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Using Lodging Taxes for Staff Support of LTAC


July 29, 2014 by Toni Nelson
Category: Lodging Tax (Hotel-Motel Tax)

Using Lodging Taxes for Staff Support of LTAC

Can you use lodging tax revenues to pay for staff support of the Lodging Tax Advisory Committee (LTAC)? It’s a good question that we’ve been getting lately. After conferring with the State Auditor’s Office, we’ve concluded that this is an allowed use of the lodging tax, as long as important requirements are met. [For an update to this post, see "UPDATE to - Using Lodging Taxes for Staff Support of LTAC," posted 8/20/2014.]

First and foremost, provided that your jurisdiction meets the requirements of state law related to lodging tax revenues, the direct costs of administration would be an allowed use of those funds. Specifically, the jurisdiction would have to submit an application for use of lodging tax funds, just as any other applicant for funds would. In addition, the allocation of administrative costs will need to be documented for audit review.

OK, but the lodging tax statutes never specifically mention support for the lodging tax committee as a permitted use of funds. So, how do we get there? Well first, the lodging tax statutes establish that the taxes must be used for activities designed to increase tourism, including tourism marketing. In addition, RCW 67.28.1815 states:
Except as provided in RCW 67.28.180, all revenue from taxes imposed under this chapter shall be credited to a special fund in the treasury of the municipality imposing such tax and used solely for the purpose of paying all or any part of the cost of tourism promotion, acquisition of tourism-related facilities, or operation of tourism-related facilities…. (emphasis added.)

So, the lodging tax revenues can be used for all or any part of the cost of tourist promotion.  RCW 67.28.1816(2)(b)(i) requires the creation of the local LTAC for those municipalities with populations of 5,000 or more.  It is our opinion that LTAC’s primary function is to promote and market tourism. As such "all or any part of the costs" of tourism promotion and marketing are provided for under RCW 67.28.1815. The role of the LTAC to “select the candidates” applying for revenues and provide a list of such candidates, along with recommended amounts of funds to be distributed to the municipality for final determination, is an required component of the distribution of these restricted resources. It is appropriate that administrative support be provided to LTAC to meet these requirements.

City or county staff specifically assigned to this function would be considered a direct allocation of costs for tourism promotion and marketing. It is important to note that the jurisdiction will be required to submit a request for fund disbursement along with the other applicants. As part of the application process, the jurisdiction will have to submit expected increases in three specific categories of travelers that have been identified as follows (RCW 67.28.1816(2)(a)(i), (ii), (iii)) :
  • Staying overnight in paid accommodations away from their place of residence or business;
  • Staying overnight in unpaid accommodations (e.g., with friends and family) and traveling more than 50 miles; or
  • Staying for the day only and traveling more than 50 miles.

All entities that use lodging tax funds must report on these measures to the State’s Joint Legislative Audit Committee (JLARC). JLARC has stated that “In cases where obtaining actual attendance by traveler category is not practical, a good faith best-estimate will suffice.” One approach may be to attribute a proportionate share of the tourists associated with the events supported by LTAC and lodging tax revenues to the administrative staff support.  However, this would have to be done in such a way as to avoid double-counting of tourists. Another approach would be to note that the administrative support would not be expected to directly increase tourists in these three categories, but rather it promotes tourism by increasing the capacity of the LTAC to support organizations that are directly sponsoring tourist activities.

What if staff support for LTAC is only part of someone’s job, or is spread amongst two or three staff members whom each have other responsibilities? Then you’ve got to allocate actual staff costs to the lodging tax fund as accurately as possible. Due to the restrictive nature of these revenues, the Auditor’s Office will expect that all cost allocations are documented and well supported for the audit review. They will be specifically looking for compliance with RCW 43.09.210 – which in part states that “one fund shall not benefit from another.” If the jurisdiction allocates too much of its administrative costs or overstates the costs of administrative services to the LTAC, it would be in violation of this statute.

For additional information on the lodging tax, see MRSC's webpage, Lodging Tax (Hotel-Motel Tax).

About Toni Nelson

Toni has over 24 years of experience with Local Government finance and budgeting. Toni's area of expertise include "Cash Basis" accounting and reporting, budgeting, audit prep and the financial issues impacting small local government.

VIEW ALL POSTS BY Toni Nelson

Comments

"Hello to all, the contents existing at this site are in fact remarkable for people knowledge, well, keep up the nice work fellows. fdfegfebefdfbcaf"

Smithb908 on Sep 4, 2014 2:14 AM

"We would concur that sometimes the statutes seem to impose cumbersome requirements to fulfill the objectives and at the same time the interpretations of the law can be constantly evolving, especially when there are multiple agencies involved in the interpretation. We at MRSC are historically conservative with our interpretations and guidance. It is our mission to make local government successful and to that end we do not want to see any local governments challenged during an audit for misinterpretations of the law. We have had another conversation with the WA State Auditor's Office on this issue and have updated the blog posting to remove the recommendation to submit administrative support costs to the LTAC for approval."

Toni Nelson on Aug 20, 2014 10:21 AM

"Very confusing post. The subject is staff support. That usually starts with annual action to provide the guidelines to the legislative body ... how much money to allocate, any special rules, limitations, etc. Once the legislative body make their decisions, City staff has to advertise, collect proposals, and prepare for the LTAC committee meetings. Questionable proposals need to be legally reviewed. Sometimes LTAC meetings are supported with City staff, sometimes not. Then, the City staff have to write the annual contracts ... yet again a legal review. Then, City staff have to administer the contracts, receive and certify invoices ensuring payments are per contract specs, etc. City staff usually collects the data for the annual report to the legislature. The concept that the City would have to submit a funding request with the three elements of tourism promotion is ... well, completely absurd. The adminsistrative cost to the City isn't even know until a year or more after the LTAC meetings. Some cities have a percentage of staff administrative costs in their LTAC ordinances, which is simple and logical. 3%-5% seems to be the usual range. I think this whole MRSC piece needs a substantive scrubbing because it doesn't make sense in any number of ways."

Robert Dashiell on Aug 15, 2014 1:47 PM

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