Tourist bureau questions if all hotel taxes collected - LancasterOnline: News

Tourist bureau questions if all hotel taxes collected

Print
Font Size:
Default font size
Larger font size

Posted: Sunday, February 26, 2012 12:20 am | Updated: 3:16 pm, Thu Sep 12, 2013.

Chris Barrett is worried.

Last year, a global leader in travel research reported that Lancaster County sold more hotel room nights than ever before. Barrett, president and CEO of the Pennsylvania Dutch Convention and Visitors Bureau, said this means revenue generated by the two taxes the county levies on hotel rooms should have soared.

Instead, it barely got off the ground, growing at an anemic 0.7 percent rate.

Barrett and others in the tourism industry want to find out why. But they're having a hard time getting answers, even as county commissioners have been asked to increase one of the two hotel levies, because it's not generating enough revenue.

Last month Kevin Molloy, executive director of the Lancaster County Convention Center Authority, asked commissioners to hike the county's hotel room tax from the current 3.9 percent to the legal maximum, 5 percent. The second levy, a 1.1 percent excise tax, would remain unchanged.

The hotel room tax generates money for both the convention center authority, which gets 80 percent of the revenue, and the visitors' bureau, which uses its 20 percent cut to help market the county to potential visitors.

Molloy said a tax hike is needed to allow the convention center to keep its financial commitments. If the tax isn't hiked, or major savings can't be found, the authority's financial covenants authorize it to begin taking all of the hotel room tax revenue. The visitors bureau, which has seen millions in state funding disappear in recent years, would endure another blow, and many worry that its ability to attract visitors could be hindered. Lancaster County's tourism industry itself could take a hit.

So the bureau recently appointed a special task force to get a clear picture of the convention center's fiscal situation and make recommendations. The task force is looking to turn over every stone in the search for more revenue. Some tourism officials think they've found a boulder: a half-million dollar discrepancy between what industry analyst Smith Travel Research suggests the county should have collected in hotel tax revenue last year and what the county treasurer's office did collect.

Tourism officials don't know why there's such a big discrepancy between the two numbers, and want to find out. But county Treasurer Craig Ebersole said some of the information the bureau and its task force are seeking simply doesn't exist; other information is proprietary and can't be released.

That frustrates Barrett, who says he's not looking to compromise anyone's trade secrets - he just wants to "understand why this historic discrepancy between the two reports has arisen, and at such an inopportune time."

Newspaper's filing

Earlier this month, the Sunday News filed a Right-to-Know request with the county, seeking access to the monthly reports filed by local hotels, which list the amount of taxes paid, and - if hoteliers filled out the appropriate part of the form - the number of room nights sold. The bureau last year filed a similar Right-to-Know request but withdrew it in the wake of complaints from hoteliers.

Last week, the county responded to the Sunday News request, officially requesting an extension of time to determine whether the records are subject to Pennsylvania's Right-to-Know Law. County Open Records Officer Meredith Schreffler said the county would respond to the newspaper's request by March 16.

In January, Molloy, of the convention center authority, released a white paper calling for a hotel room tax hike to put the authority on sustainable fiscal footing and allow the visitors bureau to continue receiving its 20 percent cut of the revenue.

The bureau receives the entirety of the 1.1 percent excise tax, less a fee it must pay to the county to collect it - which Barrett said totals about $72,000 per year.

Molloy noted that the authority's lenders require it to keep at least $5.25 million in its "rainy day" fund; if the amount falls below that threshold for two consecutive quarters, the county's hotel room tax law automatically redirects the visitors bureau's portion of the hotel tax to the convention center. That could happen by April 1.

The commissioners have been cool to the proposal; many hoteliers hate it, saying it will make a Lancaster County vacation less affordable for the average traveler.

The publicly owned convention center is in downtown Lancaster, adjacent to the Marriott hotel, which was developed by the private Penn Square Partners. The Redevelopment Authority of the City of Lancaster owns the hotel and leases it to the partners.

Penn Square Partners consists of Penn Square General Corp., an affiliate of the High companies, and Penn Square Ltd. LLC, an affiliate of Lancaster Newspapers Inc., publisher of the Sunday News and the Intelligencer Journal/Lancaster New Era.

In an editorial last Sunday, the Sunday News said Penn Square Partners should report on its room nights because of the tax dollars used to build the facility.

The task force convened by the visitors bureau is examining the convention center's financial condition, recommending ways to boost usage of the facility and investigating what default could mean. Barrett said definitive information on room nights sold and tax revenue generated is a key to this effort.

Smith Travel Research, which analyzes the hotel industry and provides market-share analysis for major hotel chains and brands in North America and the Caribbean, estimated that in 2011, a record 1.42 million room nights were sold in the county.

STR estimates that this should have resulted in hotel tax revenues of $4.1 million and excise tax revenues of $2.45 million.

But the treasurer's office reports collecting $3.68 million in hotel taxes, and $2.3 million in excise taxes - a cumulative difference of more than $520,000.

Ebersole, the treasurer, dismisses the "shortfalls" from the STR information, saying that it's based, in part, on estimates. Yet Mike Messina, the visitors bureau's managing director of sales, says the STR assessment may be a more accurate barometer of the the county tourism industry than anything the county itself can provide.

More than half of the hotels in Lancaster County, 50 of 97, submit occupancy and rate information to STR, he said. Those 50 properties are some of the largest in the county, accounting for 5,007 of the 7,171 rooms available here.

For those that don't participate, STR estimates occupancy and room rates based on what similar-sized properties have reported. The result, Messina said, can't be considered definitive, and yet it's always in the ballpark. The difference between what STR suggests the county should have collected and what the county did collect is off by a few percentage points here and there.

In 2011, he pointed out, the gap was nearly 9 percent -\!q which tourism officials call unprecedented.

"The discrepancy is so big, I can't imagine all the taxes due are being collected," Messina said.

Indeed, late payments have nearly tripled over the past three years - from just under $280,000 in 2009 to $802,053 in 2011.

So the bureau and the task force are hoping the county will release whatever information it can, without identifying individual hotels. "Ideally, we need adequate summary information concerning the total county rooms sold monthly and total monthly revenue realized from those rooms," said Barrett, the visitors bureau president.

But Ebersole, the treasurer, believes the discrepancy is most likely due to miscalculations by Smith Travel Research rather than his office.

"The on-site audits [of hotels by the treasurer's office] have been performed for years and much more clearly reflect the actual revenues as opposed to extrapolated numbers" produced by STR, he said.

The largest hotels are audited on an annual basis, he said. Facilities are notified of the date of the audit and are asked to have information for five random months out of the last 12 ready for inspection. "If those are spot on to the penny, [the auditor] will move on to the next facility," Ebersole said. If there's an issue, the auditor will ask for additional months' worth of information.

Smaller properties are audited less frequently; bed-and-breakfasts might be audited once every two to three years.

A small penalty is supposed to be assessed on hoteliers who pay their taxes past the due date - three-quarters of 1 percent per month. In theory, because late payments have increased, the amount of penalty fees should have increased and, while minuscule, would constitute another source of revenue.

Ebersole said his office doesn't track penalty fees paid: "We do receive penalty fees as part of payments, but we do not track it by facility or in total because the system is designed to get money back out every month" to the visitors bureau and convention center authority, he said.

Ebersole noted that the county ordinance that authorized the hotel room tax and excise tax doesn't require hoteliers to specify the number of hotel rooms sold each month - though the form hoteliers must submit to the treasurer's office has a space for that information to be listed. And while some hoteliers do include the information, "in the interest of keeping our costs of collection one of the lowest in the state, we do not track info that we are not required to track," Ebersole said.

Former county treasurer Greg Sahd, who preceded Ebersole and devised the form that hoteliers remit with their tax payment, said that "I don't recall hoteliers, or B&B owners, not entering the information... I don't think it was ever an issue."

As the clock winds down to the April 1 deadline, tourism officials fear their inability to get definitive information out of the county will compromise the task force's effort to create a clear picture of the convention center's fiscal condition.

"This task force isn't seeking anyone's trade secrets or proprietary information," Barrett said.

"Just the facts."

Gil Smart is associate editor of the Sunday News. Email him at gsmart@lnpnews.com, or phone 291-8817.

More about

More about

More about

Reader Poll

Loading…