Can the Buncombe County TDA use occupancy tax revenue to provide relief to our community from the impacts of COVID-19?
Revenue from the occupancy tax cannot be used for any other purpose except for that for which it is legislated – even during a crisis. All members of the BCTDA are legally obligated to administer the occupancy taxes as legislated.
– Article V, Section 5 of the North Carolina Constitution provides that “Every act of the General Assembly levying a tax shall state the special object to which it is to be applied, and it shall be applied to no other purpose.” In other words, taxes that are levied for one purpose cannot be used for another purpose after they have been collected.
– When the General Assembly authorized Buncombe County to levy the occupancy tax, it provided the purpose for which that tax must be used. Specifically, the legislation provides that the TDA may expend any funds distributed to it only as follows:
– Three-fourths of the funds may be used only to further the development of travel, tourism, and conventions in the county through State, national and international advertising and promotion.
– The Tourism Development Authority shall create a Tourism Product Development Fund and, in order to further economic development in the county, shall credit the remainder of the funds to the Tourism Product Development Fund. The purpose of the fund shall be to provide financial assistance for major tourism projects in order to significantly increase patronage of lodging facilities in Buncombe County.
What would happen if the Buncombe County TDA ignored the rules and used the tax for a different reason?
It would be a criminal act for the Buncombe County TDA to authorize the expenditure of tax funds already collected for a purpose, or in a way, that does not comply with the language of the legislation.
Failure to follow the legislation has consequences for the Buncombe County TDA, its fiscal agent (Buncombe County), its president and CEO, and members of the board.
Specifically, NC General Statute 159-181 makes it a crime for any finance officer, governing board member, or other officer or employee of any local government or public authority to make or approve any claim for expenditure it knows to be erroneous or invalid, or for refusing to carry out duties imposed by the statutes. The commission of such a criminal act can result in a fine of up to $1,000, removal from office and, most significantly, personal liability for damages suffered by the authority or the holders of any of its obligations.
Even if the TDA voted to redirect funds for a purpose other than what it is authorized to spend them on, Buncombe County’s system of checks and balances would not allow the expenditure to go through. In a statement to the Asheville Citizen Times, Buncombe County’s Finance Director and CFO Don Warn explained it this way:
“To knowingly violate the law is not appropriate. Being the duly appointed Finance Officer for the TDA, I have a statutory duty under G.S. 159 to ensure that expenditures don’t violate the law and I can’t approve expenditures of TDA funds that would do so…it would create an invalid claim or bill, essentially it would be misuse of public funds as defined in the statute and would result in serious repercussions as outlined in G.S, 159-181.
Given the COVID-19 crisis, can the governor of North Carolina redirect occupancy tax money toward relief?
Even though actions like this are taking place in other states, the statutes in North Carolina are different than those in other places. Governor Roy Cooper is not able to use emergency powers to make changes to the legislation, or to redirect tax revenue for a purpose other than that for which it was collected.
During a legislative panel discussion hosted April 10 by the Asheville Area Chamber of Commerce, Rep. Brian Turner addressed this issue, explaining to listeners that the governor cannot use an executive order to change how the occupancy tax is used. Any change would require legislative action and would apply only to future collections.
However, legislative action may be coming soon. Senator Chuck Edwards announced plans on April 24 to introduce legislation to the NC General Assembly that would allow $5 million in unspent funds from Buncombe County TDA’s Tourism Product Development Fund to be used for COVID-19 relief.
If the “Buncombe County Tourism Jobs Recovery Act” is approved by lawmakers, the BCTDA will be able to create a Job Recovery Fund through which tourism-related businesses can apply for grants of up to $50,000. (See the FAQs on the Buncombe County Tourism Jobs Recovery Fund for more information.) This legislation maintains the purpose of the tax as required by the NC constitution – to develop tourism product – but changes the process and criteria
Can the TDA push for changes in the occupancy tax legislation?
The Buncombe County TDA is a public authority. As a public authority, the TDA’s responsibility is to carry out public policy, not to advocate for change in public policy. The public purpose of the BCTDA is to strengthen the local economy by promoting Asheville and Buncombe County to people who will come here and spend money with local businesses.
Although the TDA cannot advocate for change, the members of the Asheville Buncombe Hotel Association have presented a proposal to lawmakers. In response to community sentiment, ABHA members have worked together with elected leaders and legislators since the fall of 2019 in created a proposal supporting changes to the state law that governs the use of the occupancy tax.
What are the Asheville Buncombe Hotel Association’s proposed changes to the existing occupancy tax legislation?
The ABHA proposed recommendations include:
– Changing the current split of the use of the occupancy tax revenue to conform to House guidelines, from the current 75% invested in marketing and promotion with 25% going to community projects via the Tourism Product Development Fund, to 66% and 33%, respectively.
– Expanding the flexibility of the portion of the tax designated for community projects to go beyond the current limits of only “brick and mortar” capital projects… and include some non-capital projects, such as funding for things like the City’s Transit Master Plan.
– Expanding the TDA Board to include a broader range of tourism representatives.
The chair of the Buncombe County TDA, the president and CEO of Explore Asheville, and the Asheville Area Chamber of Commerce have all endorsed ABHA’s proposal. Many members of the board have also publicly expressed support for industry efforts to amend the legislation to respond to the crisis.
Members of the ABHA were instrumental in creating the Buncombe County Tourism Job Recovery Fund Act announced by Senator Chuck Edwards to provide relief for the impact of COVID-19. Even those efforts are bound by the North Carolina constitution and the political realities of passing legislation with statewide implications.