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City collectors miss $700K in hotel taxes

Wednesday, August 10, 2005 by

But audit finds 99 percent of fees collected

A report released yesterday says that the City of Austin needs to step up its efforts to collect delinquent hotel occupancy taxes. The City Auditor reports that the city is owed nearly $700,000 in back taxes by hotels and motels, and has not taken legal action to collect them for almost a decade.

But the report,presented to the City Council’s Audit and Finance Committee Tuesday, concludes that while the overall collection rate on those hotel and motel taxes is almost 99 percent, the city has not made efforts to encourage hotels to pay their delinquent taxes since last September.

It points out that the Financial and Administrative Services Department has not called upon the Law Department to sue those delinquent hotels since 1997. “Not fully pursuing delinquent hotels has contributed to a worsening trend of non-compliance, had negative impacts on participating funds, and creates a greater risk of uncollectible accounts in the future,” the report states.

“We have met about this issue,” said Ann Morgan with the City of Austin Law Department. “The plan is that the cases will now be referred to the Law Department. We’ll have a threshold of probably $1,000. After that, we’ll file suit,” she said, adding that legal action would likely spur negotiations with the delinquent hotels. There are 37 properties known to be delinquent, with five outstanding accounts making up more than half of the overall total.

Making an exact determination on the amount of delinquencies was made more challenging for the Auditor’s office by differences in the reporting systems used by the State Comptroller’s Office and the city. The state collects its hotel-motel taxes monthly, while the city collects its taxes on a quarterly basis.

In addition, said City Controller Jeff Knodel, the extended reporting period gave some chronically-delinquent hotels an opportunity to use money that should have been set aside for tax payments to help manage their own cash-flow problems. “I would like to recommend the reporting period be shortened from quarterly to monthly,” he said. Such a change would require action by the full Council to amend the ordinance establishing the hotel-motel occupancy tax.

Auditors made a series of other recommendations to the staff of the Financial and Administrative Services Department to improve the effectiveness of their hotel tax collection efforts. The auditors also said that the city may lack a complete tax roll, including 26 businesses that may owe hotel taxes but have not been asked to pay them.

According to the report, Law Department staff should monitor revenue practices and help tax collectors develop better enforcement mechanisms. In addition, auditors said new owners of hotels should be notified that they are responsible for delinquencies incurred by previous property owners. “There was a big public outreach to the Hotel Motel Association,” said Knodel, who presented many of the report’s findings to the committee. “We feel like most of the hotels that are members are very aware of the reporting requirements, and we would like to develop a more direct approach to getting the information out to all hotels.”

The city collects a 9 percent hotel occupancy tax for each night a hotel room is rented. These funds are earmarked for tourism and convention center programs, as required by state law. More than 70 percent of the money benefits the convention center, much of it through payments on bonds for the Austin Convention Center. Some funds are also earmarked for the Waller Creek Project.

During the past four years, the occupancy tax has yielded more than $100 million dollars for the city and the trend for the current year indicates growth of 12 -18 percent. The convention center estimates that the city could collect more than $28 million from the tax during the current fiscal year.

The report released Tuesday was the first of two. Auditors said they intend to audit selected hotels and motels to ensure that occupancy taxes are being collected properly and sent to the city.

Commission postpones Riverside plan

Democracy and bureaucracy had a head-on collision last night at Austin’s Planning Commission meeting, as the two main topics of discussion pitted neighborhood groups against city staff over whether the substance of an issue or following proper procedures would take precedence.

In the first item, neighborhood groups objected to a last minute request by city staff to postpone a portion of a planned public hearing on the East Riverside/Oltorf Combined Neighborhood Plan, splitting the plan into two parts. Ricardo Solis with the Neighborhood Planning and Zoning Department requested that the commission hold a public hearing on the parts of the plan that dealt with Parker Lane and Pleasant Valley Road, while postponing the Riverside Drive portion of the plan until October.

“The majority of issues in the plan are concentrated along Riverside Drive,” Solis said. “We can go ahead with Parker and Pleasant Valley, and come back to Riverside at a later date. Our staff is committed to begin planning in other parts of the city, and we need to continue with that planning.”

Those from the neighborhoods involved in developing the plan said they were unprepared for staff’s suggestion, having planned on discussing all 126 pages of the document.

“This is the first we have heard of splitting up this project,” said Tim Mahoney of South River City Citizens (SRCC). “We are not wanting to divide up this process. People are not comfortable with separating out these areas to be considered separately.”

Jean Mather, also with the SRCC, said the neighbors in the area have worked for a year and a half to put the plan together.

“We see it as one, unified plan,” she said. “We worked on it together, and don’t want to break it up into pieces and separate plans.”

Commissioner Mandy Dealey, attending her first meeting since being appointed, questioned Solis about his request.

“How can you put a neighborhood plan together in pieces?” she asked, drawing a smattering of applause from the audience. “It’s confusing to me. I don’t see how you can carve out a part of something like this at this point in the process.”

The rest of the commission agreed, and voted 8-0 to postpone the hearing for the entire plan until October 11.

In another case, the Brentwood Neighborhood Association opposed amending the Brentwood/Highland Combined Neighborhood Plan to allow a change in the future land use designation. The request was brought by Dean Harris, who wants to locate a Wireless Toyz store at the corner of Koenig Lane and Lamar Blvd., the former site of a 7-Eleven store.

Gail McDonald with the Brentwood Association, said when the neighborhood plans were set up, the rules stated that amendments to those located west of Interstate 35 would only be heard in February, and in July for those on the east side.

“We worked for a long time to put this plan together, and taking things out of turn will set a very bad precedent,” she said. “We want to eliminate the “nibbling” away at the approval process, but with this, the standard is undone. What it ultimately means is that we no longer can say no to people who want to make exceptions to the rule.”

City staff said the request for an amendment was brought forth at this time because of an error made in designating the property P-NP for Public, rather than LR-CO-NP for Neighborhood Commercial-Conditional Overlay, which it should have been when the 7-Eleven was operated from the site.

Architect Don Burbell with the Brentwood group said that at an August 2 meeting, participants at a neighborhood meeting voted to disagree with the staff’s determination that the plan could be amended due to an error. But at the same meeting, the participants voted to support the proposed plan amendment and zoning change, with conditions.

“So while we disagree with the timing of the request, we have no problem with the business going in at that location,” he said.

Commission Chair Chris Riley said he was perplexed by the neighborhood’s position.

“Why would you have any interest in keeping what is an empty building there now that way until February?” he said. “It seems to me that if I see that someone wanted to redevelop the site and improve that corner, I would be for it.”

Commissioner Matthew Moore and others sought a compromise.

”We don’t want the neighborhood planning process to be too rigorous,” he said. “It seems absurd that after a small business owner has worked through the city process in good faith that this gets thrown up in front of him.”

The commission proposed that the zoning be changed to LR-CO, and city staff work with the Brentwood Associated to help them develop a Neighborhood Plan Contact Team to deal with similar requests in the future.

The motion passed on an 8-0 vote, with Commissioner David Sullivan absent.

©2005 In Fact News, Inc. All rights reserved.

New job for Espinoza. . . Mario Espinoza, city government affairs manager for the LCRA, will be joining the Central Texas Regional Mobility Authority (CTRMA). Espinoza will be responsible for community outreach and economic development activities for the CTRMA, working with local elected officials and the Central Texas legislative delegation on the region's transportation needs . . . Wellness Clinic doing well . . . Travis County reports a good return-on-investment from its wellness clinic, which provides walk-in medical diagnosis for minor medical conditions, as well as on-site presentations at various county offices on medical issues. The clinic also offers exercise classes and walking groups. Alicia Perez estimates the clinic had saved the county $133,000, which is close to the amount that the county estimated it would save. . . Meetings. . . The Solid Waste Advisory Committee meets at 6:30pm in room 105 at the Waller Creek Plaza. On the agenda is a briefing on the 2006 Solid Waste Department budget and a discussion of the pros and cons of privatizing single stream recycling. . . .The Bond Election Advisory Committee, Facilities Subcommittee, meets at 11am in room 1101 at City Hall… The Telecommunications Commission meets at 7:30pm in room 1101 at City Hall. . . . County budget hearings set. . . Executive manager Christian Smith Tuesday presented a brief overview of the preliminary Travis County budget, which would be funded by a tax rate of 48 cents per hundred-dollar valuation. Given rising home values, that will mean a $21 bump in taxes for the average homeowner, up to $792 in county taxes per year. The first hearing on the budget is tonight at 6pm at the Stokes Administration Building. Budget mark-up is scheduled for the first week of September, followed by hearings on Sept. 13, 20 and 27. . . RECA economic forecast luncheon today. . . The Real Estate Council of Austin’s Fifth Annual Mid-Year Economic Forecast for the Austin Real Estate Market is set for Noon today at the Four Seasons Hotel, 98 San Jacinto St. Keynote speaker will be Dr. Mark Dotzour, Chief Economist and Director of Research for the Real Estate Center at Texas A&M University. We hope you already have your tickets, because according to the RECA website, the event is sold out . . . . Chamber Business Awards . . . The Greater Austin Chamber of Commerce has announced its finalists for the Fifth Annual Business Awards banquet scheduled for August 24. Awards will be given in several different categories, which In Fact Daily will preview between now and the event. Nominated in the Commitment to Community category are AvenueOne Properties; Capital Area Council, Boy Scouts of America; David Weekly Homes; Deloitte and Touche; Graves Dougherty Hearon and Moody; Higginbotham and Associates; Meals on Wheels and More; The Real Estate Council of Austin; Seton Healthcare; T ime Warner Cable; Tokyo Electron; United Heritage Credit Union; and Wells Fargo. See for more details.

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