Penticton city council dropped a bombshell Monday night, revealing they had voted unanimously in camera to reverse direction on how the two per cent additional hotel room tax collected in the city is managed.
The motion takes the position that the Penticton Hospitality Association is in breach of the obligations spelled out in a five-year contract signed with the city in July 2012 giving them control over the approximately $400,000 collected annually via the hotel room tax.
Council didn’t take the decision lightly, said Mayor Garry Litke in a prepared statement.
There had been months of discussions and meetings, including mediation, to ensure that the HRT agreement provisions were met. As of Oct. 31, the funds will be redirected to the Penticton Tourism Society.
“But despite this exhaustive process, there was a very long delay in the provision of the audited financial statements and once obtained these statements confirmed that significant funds that have been accumulated remained unspent,” said Litke.
Rob Appelman, president of the PHA, was informed of the city’s move to end the contract last week.
The organization, he said, is consulting a lawyer about how to proceed.
“We feel we are not in breach of contract and we will be legally pursuing our options,” he said.
Last May, council questioned PHA representatives about how the HRT funds were being spent, noting in one question to the PHA that a total of $424,357 was collected in 2012 from the tax, and only $93,659 had been spent at that point.
PHA director Tim Hodgkinson said at that time the group was working from a standing start, and had been working on developing a business plan for how to spend the funds. Though they still have funds in reserve, he said they have invested significantly in tourism marketing for 2013.
Hodgkinson estimates the PHA has spent around $314,000 on marketing between January and October 2013, including: $60,000 for online advertising, $47,000 for print media, $40,000 in a collaborative campaign with Tourism Penticton. Along with that, the PHA also gave Challenge Penticton $35,000 to support their marketing, as well as $2,500 to the Elvis Festival and $5,500 to the Young Stars Hockey Tournament.
Hodgkinson said the city is aware of how the money is being spent.
“We have been spending the money. We reject that comment out of hand.”
David Prystay, general manager of the Lakeside Resort, said council has made an “ill-informed, terrible decision.”
Both the PHA and Tourism Penticton have been working with a facilitator, Ingrid Jarrett, to form a single society, similar to how tourism marketing in Kelowna is managed.
“I believe they are very close to having an agreement done, so for the city to step in at this time they would be cutting their own throats,” said Prystay. “The PHA is not perfect, nor is Penticton Tourism perfect. I think the perfect scenario would have been the two groups working together.”
Hodgkinson confirms the two groups have been carrying on successful discussions, and have a good working relationship.
Jessie Campbell, CEO of Tourism Penticton, said they were surprised by news of the funding switch, but also see a single society as a goal.
“We remain committed to the belief we have had since day one, that a unified organization made up of robust industry stakeholders is the way to most effectively market tourism in Penticton,” she said.
Prystay said that if council follows through on its decision, they could be facing larger problems down the road. It was hard enough, according to Prystay, to get hotel and motel owners to support the voluntary room tax.
“What is going to happen in three years time is anybody’s guess. I doubt very much that this tax will be renewed,” he said. “Now that they are going to lose control over the money they collect, I can’t see it being renewed and the city is going to lose out on $400,000 a year through greed and mismanagement on their end.”