Quick Take:
As Lebanon County's hotel tax grant program faces questions about its financial sustainability, County Commissioners are considering changes to the overall hotel tax program.
Since 2017, the Hotel Tax Grant Program in Lebanon County has generated over $5.62 million for the county, the local tourist agency, and convention center at the fairgrounds.
The 5 percent tax per room is remitted to the county’s treasurer’s office from businesses that charge guests for overnight accommodations, and Lebanon County applies a 4 percent administrative fee as a service charge to collect the tax.
In Lebanon County, there are about 1,000 “rooms” for lodging, according to Visit Lebanon Valley (VLV), the local tourism marketing agency. Hotels, motels, VRBOs, Airbnbs, and campgrounds with potable water hookups are some of the businesses that pay the hotel tax fee.
The county then sends the monthly remaining balance to VLV for further distribution.
Per the county’s hotel tax program guidelines, VLV officials distribute 35 percent of the remaining 96 percent of the funds to the Lebanon Valley Exposition Corporation (LVEC) and 10 percent to Lebanon County government. It keeps the remaining balance, or 55 percent after admin fees have been deducted.
Read More: Lebanon County Commissioners tighten hotel tax grant guidelines
The hotel tax program is a statewide initiative created by the state Legislature following its passage into law on Aug. 9, 1955.
Based on documents LebTown obtained from the county through a Right-to-Know (RTK) request, VLV has received about $2.97 million, LVEC just under $1.89 million and the county around $765,000 total (10 percent plus the 4-percent admin fees) from 2017 through 2023.
(It should be noted that there is a delay in reporting given the time from when the money is collected until it is disbursed, so the actual dollar amounts may slightly vary.)
During that same seven-year period, the county provided $834,009 in grants to local organizations and businesses who have requested the county’s financial support through this program.
Providing more funding than it gathered in recent years as the program has grown in popularity helped drain the balance to its current low levels. As of mid-August, there was around $17,000 in county coffers for the grant program.
The low balance led commissioners to make program changes in recent months.
They lowered the grant amount awarded from a high of $10,000 to $7,500 and then eventually $5,000, which is the maximum amount an applicant can receive per funding request.
Then, at their Aug. 1 meeting, they voted 2-1 to alter the grant guidelines to ensure recipients requesting funds are using those dollars to promote events that attract tourists to stay overnight in Lebanon County.
In other words, they made it a goal to put “heads in beds.”
Commissioner Mike Kuhn even requested that specific verbiage be added to the guidelines during their Aug. 1 meeting, but the language change was not included in the motion that was approved.
The revised guidelines still have a focus to put “heads in beds” even if that language isn’t included per Kuhn’s request.
The first “requirement” of 11 for the county’s revised hotel tax guidelines reads, “Grant monies shall be used for promotion of events that attract tourists to spend hotel stays in Lebanon County. Application must include evidence, event data, or a narrative that demonstrates this.”
Although the guidelines have certain funding requirements, how the county’s portion is spent is wholly at the discretion of county commissioners.
“It’s entirely up to you, the guidelines are yours,” said Wolgemuth Aug. 1, prior to the guideline changes vote. “You could waive the guidelines, you’ve done that from time to time, and that’s perfectly allowable.”
LebTown asked commissioners last week if the program guidelines should be further strengthened given the fund’s low balance. The question received mixed responses.
“There’s no reason why we can’t revise the hotel tax application more recent – more often – than what we’ve done,” said Commissioner Jo Ellen Litz. “Why can’t we have a question on there about how many days this event is. … If it says two days, three days, or four days, then we know there’s a potential to bring heads in beds. And I think that is an important revision that we just didn’t think of when we made the recent revisions. There’s no reason why we can’t do that now.”
Phillips said he prefers to give the new guidelines a chance to work as the program moves forward “slowly and methodically,” adding he isn’t opposed to making future changes as needed.
“To the extent we’ve taken steps in that direction, just recently modified the guidelines, and in response to your comment about the popularity of it, we’ve reduced the maximum amount of the grants,” said Phillips. “The commissioners can still make exceptions whether that’s a historical or some other reason to make an exception, but we will have to try and live within the budget that we have as much as we can and try to apply it to the best events that are going to put heads in beds.”
Providing funds to nearly every organization that has made a request – whether their events are bringing in out-of-town guests to stay overnight or not – has not financially replenished the program.
“Changes to the guidelines are to make a priority out of putting heads in beds, which is what generates the tax,” Wolgemuth said Aug. 1. “It makes a priority out of events that will generate overnight stays and asks the applicant to provide some data or demonstrate that’s the case. Some applicants did a fantastic job of that. … Some applications, from my perspective, it’s questionable whether they are generating any overnight stays. So then you really aren’t replenishing the funds by giving to those events.”
Litz told LebTown last week that she believes local hotels and other lodging providers should file reports concerning guests who are using their facilities, adding there should be a method for hotels to report why their guests are staying in the Lebanon Valley.
She surmised that the hotel near the Lebanon Valley Expo Center generates most of the out-of-town stays for events at the convention center. She also believes visitors to events at Fort Indiantown Gap seek overnight accommodations.
VLV president Jen Kuzo said the tourism agency in August purchased Placer.ai, a software program that analyzes cellphone records to gather out-of-town attendance at various Lebanon Valley tourist destinations. In Lebanon County, that data exists from 2017, and VLV is in the process of interpreting that information.
She said it appears that 70 percent of the guests who visit the Expo Center for events held there throughout the year are traveling from within a 30-mile radius. Kuzo stressed VLV officials are still learning the Placer.ai platform and that these figures are preliminary.
“The Expo Center is an important asset to the community and they play a vital role in tourism and conferencing in the Lebanon Valley,” she added.
Another popular destination, In the Net sports complex, has visitors traveling a 30- to a 250-mile radius to use those facilities for events that span several days, said Kuzo.
She noted In the Net has 235 sporting events there annually.
LVEC executive director Pat Kerwin said it has 150 public events a year and countless private events, including the county’s 4-H and local FFA program.
Kuzo said VLV has not yet had the opportunity to analyze data for other areas of the county via Placer.ai.
She noted the tourism board decided to purchase Placer.ai to determine if the agency is getting the most value out of its advertising dollars in those markets where their tourism ads are placed.
LebTown asked commissioners how they approach the hotel tax fund and if it’s their goal to keep the balance near zero since four of the past seven have been overspent.
“I don’t think spending 100 percent is the goal,” said Kuhn. “But the commissioners always have the authority to use general funds if they believe an activity is that important.”
Phillips agreed about not maintaining a zero balance for the fund.
“No, if there aren’t any eligible requests. And it is not a goal to zero out at the end of the year,” he said. “They (grant awards) depend on the frequency of the applications and their merit.”
County administrator Jamie Wolgemuth said the fund has traditionally carried, until recently, a higher balance from one year to the next.
“A surplus has existed for years prior and there has always been a balance of a couple hundred thousand dollars or more,” said Wolgemuth.
As applications have increased through word of mouth and those local groups have received funding, hotel tax receipts have not increased at a proportional level.
Wolgemuth agreed that the program appears to be a victim of its own success.
“The fact is that the grants have (recently) exceeded revenues, but we’ve never used any general fund money to subsidize it. Prior commissioners, board of commissioners, didn’t just use it as heavily. I think that’s more about it and that it’s being more heavily utilized,” he said.
Kuhn noted that past grant applicants all have good programs that add to the aesthetic appeal and overall quality of life in Lebanon County. However, given the funding crunch and new guidelines, those who have received funding in the past may not necessarily be supported in the future.
“The important point we need to make and we’ve discussed at the last several meetings is that we have to have these applicants understand and they have to explain to us how they are bringing people into Lebanon County and that their visitors are staying overnight,” said Kuhn. “Programs that we’ve supported in the past we may not support in the future. We have to get the best return on our investment.”
As a follow-up to a prior comment Phillips made about revamping funding percentages the three organizations receive from the hotel tax program, LebTown asked if that proposal was still on the table.
“It is because I feel we’re in the middle of reviewing that whole picture,” said Phillips. “The bulk of it, the 55 percent for the VLV, (is given) because we anticipated that they (VLV) would be building out at the expo and now they are renting across the street. They have a cash surplus on hand and there are so many needs that are over at the expo, that it just makes sense to move it. So it makes sense to investigate it.”
Phillips added it would take two votes to change the funding criteria and that this issue, compared to others, is not front-burner for him — even though the infrastructure at the fairgrounds, in some cases, is 60 years old.
Read More: Infrastructure improvements at county Expo Center enhance visitor experience
Kerwin told LebTown that the expo has infrastructure needs and would like to make other capital improvements around the facilities.
Kuzo said she feels VLV’s reserves are not excessive.
“If we get another COVID-type situation, we have to have some reserves. I don’t believe the reserves are excessive,” said Kuzo.
She said VLV did plan to construct new headquarters but has since pivoted away from that discussion.
“We had saved for building an office and buying some land, whether it was at the expo or elsewhere, but we have chosen to stay where we are instead. At this point, there are no further plans of moving,” said Kuzo. “This office absorbs a smaller footprint and a lesser cost than what we were expecting, so that’s why we had saved money in a reserve for an office in the future. But things are working out fine here and I have no plans to move in the future.”
Read More: Visit Lebanon Valley opens welcome center in North Cornwall Commons
On a separate topic concerning the hotel tax program, LebTown asked if the county should get out of the business of providing hotel tax grants to local groups.
“I would want to negotiate more for the expo, but I would consider that because they are in that business, the VLV,” said Phillips. “I’d be open to that, but I would still want to negotiate the percentages so that the expo receives more than they are currently getting.”
As part of county Ordinance #54, the county is to receive audited annual reports from VLV and LVEC that are specifically for income and expenditures of the revenues as distributed by the county treasurer’s office.
Wolgemuth told LebTown that the county receives audits of LVEC, but not as it specifically relates to the hotel tax grant program. He added he didn’t believe VLV had submitted hotel tax grant audits, either.
Kuzo told Wolgemuth she gives an audit to the commissioner who is a representative on the VLV board and is not aware a separate copy needed to go to the county treasurer’s office. She added a commissioner has been a representative on the VLV board the past seven years.
The county treasurer’s office, as noted in Ordinance #54, administers the hotel tax grant program. County treasurer Sallie Neuin said her office had no audited reports from either recipient organization and said those agencies may have submitted audited reports to the county controller.
A call to Robert Mettley, controller for Lebanon County, revealed that the agency does not receive those reports nor does that department conduct audits on behalf of the county of VLV’s and LVEC’s hotel tax recipients and expenditures.
“I guess that is something that we should start enforcing. I don’t think we’ve received that kind of specific information on a regular basis,” said Wolgemuth in a call with LebTown.
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