How Greeneville and Greene County choose to allocate Hotel/Motel Tax revenue remains a topic of discussion between the two governments. Greeneville has yet to make its appropriations, raising concerns among county officials that a failure to fund the Greene County Partnership could jeopardize federal support.
On Wednesday, Greene County Mayor Kevin Morrison and Budget and Finance Director Danny Lowery addressed the county’s Budget and Finance Committee. They warned that if Greeneville discontinues its usual allocation of Hotel/Motel Tax funds to the Partnership, the result could be a loss of $100,000 in American Rescue Plan funding.
ARP funds, which were distributed in the wake of the COVID-19 pandemic, can be used by local governments for a variety of infrastructure and development projects. Lowery said the ARP contract prohibits a reduction in funding from the amount allocated in the first year of the three-year agreement. He cited guidance from the Tennessee Department of Tourist Development.
As a precaution, the Budget and Finance Committee approved a resolution authorizing supplemental funding to the Greene County Partnership from Fund 189, which is supported by Hotel/Motel Tax revenue.
Meanwhile, the Greeneville City Council took no official action on Hotel/Motel Tax appropriations during its meeting Tuesday. However, members discussed the possibility of addressing the issue at their next meeting in two weeks.
In a two-page memo to council members earlier this week (SEE BELOW) City Manager Todd Smith said the upcoming meeting would include discussion and guidance on drafting a formal policy for how Hotel/Motel Tax funds should be allocated in the future. Smith said the goal is to have a draft policy ready for consideration by Aug. 5.
After some discussion, council members agreed to consider making appropriations in two weeks to fund this year’s recipients—groups that have historically benefited from the tax. They plan to focus on long-term planning for next fiscal year and beyond after that decision is made.
NOTE FROM TODD SMITH TO CITY COUNCIL CONCERNING THE FUTURE OF HOTEL/MOTEL TAX FUNDING
City Council,
Greeneville is a pioneer in implementing the most recent state statute allowing for the collection of hotel/motel tax. Expenditures are limited to tourist-related activities, but unknowns exist as to how these expenditures should be distributed. The state Comptroller’s office is also trying to fully understand the statute. One recommendation the Comptroller’s office had, however, was to adopt a Council approved spending policy for hotel/motel tax collections.
Expenditures are limited to tourism activities, defined as “attracting nonresidents to visit a particular municipality and encouraging those nonresidents to spend money in the municipality”. Under this definition there are two categories to spend these funds: operations and capital.
Operations
These expenditures would cover recurring and ongoing expenses. Examples include paying for ongoing marketing, advertising, event planning/execution, materials for event execution, staff time for events and other recurring expenses.
Capital
This category includes equipment and property purchases/improvements related to tourist activities. Examples include equipment for special events and sporting events (ie stages, portable bathrooms, bleachers, etc). Property improvements/construction include building renovations for tourism events, infrastructure improvements for tourism related properties, construction of facilities to promote tourism, and other one-time large expenses.
Considerations
The City Council could choose to spend hotel/motel tax on one option (operations or capital) or choose a combination of those options. In looking back on the implementation of the tax, recurring operational expenses were seemingly covered prior to implementing the hotel/motel tax. Granted, we may have seen enhanced recurring operations since the tax, but advertising, marketing, event planning/execution, and staff expenses were being covered prior to the additional spending brought about through the hotel/motel tax.
I recommend the City Council consider a policy reserving the hotel/motel expenditures for large significantly impactful capital projects. Revenues received can be used for debt service, allowing the funds to leverage large projects that could have a meaningful draw of tourists. Examples of these types of projects run the gamut from the low end of purchasing portable stages ($200,000) or portable restroom trailer ($200,000) to be used for special events. On the higher end building an access road connecting hotels/restaurants along Hwy 11E, revamping the Little Theatre at the Roby Center or constructing a farmers market facility. These are projects that can utilize the hotel/motel tax for ten plus years and make a significant impact on the future of tourism for generations to come. I recommend we create a policy that considers projects that will impact tourism for decades into the future.
