WILMINGTON — In a 5-1 vote, Wilmington’s council passed a second reading on an ordinance that would change how the city’s portion of hotel taxes is allotted.
Since late 2015, council members have considered re-allocating how the hotel lodging taxes are distributed, as previously reported.
Council member Joe Spicer continued his vote against the ordinance. Council member Randi Milburn, who voted for the ordinance in July, was absent.
Former council member Rob Jaehnig said council should table the ordinance, accused a council member of having a conflict of interest, said council had no plan to market the community or its businesses, and said granting the taxes would be illegal without a planned grant process. Several city officials disputed some of Jaehnig’s statements.
“The CVB worked very hard to bring things like ECTA (East Coast Timing Association), the Sports Car Club of America, the Miami Valley Sports Car Club, enlarging the horse arena,” he said. “It wasn’t the city that landed these. It wasn’t the county that landed these. It was individual people and the CVB that helped bring these in. You have no plan for how to replace that.”
President of Council Randy Riley, who said he served for seven years on the CVB’s board, said, “The CVB cannot take responsibility for every dime of visitor money that is spent in Wilmington” nor can it claim all credit for the expansions of businesses and the attraction of groups like the ECTA.
Jaehnig also said the city has “no plan” for spending the funds, and he said if the funds don’t go to a specific project or entity, he wouldn’t support council on its income tax issue in November “because if you’re not going to be upfront about what you’re doing with the taxes, you don’t deserve any more.”
Council member Matt Purkey said it’s the finance committee’s job to determine where money goes, not the judiciary committee that presented the ordinance.
He also said the ordinance would reduce the city’s administrative fee, increasing the amount of money that could be allotted, including to the CVB.
“This is a move for transparency,” Purkey also said. “The regulations that were put forward for this were designed for there to be some oversight by city council and that was just never done.”
Purkey said he believed there may be “wasteful spending” in the CVB’s budget.
“If I’m wrong, there’s one extra layer” of accountability, Purkey said. “If I’m right, I took an oath to help manage the taxpayers’ money as judiciously as possible.”
Jaehnig accused Purkey of having a conflict of interest, citing Purkey’s employment at the General Denver, which Jaehnig said has directly benefitted from the CVB’s advertising.
“I don’t feel there’s an ethics issue there,” Purkey said. “The General Denver also pays excise tax into this.”
“It doesn’t matter whether you feel you need to,” Jaehnig said. “It’s a moral and ethical wrong.”
Later, Wilmington Law Director Brett Rudduck said, “We had definitively stated we didn’t feel there’s an ethical issue there.”
Jaehnig also said the city doesn’t have a plan for spending the money. When council member Kelsey Swindler said the finance committee could determine who would receive the money and how much they would receive, Jaehnig said a competitive grant process is a legal requirement.
“It’s not simple to just apply for governmental funds,” Jaehnig said. “If you’re going to do a program where you’re going to give funds out, then that has to be competitive.”
Riley said the city has granted money in the past, and council member Mark McKay asked for research to be done on any legal requirements before a third and final reading of the ordinance is voted on.
In his dissent, Spicer, who is also council’s representative on the CVB board, said the city is “trying to create just another layer of government” and that council should fix the oversight issue without taking any of the CVB’s money.
“The bottom line is it was set up that they were supposed to report every quarter … and yes, they were supposed to submit a budget,” Spicer said. “The intent (of the initial legislation) was to fund the convention bureau.
“I think it’s an oversight that we don’t need,” Spicer also said. “We live within our budget. That’s more than I can say for council, and we’re worried about the convention bureau?”
Spicer further said the businesses and organizations that benefit from the CVB can’t afford to do advertising comparable to what they receive from the CVB.
“This is the same layer of government that has existed for public money forever, which is that the elected officials would represent the people in the use of public money and have some say in that and not just a lookback,” said council member Swindler.
Swindler also said the CVB does a good job marketing the community, would be eligible to receive the hotel tax income and was not at fault for the lack of reporting council didn’t demand.
David Hockaday, who sat on council when the initial legislation was passed, said the legislation was set up for no reason other than to support the CVB.
“It was the consensus of council that we pass this ordinance for the convention (bureau) to be able to promote Wilmington,” Hockaday said. “And that the funds that were set up, 10 percent would go for administration and the rest of it would go to the convention (bureau).”
Deputy auditor Mary Kay Vance said the hotels currently receive a code of regulations that says council “shall determine what percentage shall be paid to the hotel lodging excise tax fund.”
Vance said council approves the 90-10 split every year with its annual budget and quarterly when it approves of quarterly hotel tax reports.
“We’ve always had the ability to change what percentage you wanted to send to the CVB right here,” Vance said. “You also did it every year during the appropriation process.”
Reach Nathan Kraatz at 937-382-2574, ext. 2510 or on Twitter @NathanKraatz.