The Knoxville City Council met Monday evening. They approved a sewer revenue loan and disbursement agreement, a farm land lease agreement, set a public hearing for March 9 at 6:15 p.m. to approve the fiscal year 2016 budget, and approved the Chamber of Commerce Hotel/Motel tax quarterly report, among other items.
Knoxville Chamber of Commerce President Annie Leonard told the Council that after considerable discussion and input from their membership, the Chamber wishes to refocus on promoting and assisting their members, and will place less of an emphasis on event planning and tourism in the future. Their efforts in the past had been supported by city hotel and motel tax revenues capped at $25,000.
Knoxville City Manager Harold Stewart says he applauds the Chamber leadership for having the vision to make this difficult decision. He adds that he hopes that the public and business community respond favorably to the decision.
Leonard says that they will continue to assist the community with tourism efforts, but will no longer be taking the lead role.
Here is a copy of the letter shared with the Council:
An open statement to the Knoxville City Council
February 16, 2015
Thank you for the opportunity to come before you this evening to discuss the Hotel Motel Tax allocation for fiscal year 2015-2016.
Nearly ten years ago, the Iowa legislature enacted a law to collect what has become known as the Hotel Motel Tax to generate a revenue stream for Iowa communities to spend on tourism and economic development related activities. These funds are collected from a special tax levied on visitors staying in hotels and motels.
Subsequently, the Knoxville City Council and Chamber of Commerce entered into an agreement whereby the Chamber would take on the responsibility for many Tourism related activities, such as organizing community events, attending tourism focused trade shows, and marketing our community to potential tourists. In exchange for this work, the City Council passed an ordinance that the Chamber would receive half of the revenue collected from local Hotel Motel Taxes.
This meant that in exchange for about $25,000 per year, the Chamber shouldered the work that in many communities is done by a Convention and Visitor’s Bureau, in addition to performing its primary function of serving as a liaison and advocate for the local business community.
Last year, this arrangement was called into question, and after extensive negotiations, an agreement for Fiscal Year 2014-2015 was hammered out. The Chamber agreed to track and report how the funds were being spent in a more meticulous fashion, the City capped the funding at $25,000, and 10% of the funds were allowed to be spent on salaries and other overhead expenses. Further, this arrangement could be renegotiated the following year.
After working under this arrangement for the past 8 months, we have come to appreciate the tracking directive, because as we worked on carefully separating all Hotel Motel Tax funds in our accounting system, and examining every penny that was spent, we found some very interesting hidden costs. We found that our Director spends approximately 25% of his time on Hotel Motel Tax / tourism related activities. Our Board and other volunteers spend more than that percentage of their volunteer time with the Chamber on the same category of work. This also means that our overhead expenses, such as rent, utilities, copy machine lease, etc. are being used 25% of the time to promote tourism. A conservative estimate of just the most obvious of these ‘soft costs’, comes to an amount in the neighborhood of $15,000. Contrast this with the fact that the ten percent of allowable spending on overhead from the Hotel Motel Tax disbursement of $25,000, is a mere $2,500.
After careful review both of these expenditures and the feedback we have gotten from our Membership, and after extensive discussion, the Chamber now respectfully withdraws our request for Hotel Motel Tax funds for the next fiscal year, and relinquishes the Tourism related duties back to the City. Of course, we will honor the agreement we made for the remainder of the current 2014-2015 fiscal year, for which we have already received funds. We will continue to help with Nationals by arranging housing and organizing volunteers to staff parking shifts. And in the future, we will certainly be glad to partner with the City and other entities in helping to promote tourism to our community in a variety of ways, but we will no longer be taking the lead.
Instead, the Chamber will refocus its efforts and resources on fostering the success of the business community and our Members. In other words, we will be getting back to basics, and will take all the time and energy our staff and volunteers have expended on tourism related activities, and put those toward work that will more directly benefit the businesses and organizations that make up our Membership.
We welcome you to attend our Annual Banquet this coming Saturday to hear more about our plans for this new approach.
Thank you.
The Knoxville Chamber of Commerce Board of Directors
Joshua McKenna, PMP
Executive Director
Knoxville Chamber of Commerce
217 S. Second Street
Knoxville, IA 50138