We have been trying to understand the finances of the Lake County Ohio Port & Economic Development Authority and the Lake County Visitors Bureau. The Visitors Bureau is a Non-Profit 501(c)6, and the Port Authority is a governmental body and a product of the Ohio Revised Code. Although they are supposed to be independent autonomous entities, they are very closely monitored and controlled by the Lake County Commissioners, and in our opinion falls under our golden rule philosophy (He who has the gold makes the rules).
There is a particular circumstance that bothers us a bit since we believe the Commissioners are “working around” the Ohio Revised Code relative to the allocation of Lodging Taxes. It is a bit confusing, but let us try to simplify it.
1. The ORC allows an eligible county to collect a 3% lodging tax. Lake County is an eligible county and Lake County has levied a 3% lodging tax.
2. The ORC requires the county to return about 2% of the tax proceeds back to communities within Lake County that have hotels within their boundaries.
3. The remaining 1% of the lodging tax proceeds are to be held in a separate fund, which is being called the Tourism Reserve Fund, by the county to be used solely for convention center or Visitors Bureau expenses.
4. In 2015, the 131st General Assembly proposed modification of a whole lot of sections of the ORC in H.B. 64, a budget bill (LFC Note: Since 2009, it appears that every instance of levying and raising lodging taxes by revision of those sections of the ORC has been accomplished by way of budget and appropriations bills).
5. One of the proposed modifications was an increase in lodging taxes of 2% to be used for the sole purpose of financing lakeshore improvement projects constructed or financed by the Port Authority. This section of code clearly states that none of the proceeds from this brand new 2% lodging tax is to be used for Port Authority operating expenses.
ORC Section 5739.09, Administration and Allocation of Lodging Tax, is the section of code that governs the allocation of the lodging tax (http://codes.ohio.gov/orc/5739.09v1). This explanation found at the Ohio.gov website is a bit easier to understand https://www.tax.ohio.gov/tax_analysis/tax_data_series/sales_and_use/s4/s4cy03.aspx.
As stated above, based on our reading of the ORC, at no time shall lodging tax funds be used to pay for operating expenses of a port authority, unless said port authority is operating a military-use facility. A port authority may be reimbursed for expenses incurred in connection with a coastal improvement project via cooperative agreement under ORC Section 307.678 Tourism Development Facility or Project Cooperative Agreements.
Here’s where things get a bit, as they say, “dicey.”
The Director of Coastal Development, is a port authority employee reporting directly to Mark Rantala, Executive Director of the Port Authority. As a Port Authority employee, the Director of Coastal Development receives all the benefits of a Lake County government employee, including OPERS. However, the Port Authority does not have enough revenue to fund this position. Here is where the Commissioners get a bit creative and a “wink and a nod” to the ORC.
The Commissioners use the revenue in the Tourism Reserve Fund (the 1% lodging tax fund referenced above), which is to be used solely for Visitors Bureau expenses according to the ORC, to fund the salary and benefits for the Director of Coastal Development, a Port Authority employee. Technically, the Commissioners are following the ORC, i.e. they do not write the check directly to the Port Authority. Here’s how it works:
- The Port Authority Director, Mark Rantala, sends a letter to the Visitors Bureau asking for their support (Port Authority letter to Visitors Bureau).
- The Visitors Bureau dutifully drafts a letter to the Lake County Administrator, Jason Boyd, requesting allocation from the 1% Tourism Reserve Fund to cover the salary and benefits of the Director of Coastal Development (Visitors Bureau letter to County Admin).
- Boyd processes the request, sends the check to the Visitors Bureau which, in turn, writes a check to the Port Authority for the same amount. And “Bada Bing Bada Boom…Bob’s your rich uncle,” everyone has covered their bases, and compliance with the Ohio Revised Code relative to allocation of the 1% lodging tax funds has been met.
Based on the records that have been produced, this practice has been going on since the Director of Coastal Development position was created. Is that really how we want our local government to work? Is it right that the Visitors Bureau is funding a County employee who receives a much better salary and benefits package than the Visitors Bureau employees?
Lake County does have a Coastal Development Plan (http://lcport.org/coastal-development-plans). One could argue that the Lake County Coastal Development Plan qualifies as an ongoing project, right? Not so fast. It is so very important to read the definitions in each section of the ORC, because by golly the definition of a word in one section of the code does not necessarily mean that the same definition will be applied to the same word in another section of code.
After careful review of ORC Section 307.678 Tourism Development Facility or Project Cooperative Agreements (referenced above), the definition of the word “Project” means acquiring, constructing, reconstructing, rehabilitating, remodeling, renovating, enlarging, equipping, furnishing, or otherwise improving a tourism facility or any component or element thereof. Could the salary and benefits of the Director of Coastal Development, a Port Authority operating expense, be considered a component or element of a tourism facility?
We humbly offer the following suggestions to the Commissioners:
- Work with State representatives to change the ORC to allow the Port Authority to use funds from the newly levied 2% lodging tax to be used for coastal development projects to include funding of the salary and benefits of the Director of Coastal Development (We know that it is a long and tedious process, voters may become involved because some of these modifications of the ORC are subject to referendum, frankly this suggestion may not be possible given the specificity with which the lawmakers spelled out that funds from this 2% could not be used for port authority operating expenses when they levied the tax, and other sections of the ORC may prohibit this suggestion…but maybe just give it a whirl).
- Make the Director of Coastal Development a Visitors Bureau position reporting to the Executive Director of the Visitors Bureau…problem solved and the transaction is squeaky clean (Problem there is that the salary may be required to be reduced due to the fact that the Visitors Bureau is a non-profit. Additionally those nice government bennies go away).
- The Commissioners can pick up the slack and fund the Director of Coastal Development position out of the general fund or another fund, but the budget gets tighter every year (The Commissioners are already funding a large portion of the Port Authority and Lost Nation airport budgets as it is, the Port Authority is miles away from being self-sustaining; and we understand that The Better Flip project is not going as well as planned…stay tuned for that story).
- Insist that the Port Authority find enough revenue in their current budget to fund the salary and benefits of the Director of Coastal Development (We have some ideas about how this might be accomplished in short order if the Commissioners are interested).
With a special thanks to an ever helpful and transparent Jason Boyd, Lake County Administrator, and Michael Matas, Lake County Finance Direcctor, here is a summary of all expenditures from the 1% Tourism Reserve Fund for the periods 2014 – 2018. bed tax 1% fund expenditures 2014 – 2018