Judge sides with Penticton Hospitality Association

Group waiting for city to hand over hotel room taxes

The B.C. Supreme Court has ruled in favour of the Penticton Hospitality Association in their long-running dispute with the City of Penticton.

Supreme Court Justice Douglas Allan Betton handed down his decision Thursday, finding in favour of the PHA and awarding them control of the two per cent additional hotel room tax, as well as court costs.

“It should have never gone this far,” said David Prystay, general manager of the Penticton Lakeside Resort, describing the decision as “justice well served.”

“It was never in the city’s best interests to try and take the money away from the PHA.”

Justice Betton said there wasn’t evidence that the PHA’s actions constituted a fundamental breach of the contract on any of three factors the City of Penticton  specified: annual spending by the PHA on tourism marketing, adequacy of monthly financial statements and delivery of annual budgets.

“It says two things. It either says the city has made an accusation that can’t be proven, or they have made an accusation that is false. In effect that means it is a lie,” said Tim Hodgkinson, PHA operations director.

“It’s basically saying you haven’t got a case, this is a waste of time.”

“The PHA is naturally delighted to announce that the Supreme Court of B.C. has now struck down in its entirety the City of Penticton’s illegal attempt to seize control and withhold funds from the lawful stewardship of the PHA. This is a just decision that benefits the entire community,” said Hodgkinson, reading from a prepared statement.

Not surprisingly, Mayor Garry Litke said the city is far from delighted with the decision.

“Obviously, I am not happy with the decision. It wasn’t a decision that we really expected. We became involved in this topic more than a year ago now, when we became concerned  about the financial accountability of that organization (the PHA),” said Litke.

“We are not going to appeal. We are interested in moving forward and restoring the relationship. We need to have a good working relationship with the accommodation sector and the tourism sector. We need to be working together on this,” said Litke.

Rob Appelman, president of the PHA, said Thursday afternoon he is still waiting for a call from the city to discuss return of the funds the city has been withholding since October.

“We figure it’s a full year, about $400,000,” said Appelman.

The current dispute began nearly a year ago in October 2013, when Litke announced that the city was terminating a five-year contract with the PHA, alleging the hoteliers’ organization was not fulfilling the terms of their agreement to manage the hotel tax funds, which are intended for external marketing of the city.

Litke said the court action was a last resort by the city after attempting mediation and personal negotiations to resolve disagreements with the PHA.

“We were thinking there were some pretty fundamental breaches of the contract and some significant lapses in the accountability of taxpayer’s money,” said Litke. In November 2013, the city said $21,000 had been spent on litigation and mediation with the PHA, but according to Litke, the current total for legal costs is $41,769.75.

Since May of last year, the city has expressed concern over the PHA’s lack of spending in the latter half of 2012, after taking control of the hotel tax funds in July.

Justice Betton set that concern aside, saying that nowhere in the agreement was there a requirement setting out how much of the HRT funds received in any specific time frame are to be spent.

In terms of the monthly financial reports, Justice Betton found that was solved after a mediation session in September 2013 that resulted in an action plan for both parties.

“I cannot on the evidence conclude the PHA did not meet the reporting requirements every month prior to the mediation. The specific content requirements were not clear in the HRT agreement but were clarified by the action plan,” wrote Betton. “After the action plan, the PHA appears to have provided all the financial records required.”

“We at the city have always taken a strong stand around fiscal accountability. This was just one more instance of us trying to be financially responsible and ensuring that our taxpayer’s money is being well taken care of,” said Litke, adding that he was disappointed the judge didn’t see it in the same way.

“We will accept that pronouncement and move on,” said Litke, explaining that the city’s long-term goal is for the PHA and Tourism Penticton to work together to leverage the tax funds and get back as much as they can in terms of enhancing tourism in the city.

Prystay said the PHA was working toward that goal, but wasn’t so sure the city shared it.

“They (the PHA) have always been leaning towards that, but the city didn’t want it, because they wanted to rule the roost,” he said. “Now, they have been told they can’t. Why not join forces, get one society, save some costs, and put our marketing dollars together and market Penticton the way it should be marketed by those that know the business?”