city's administrative fee on HOT collections.

The draft interlocal clarifies service expectations, delineates which entity will pay for routine maintenance versus capital repair, and ties Park Board compensation for seawall services to the Board's cost-of-service budgets. Dan Buckley, the city's lead on the interlocal, said staff and trustees had reduced projected seawall amenity costs from more than $1 million to about $698,000 by better defining responsibilities and realigning staffing.

Interim Park Board CEO Marty Miles told council the Park Board recently received 501(c)(3) status for a community police foundation and is changing how reserves and operating cash are managed. He said trustees plan to revise the Park Board's reserve policy so the Board can use reserves to smooth cash-flow gaps and pay for unexpected capital needs without returning surplus HOT dollars to the city immediately.

Laddani said staff recommend approving the Park Board budget for the first two quarters of FY26 to allow the Park Board and city staff time to negotiate open items and produce a midyear amendment by February or March 2026. That would let the Park Board operate while staff work on solutions for the $513,000 shortfall and on clarifying reserve rules, she said. Council members pressed for a definitive path to resolve the shortfall; several said they want the Board to be able to draw down reserves for one‑time capital repairs but not to rely on reserves for recurring operations.

Council members also asked for clearer, recurring reporting from the Park Board and for written policies about staff entertaining clients and spending HOT funds. Buckley said the HOT contract being drafted bars use of HOT to pay lobbyists and limits severance pay charged to HOT; it also requires quarterly HOT transfers and more detailed reporting.

Councilmember David Brown and others said they supported moving the collection of STR registrations and HOT to the city on Oct. 1 but urged quick follow-up on the reserve policy and on the Park Board's CIP requests. Park Board trustees said they plan to present a CIP and any reserve-policy changes to council and trustees in the months ahead.

If the council approves the draft interlocal and HOT contract as planned in late August, Buckley said staff will work with trustees to finalize outstanding items and return with ordinances and the Park Board's CIP in time for budget hearings.

Ending: City and Park Board staff said they will continue working on the administrative‑fee shortfall and the Park Board reserve policy; council directed staff to bring a midyear Park Board budget amendment and clearer reporting language back before March 2026.