Innkeepers Tax Revenue – Govt Oversight

brown county indiana

Updated: Jan 12, 2022

2016 IC 6-9-14 Chapter 14. Brown County Innkeeper’s Tax

Jan 6, 2022. Innkeepers tax hits $1 million: Checking in with visitors bureau, music center By Suzannah Couch

    •  IIC 6-9-14-4. Payment of expenses; budget; expenditures Sec. 4.  All expenses of the commission shall be paid from the fund required by section 7 of this chapter. The commission shall annually prepare a budget taking into consideration the recommendations made by a not-for-profit corporation qualifying under section 3 of this chapter and shall submit it to the county council for its review and approval. No expenditure shall be made unless it is pursuant to an appropriation made by the county council in the manner provided by law.
    • The not-for-profit-corp is the Convention Visitors Bureau (CVB).
    • “Sec. 7. The county treasurer shall establish a convention and visitors fund. He shall deposit in the fund the money he receives under section 6 of this chapter. Money in the fund may be expended only as provided in this chapter.”

The Brown County Council believes that they do not have to apply the same standard for a budget review and approval for the Conventions Visitors Commission (CVC) budget that they do for the other County Departments.  No documentation was provided that identifies the recommendation made (if any), by the CVB as required by statute.

The review and approval of Department budgets involve reviewing revenue and expense trends from prior years, reviewing the status of funds, and reviewing expenses by fund code.  Council members then discuss the need for adjustments.

In the case of the CVC budget, only summary amounts of the expected total income and expense were identified. This is what was reviewed and approved by the Council.

    • Per Dave Redding, Council President (email, Dec 22, 2021):  “The question was raised with Barnes and Thornburg during or after our mid-year budget review process  (2020) about whether Council had conducted proper reviews of all fund budget requests.   This was a phone conversation between myself and two of the attorneys from B&T and they confirmed that our Council budget reviews met/exceeded the requirements.”
    • Note:  I served a “tour” as a federal financial auditor. The review and approval process for the CVC budget would not have met requirements. I understand the State and County may have less stringent legal and professional standards. This is especially true in the area of obligating expenses without approval of a specific appropriation such as what happened with the $239k subsidy (see below).  The Federal Goverment also has a more robust internal control program required by the Federal Managers Financial Integrity Act (FMFIA). The purpose is to help assure the efficient and and effective use of tax dollars. My experiences reinforced the need for “systemic” improvements.
  • Revenue from the innkeepers’ tax serves as collateral for the $12.5 million dollar mortgage loan for the (BCMC).  Commissioners and Council were required to review and approve this commitment.

The priority for the revenue from the innkeepers’ tax is to pay the mortgage and any needed expenses for the BCMC.  The remainder of the revenue is provided to the CVB. A councilman and commissioner are members of the BCMC management group.  The Council did not review any financial statements associated with the BCMC as part of the annual budget review and approval process.

Lack of oversight of the revenue from the innkeepers’ tax contributed to the need for the County to provide a $239K subsidy (including “rent”) this year (2021) to the Brown County Music Center (BCMC).  Both the Council and Commissioners approved this subsidy “after” the terms were developed and a financial obligation incurred.  Details as to the specific services the County received were not identified. Nor, was there any indication that an anaysis of alternatives (AoA)  was conducted.  There were less expensive options.

Innkeeperss Tax – Purpose

The State government approved the in.nkeepers’ tax statute.  It’s a tax of 5% on overnight stays in hotels, tourist rentals, AirBnbs, etc. The County government enforces the statute, and the revenues are managed by the county auditor and county treasurer.  The  Convention Visitors Commission (CVC) administers the funds. The Council and Commissioners appoint members to the CVC. The Convention Visitors Bureau (CVB) is a non-profit entity established to manage the funds with the purpose of promoting tourism.

The State is primarily funded by revenue from Sales tax and Income tax.  The justification for the innkeepers’ tax is to help generate sales tax revenue. The County is primarily funded by income and property tax.

Tourism and Overtourism

On Tourism, it can include almost any endeavor that results in visitors.  A variety of tourism categories is provided at Wikipedia.  The issues involving “overtourism” is defined below.

Typically, citizens not involved in the tourism industy have had little if any input on how the revenue from the innkeepers tax should be spent. The County Council has historically taken a hands off approach and not recognizing that this revenue is a “county” asset. Consequently relative to their approval of the Music Center, the Council as well as Commissioners did not hold any public meetings to obtain citizen input on this venue.  Background information on the topic:

Preventing overtourism that negatively impacts the County is the responsibility of the county elected officials that appoint members to the CVC.  The vision for tourism and the intent to avoid overtourism could be provided in the County Comprehensive Plan that is approved by the Commissioners.

    • “Overtourism is the perceived congestion or overcrowding from an excess of tourists, resulting in conflicts with locals. The World Tourism Organization (UNWTO) defines overtourism as “the impact of tourism on a destination, or parts thereof, that excessively influences perceived quality of life of citizens and/or quality of visitor experiences in a negative way”.[1] This definition shows how overtourism can be observed both among locals, who view tourism as a disruptive factor that increasingly burdens daily life, as well as visitors, who may regard high numbers of tourists as a nuisance.”

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