Comptroller representative outlines uses for HOT funds
by Gary Kent
Aug 12, 2012 | 1109 views | 0 0 comments | 5 5 recommendations | email to a friend | print
BEEVILLE — It was not exactly standing room last month when Russell Gallahan of the State Comptroller’s Office spoke on the use of hotel and motel occupancy funds.

One City Council member, Mayor Pro Tem Mike Scotten, was there, along with City Manager Deborah Ballí and Interim City Secretary Tami DuBois.

But no one from community organizations that have traditionally requested funds to assist them in advertising and arranging attractions for events like the Bee County Western Week Celebration or Diez y Seis Fiesta was among the crowd of 18 at the late July session.

Beeville Main Street Manager Michelle Wright had invited as many interested parties as possible to the meeting she dubbed, “What’s HOT and What’s Not.”

The term HOT is what is normally used to shorten the term hotel and motel occupancy taxes.

Gallahan explained that cities and counties are allowed to establish the occupancy taxes on hotels, motels, bed and breakfast rooms, rooming houses and cabins. The standard rate is 6 percent, he said, but some municipalities charge 7 percent.

One catch in the tax is that it can only be collected on the temporary rental of a bedroom in a fixed building. The tax does not pertain to tents, travel trailers or mobile homes.

Also, if a room is rented by the month (30 days or more) the tax cannot be collected. The lodging would then be considered a permanent residence.

Gallahan said the tax rate is set by the locality but it cannot exceed the state limit. Also, it is collected locally. “Hotels file a tax report directly to the city or county,” Gallahan told those at the meeting. And the entities are the ones who must collect unpaid taxes.

Local governments may allow a business to pay only 99 percent of the tax and keep the 1 percent for collection expenses.

Gallahan said these days that normally is done by computer and the business does not have an expense in collecting the tax. But the ability to keep that 1 percent is an incentive for the business to make sure the tax is paid.

Some guests are exempt from paying the tax. Those include federal employees, foreign diplomats and state legislators and judges. State employees must pay the tax but they are allowed to request a reimbursement.

HOT funds can be used for a number of expenditures that will bring customers to the hotel and motel industry in a community. That includes promoting events like rodeos, building baseball stadiums, posting signs to promote events and for repaying bonds sold to finance such projects.

Although HOT funds can be used to pay for management contracts, they cannot be used for general revenue or for expenditures, like paving streets.

Chambers of commerce are eligible to receive HOT funds. But those organizations must use the money to promote the hotel and motel industry in their communities.

Chambers of commerce that receive HOT funds on a contract basis must provide the local government with an annual budget, provide a quarterly report and that money must be kept in a separate account. Chambers also must have those records audited annually.

“Don’t make the Chamber of Commerce pay for an audit,” Gallahan said. Have the chamber turn its books over to the city so that the auditor inspecting the city’s records can add the chamber’s HOT funds audit to the task.

Gallahan said that can save the chamber money.

When it came time to answer questions, Gallahan assured those present that HOT funds could be used to pay the cost of putting up a booth at a hunting conference in another city or to promote the arts.

He said hotel and motel clerks routinely ask visitors what brings them to town and that information is recorded.

Hotels and motels also have information that could be shared with cities that could give the municipality an idea of how many visitors rented rooms during a particular event.

When he was asked about the impact of the current oil boom on motel rooms in Beeville and how the community could see to it that rooms are vacant during local events, Gallahan said there were a number of ways to do that.

One way would be to schedule events on weekends or holidays when many of the oil field workers would be going back to their homes. He said another way that rooms are made available is by hotels and motels raising their rates to take advantage of the higher demand.

In most cities located in and around the current Eagle Ford Shale oil field activity, mobile home and RV parks have been popping up outside the cities. That opens up hotel and motel rooms for other guests.

Gallahan said Beeville can expect the demand for rooms to remain high here for decades to come. He said current estimates for the Eagle Ford Shale are for development of the wells to continue for 40 years and for extraction from those wells to go on for 60 years.

Taxing entities also may stockpile HOT funds indefinitely, Gallahan said.

The taxing entity may loan out the money for projects that will bring more visitors to stay in hotels and motels. It would be up to the city to collect the repayment of those loans.

“The City Council is the ultimate arbiter of HOT funds,” Gallhan said. But the city attorney must be the council’s guide in making those decisions. The attorney will be the person called to testify to the Attorney General’s Office if any of the money is misspent.

Attorney Tom Beasley asked who is responsible for deciding if the money is “putting heads in beds.” He was told that would be the City Council.

Beasley then asked what would constitute historic preservation and Gallahan said any building more than 50 years old could qualify for HOT funds. “If you believe restoring a building will put heads in beds, then you can use money for it.”

Wright asked about the use of HOT funds at the city’s community center because it hosts some events that bring out-of-town visitors.

Gallahan said that to qualify, the community center would have to be designated a “convention center.”

The comptroller’s representative then explained how other cities have used HOT funds, citing Fredericksburg’s use of the funds on restoring historic buildings and Zapata using the money to build up a hunting and fishing industry to keep the community going after the end of the current oil boom.
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