Commissioners look to change how hotel tax revenue is disbursed to tourism agency
Kotula says plan violates state law
The Washington County commissioners are poised to alter how they distribute more than $2 million in hotel tax revenue given annually to promote tourism, although the head of the county’s tourism agency said the proposed plan would violate state law and could lead to a lawsuit.
Commissioners Nick Shereman and Electra Janis want to create a partnership between the county and the Washington County Tourism Promotion Agency that would send 75% of the hotel tax money to a joint fund that would require agreement on how the funds are spent.
The tourism agency would receive 20% of the remaining revenue and the county’s treasurer would receive 5% as an administrative fee. The changes also include plans to jointly “pursue the creation, funding and construction” of a sports recreation and convention center.
The 5% hotel tax brought in about $2.2 million in revenue last year, and the tourism agency received 96% of that money, just as it has since the county’s hotel tax ordinance was last amended in 2017.
“What we want, and the main goal of the county is to actively pursue the creation and funding of a sports recreation and convention center. With $2 million a year, we could fund a significant bond to accomplish this,” Sherman said in a written statement. “Ultimately, there is no better way to attract tourists to Washington County, which is what hotels want and why they pay the tax, than to have a destination that brings people and events here.”
The commissioners discussed the new allocation formula at Tuesday’s agenda-setting meeting and plan to vote during Thursday’s regular meeting to direct solicitor Gary Sweat to draft a new ordinance that would repeal and replace the current one. Commissioner Larry Maggi, who said he was opposed to the move, questioned the changes and asked Sweat if it was legal to include the county in the joint tourism account.
“In your legal opinion, can we do this? Maggi asked Sweat.
“Yes. We’re the legislative body that has full authority and can enact, amend and repeal ordinances,” Sweat responded.
“And you’re saying we can do everything on here that we’re going to do?” Maggi said.
“That’s my opinion. That’s not to say it’s not going to be challenged,” Sweat said.
And that will likely happen after Washington County Tourism Promotion Agency President Jeff Kotula said Tuesday he was “disappointed” the commissioners did not discuss with them the proposed changes, which he thinks clearly sets the county up for a potential lawsuit.
“We would have advised them that the changes they are seeking will violate state law and could end up in litigation against the county,” Kotula said.
He pointed specifically to Pennsylvania County Code Title 16, Section 17507 that gives clear instructions on how the money can be spent and distributed, which states that the “county shall distribute to the recognized tourist promotion agency all revenues received from the tax” within 60 days of receipt.
There is also no clear language about whether construction of a convention center is permitted, with most of the uses going toward marketing, advertising, programs, grants and general promotion of tourism. In September, the county’s Tourism Promotion Agency pitched a 30,000-square-foot, multi-use events center that hosts concerts, conferences and other major events, although Kotula said at the time they were looking for investors to spearhead the project.
“Our legal counsel informed us that the County Code is clear on how the hotel tax is to be collected, distributed and used,” Kotula said. “The County Code does not permit the county commissioners to retain, redirect or allocate those funds for other purposes. The commissioners do not have the authority to change state law by county ordinance.”
In his written statement, Sherman said the proposed changes would harken back to a previous arrangement the county had in 2001 up until the changes were made in 2017. County officials also said they have questions about how the funds are being used with an audit recently showing that millions of dollars are in an interest bearing certificate of deposit account.
“According to the records we do have, we are paying someone to tell us how to attract people to the county,” Sherman said. “We are paying consulting firms and advertising agencies. If (Tourism Promotion Agency) is simply acting as a pass-through, why not eliminate the middleman and put more money toward the actual product? When we sit at the table, we often have the same ideas, so why are we spending so much on consulting fees?”
Maggi said he was concerned about the potential changes on the heels of another decision by Sherman and Commissioner Electra Janis to terminate a multi-year economic development agreement with the Washington County Chamber of Commerce, which is also run by Kotula in conjunction with the tourism agency. He pointed to popular events in the county, such as the annual agricultural fair, PONY League World Series and Covered Bridge Festival as shining attractions promoted by the tourism agency.
Maggi added that he does “not think it is wise to give county politicians control of tourism money to make decisions behind closed doors” with the hotel tax funds.
“I am very disappointed that my colleagues are using back-door tactics to try to dismantle a very efficient and fair system of distributing tourism money throughout Washington County,” Maggi said in a written statement. “I have grave concern over the county’s attempt to grab total control of an agency’s money.”
Maggi said he also reviewed the state law on the subject and noted that it is “pretty clear” the commissioners do not have the power to oversee a joint account with the tourism agency. He said he was asking Sweat to write a legal opinion on why he thinks the change would not violate the prescribed uses of the hotel tax revenue.
“We have no ability to direct where the money goes as state law supersedes local ordinances,” Maggi said.
The commissioners are scheduled to meet at 10 a.m. Thursday in the ground-floor public meeting room in the Crossroads Center building at 95 W. Beau St. in Washington.