Door County Tourism Zone Commission : Meeting Minutes

Home Page: Meeting Minutes

August 21, 2008 Training Meeting for New Commissioners

DOOR COUNTY TAX ZONE COMMISSION
MINUTES OF THE TRAINING MEETING, AUGUST 21, 2008 Harbor Fish Market, Baileys Harbor

Present: Mary Boston, Nancy Goss, Bob Kufrin, Jeff Larson, LittleBit LeClair, Chuck Tice, and Nora Zacek.

Also Present: Kathy Kirkland, TZC Administrative Assistant

Call to Order: Chairperson Kufrin called the meeting to order at 7:05 a.m.

Kufrin stated that the purpose of the meeting is to update newer member on the running and background of the Tourism Zone Commission (TZC). In the mid-1990s, there were a couple of tries at the room tax that had been defeated. In 2006, the Door County Visitor Bureau (DCVB) was in poor financial shape, and some individuals wanted an assessment on how it was being run, so they retained an outside consultant to develop a marketing plan. To ensure the plan would work, extra income from a room tax would be required. About 50-60% of the executive committee of the DCVB left, and they expanded to about 36 members. From December 2005 to April 2006 and then into 2007, there were meetings among what became member communities and a task force. Various requirements of being a Tourism Zone were discussed; agreements were finalized in April 2007 in Egg Harbor and officially signed. It began with nine members began, and the original draft called for a minimum of three communities. The Commission became an entity on April 12.

Kufrin talked to accounting firms for proposals for handling all the administrative/billing support. Two firms presented, and Kerber Rose was accepted for a 90-day trial period for about $30,000. Dianne Lensert collected all possible permit holders based on Bob�s forms. All informational packets went out on April 30, 2007. At that point, Commission members were meeting twice a week for three or four hours at a time. As a local government, we were following State statute, could collect taxes, had to meet all requirements of open records, and so on. Most operating governments have all those records in place. There was no state Room Tax/Tourism Zone that was intergovernmental; they were single communities managing it all, such as Sturgeon Bay.

It was necessary to create a framework beyond the Intergovernmental Agreement. Tice said the government officials were doing it all at that point; lodging owners were not involved until the municipalities appointed the members. The only carryover participants from those early days were Tice, Charlie Most, Kufrin, and Bruce Hill. It was unknown what kind of people the communities would appoint: their supervisors, trustees, innkeepers, business associations? It has been a good group. The State statute says the at-large members (we have two) have to be associated with the innkeeping business.

Because the May 1 start date found many innkeepers with reservations in place, there was exemption language that addressed the situation; however, unless a guest paid in full, not just a deposit, the innkeeper had to pay the tax. That had a backlash effect. Claims were made that people wouldn�t come back. Why couldn�t they know earlier? Tice said people stated the single-unit renter was pocketing all the income, not paying state sales tax or income tax; now the Zone added another tax and will draw attention. Innkeepers wanted consideration breaks to new people coming on. They have to have extra insurance, and not fly under the radar.

One of the biggest challenges, after the initial permits were out, was that housekeeping things had to be done�printing envelopes, going online, PO Box, Federal ID number�but we had no budget. How much would we collect? There were no solid numbers to go by. The Finance Committee tried to develop projections from the funding task force. There were several meetings in May 2007, and it was decided that Associated Bank would be the best banking deal financially. The entity agreement with DCVB was being negotiated. The Chamber changed its name (their choice). May 2007 was when Karen Raymore made presentations on the marketing plan that are still basically in place today. After the plan was approved, Raymore resigned, creating a problem for the TZC. Jon Jarosh stepped in, and Jerry Zaug became acting director. The DCVB went through a transition while the TZC began working on the day-to-day issues of collection of tax: policies about late pay, paperwork, grace periods, and so on. We needed a Commission to make those decisions. Tice said that following a corporate business plan would not be the same for government entities; for instance, interest charges on late payments and penalties are set by statute.

Kufrin said reporting challenges included strict confidentiality of information so innkeepers were assured their confidential information wouldn�t be known. The totals on taxes (but not individual businesses) goes to the communities but is not posted online re: who has paid and gross collections. There have been no breaches so far, and Tice added that there�s a personal penalty for divulging that information. Some businesses would pay a tax but were reluctant to disclose average daily occupancy information, and Tice noted these are the figures we need. Kufrin added that we have to measure rates and occupancy. Now most are giving those statistics.

Kerber Rose was reupped through the end of 2007. Randy Nesbitt was there from Day One but was officially retained as an attorney for legal issues; however, his priority is Sturgeon Bay, so there were conflicts. He withdrew, and we solicited from members. Bill Vande Castle is a municipal law attorney with no associations up here except for Egg Harbor. He had been through the Stadium Tax and had similar experience.
Kerber Rose was working on standard software: Excel, QuickBooks, Access. It became apparent that we needed a permit system with all the fields so we wouldn�t be recreating a large database later. In November 2007, the Commission authorized Bay Lake Information System to write a custom accounting package; a check revealed that other communities had their own IT departments writing their packages.

Jack Moneypenny came onboard the DCVB in Oct/Nov 2007, and in December, the DCVB went to a calendar year as opposed to August-July so it would match our fiscal year. Moneypenny presented a revised budget in December�a seven-month and then a five-month budget, then will begin with a 2009 calendar year. We encountered problems with how we were paying the DCVB. The entity agreement said we would reimburse instead of pay upfront; it gives the Commission control over what we�re giving them. We found in summer/early fall of 2007 that the DCVB didn�t have a clear grasp of their spending by month. We finally agreed that we�d disperse in twelfths. The DCVB would prefer it coming to them as it comes in; however, so far, the Commission is inclined to keep more control. We�ve gotten only one quarterly report this year, which is less than expected.
The budget has been lagging; typically, it�s approved before the year starts. However, we don�t know how the previous year has gone because of lag time. Tice noted we started with a short year. Normally, October 2007 would be budget time; we had only a couple of collections completed and a handful of bills. The final budget was approved in February 2008, and the Finance Committee did a good job of making projections. We ended up with an approximate $35,000 fund balance. We still ended up with a $16,000 balance after large one-time expenses such as Bay Lake Systems. Startup expenses won�t reoccur.

Little Bit asked about the 4%. Kufrin said it covers all of our administrative costs. The debate was whether we needed an employee. Between Kerber Rose and Kufrin, the time and money was too much. It made sense to hire someone.

LeClair asked about applying for a license; Kufrin applied on a personal basis but he doesn�t see it as a problem. Someone has to sign, so if he leaves as Commissioner, would it be a problem? The attorney was consulted, and it was done that way. Since then, the organization has evolved and becoming concerned about monitoring the DCVB instead of the overall tasks of permitting and collecting, which has become routine after two years. Tice said there are always stragglers, new owners, etc. We�re still dealing with additional communities. Administrative Assistant Kirkland is searching for stragglers, taking that away from Kerber Rose.
Nora Zacek joined the meeting.

Kufrin went through some of the key points of the Intergovernmental Agreement. The initial structure was with nine members; we�ve added Washington, Gardner, Nasewaupee. We tried to mirror the State statutes. Kufrin handed out the State statutes that relate to Room Tax. It�s brief, 66.0615. The yellow parts (addendum to these minutes) relate to what we�re doing. The key on pg 56, �tourism development,� is to generate paid overnight stays by doing the things reasonably likely to generate: marketing, advertising, printed and electronic materials, conventions, sporting, motor coach, transient information, services, development.� That�s what the dollars are supposed to be spent on. A Zone is two or more municipalities agreeing they�re a single destination. It needs to be non-profit. The Chamber was in existence as of 1992, meeting the length of time required; even though they�re in Sturgeon Bay, which was overlooked temporarily, figuring that Sturgeon Bay would join.
Dollars collected affected our DCVB dues; the dues came down drastically, LeClair said. This was done to get a trade-off for support from innkeepers. Boston says if Sturgeon Bay doesn�t join, and we can�t give them certain funds for operational activities, we may be back to paying more to join. Tice and Kufrin said that wouldn�t be happen. Boston asked about the offices; can they stay in Sturgeon Bay? Kufrin said the office must be in the Zone; the tourist information services can be outside the Zone.

Point 4, the Commission must contract with one entity on behalf of the municipalities in the Zone, that�s the law. Tice said Sturgeon Bay was always involved; they were the first to enforce a room tax. Kufrin said there�s nothing to say that the DCVB building, which has a variety of functions (tourist information and DCVB offices), needs to be the official office. The law reads we have to contract with someone in the Zone, but the building can remain the same. We must follow the law, and the longer we ignore that; we will start getting complaints. Our attorney has been saying this since the first of the year.

Goss asked about Paragraph 2: If Sturgeon Bay doesn�t join, would one of the local visitors bureaus set up before 1992 have to be the office? Kufrin said ultimately one of the local associations could step up. It�s more likely that Jack would share an office in the Zone. Unfortunately, we can�t contract with more than one, so Sturgeon Bay�s request to contract is not doable. It says that all communities must have the same tax rate; Sturgeon Bay wants to keep their own and split the difference.
LeClair asked about that issue; each village could make their own Tourism Zone, and how much tax would be collected? Many wanted the max, which might scare people away from Door County. Different taxes would divide the county. Tice said that�s still the issue with Sturgeon Bay. Sturgeon Bay raised theirs to 5.5% the previous Tuesday. They�re trying to get the State statute revised so that each community can have different percentages, and they want to go to 7%. Kufrin said we have to deal with what the law says now, not what it can become months from now.
Kufrin said that the rest of the statute relates to what happens with money collected. It must be spent on tourism promotion and development by the municipality directly or forwarded to the Commission. Originally, the idea was that the municipality could handle permitting; maybe some would want to be that involved. No municipality wanted to do it individually, so they tasked the Commission with enforcement powers. It�s a lot of work.
On pg 57, top, there�s language ensuring what tax dollars have to be used in the Zone or in the municipality. Confidentiality is also a component and there are penalties associated with that. The State statute language is sparse compared to our Intergovernmental Agreement. Not much of a guide for how our intergovernmental association is supposed to exist. Zaug and others had created from other intergovernmental agreements, which served as a basis. Amendments in May 2007 were the result of discussions that everyone has to come in under the same guidelines as existing members. With Nasewaupee, there was a standard adoption ordinance, and there were at least two versions of how exemptions were worded; Nasewaupee changed their language so that if someone contracted before the date, it was good enough. Some others had inserts and alterations, so ultimately Nasewaupee was the biggest issue. When Gardner adopted, they had no exemptions.

Tice said the actual ordinance language wasn�t that different; it was the presentation at the town meeting and promises made and interpreted. Kufrin said there were a lot of players in the first six months. DCVB members, funding tax force members (not always DCVB members), municipal members and then innkeepers. Four groups interpreting, so as the Commission got going, there was six months of discussion on how it should all work. Initial problems related to how to collect the tax, do condos and hotels have the same rules, ones-and-twos cottages that said �This is just for my friends, I shouldn�t have to do this.� We worked through all that because the ordinances were very specific.

There were also issues on what penalties should be; the Commission took a hard-line approach and said if we notified you after May 1, you�re still responsible for paying back to May 1, even though we didn�t sent a letter until July 1. Tice said there was enough media out there that people should�ve known. During that time, we found Jacksonport failed to approve the ordinance but had signed the Agreement. They had been collecting the tax and hadn�t approved the ordinances, so how do you refund the tax? How do you tell people? It would�ve been embarrassing all the way around. Very quickly, Jacksonport got an opinion from their attorney to say they could apply the tax retroactively back to the date it was supposed to be done, and they approved an ordinance to that fact. Kufrin was trying to collect copies of everyone�s ordinances and Agreements with signatures, and Jacksonport overlooked the ordinance.

Kufrin said it was addressed in later agreements was what do we do with excess funds? If we approve a budget that says we�ll collect $2 million and we collect $2.2 million, how is the excess handled? Now the Intergovernmental Agreement addresses that, it can be disbursed by the Commission by a two-thirds vote or rolls over into the next year. Tice said it�s still a problem of having the Visitor Bureau coming to the Commission with their projections and budget, and that�s backwards. We need to tell them how much we have to spend. Zacek said we don�t have a history, which makes it difficult. Kufrin said that was true initially; now when the finance committee meets in September, we�ll have enough information to come to the Commission and give projections. The Commission will vote in a budget for the DCVB, and that�s what the DCVB will use for 2009.

Tice said there�s disagreement among the Commissioners who want to spend everything immediately; others feel we need a reserve for the future to meet the contracts. Kufrin feels that�s healthy; there should be discussions of that nature. There are implications of one choice over the other. If the DCVB is relying on spending everything, they don�t have reserves. Boston said if Lake Delton had spent all the reserves, they would�ve been in trouble. Kufrin said the new Agreement goes into more detail as to what is seen as excess funds� dispersal. There�s no ability for the Commission to keep the funds; they have to be given to the Visitor Bureau. Tice said they have to be spent on tourism promotion, but nothing says we have to spend it today; we can set some aside for next year.

Kufrin said the mechanics of enforcement, penalties, have remained unchanged from the start. What changed was when the Agreement was drafted, it provided for enforcement by the municipalities. We found that given the complexity of confidentiality, the standard application of what a violation consists of, varieties of attorneys, we asked that we be the ones responsible for enforcement. Tice said we requested for collections so it was only right that we pick up enforcement. Kufrin said everyone would be treated the same and the clerks and attorneys wouldn�t bear the costs of enforcement. The State statute provides that the Commission can force an audit on a property we feel is in violation. What�s a mystery is that the County Health Department, State Dept of Revenue, State health people have never requested any of our lists in terms of who�s permitted and who�s not. Kirkland said none of the municipalities have been asked for their records; we�re getting their records, but no one has asked from the other direction.

Kufrin said the statutes provides for membership based on the amount of money collected. We did expect the municipalities to exceed $300,000, but we didn�t expect the smaller ones, in the first year, to exceed the limit; there are three now that do. This is a good trend. The Commission members have one-year terms and are appointed by the town chair or president and serve at the pleasure of that group. We don�t have the ability to expel a member for nonattendance or other reasons. All we can do is ask the town or village chair to do so. There is language if you join the Zone and don�t appoint anybody, you still get the money, but they don�t have participation for quorum purposes. There could be some communities that don�t want to get that involved or can�t find someone. Tice said you could have a group like Forestville that has no lodging business; they still may join, but they don�t need a representative at this point.

An initial issue that took time to work out was Bylaws. Tice pulled together Bylaws that had to be approved by the member municipalities, which is unusual. We probably will not need to amend this for a long time. The Intergovernmental Agreements last for five years from January 1, 2007, even though it predated the creation of the Commission, so until December 31, 2011, once you join, you�re in and can�t get out. That was a concern with some municipalities; it�s irrevocable. You�re really committing, because the impact of the room tax won�t be felt for 18 to 24 months, so making a spending plan with anticipation of dollars, if people start to pull out, you�d have chaos. After 2012, you can pull out, but for the first year after leaving, you have to give the Commission the 70% that would�ve have been collected; you can�t pull out suddenly because contracts and budgets would be in place expecting that money.
Tice brought up the two at-large members. Kufrin said the State statutes provides for at-large members, who are intended to balance the municipal appointees. It could�ve been just supervisors and village trustees without a single innkeeper on it. There�s no restriction on who the municipalities appoint, but it does say you have to have at-large members who represent the innkeeping industry. Tice said they�re selected by the Commission, not the towns. Originally, the initial officers should stay for six months; Kufrin felt there could be more members coming on, and you�d have time to reshuffle the deck. We found most of the original dates in the original agreements were ambitious and impractical. That all had to be retooled by at least two months. Typically, communities appoint in April or May; we had elections at the same time, when you don�t even know who the Commission members are going to be. Washington Island and Gardner had big pushes to get everyone permitted. There are discussions in Brussels and Union. When we started, one challenge was trying to identify who�s in and who�s not, and we had permitted and collected tax from Sturgeon Bay people because the addressing is mixed. Many people don�t know where they live. We had to refund money.

At every meeting, there are new issues to work through. There are membership issues, financial projections are becoming more solid, enforcement will be swifter to reduce some of noncompliance. People now seem to understand what we�re doing and we have a track record. That helps with the member municipalities that they can see things are being accomplished and they�re getting their 30% checks, which are probably larger than they anticipated.

The Agreements and ordinances never require a member municipality to spend their 30% on anything in particular; it was up to the municipality on what they wanted to do with it, whether it was tourism, general government, there�s nothing that said the 30% had to do anything in particular. That gives the local governments latitude to spend on anything. Sevastopol�s share is being put into a building fund, etc. Kufrin said it depends on what the adopting ordinance of each municipality says; some could change it to say how it should be spent.
Kufrin said the Commissioners are representatives back to the local boards, and he wants them to appear periodically to fill them in on what�s going on, talking about activities, problems being faced, what�s happening. There should be a connection between the Commission and the communities. Some appear at every meeting, and he�s not sure what the other members are doing.

Kufrin asked for questions. Tice moved to adjourn and Larson seconded to adjourn. Motion passed unanimously. Chair Kufrin adjourned the meeting at 10:53 a.m.

Respectfully submitted,
Kathy Kirkland
Administrative Assistant

View all from: 2011 2010 2009 2008 2007