By BILL KISLIUK
Register Editor
While hotel tax is a critical source of revenue in Napa County, local cities and government agencies do a spotty job of tracking and collecting the money, according to the Napa County civil grand jury.
A recent grand jury report states that the cities of Napa and St. Helena do not audit local hoteliers and inn owners to make sure they submit their fair share, and that other cities do so only intermittently. The grand jury recommends the agencies take steps to improve their tracking of what is known as TOT, or transient occupancy tax.
The only city given an entirely clean bill of health for tracking hotel tax revenues was American Canyon, which has only three hotel operators.
The city of Napa came out with the longest to-do list from the grand jury, as the report said the city’s internal accounting is substandard and suggested the city could be losing significant tax revenue because it does not audit hotel operators.
Separately, the grand jury raised questions about whether the practices of online discount travel services cost the government revenue.
Tourist tax
Napa County and all five of its cities charge TOT, and the first hotel tax was instituted in the valley in 1954, according to the grand jury. All the agencies charge a tax of 12 percent per occupied room per night, with the exception of American Canyon, which charges 10 percent. The tax is passed on directly to hotel guests and added to their bills.
The grand jury found that only three of the taxing entities — Calistoga, Yountville and Napa County — audit TOT receipts.
The county audits annually, according to the report, Yountville every two years and Calistoga only occasionally. In reviews of the most recent audits by all three, the grand jury found that hoteliers had underreported or misreported income to the detriment of the agencies.
Yountville’s audit of the 2004-05 budget year showed the town missed out on about $20,000 in revenue because of reporting errors.
Napa County missed out on about $17,000 in 2007-08, according to the grand jury, and Calistoga missed out on some $64,000 in 2005-06.
The grand jury attributed the differences between what was reported and what should have been reported to poor record-keeping by innkeepers, “underreporting of gross receipts” and in some cases a mingling of the proprietors’ personal and business finances that made it difficult to identify the correct figures.
The grand jury found that only one in five operators was properly tracking and turning over information as required by local regulations. At the same time, the report criticized most agencies for providing only minimal information about the law to the affected businesses.
As for the city of Napa, the grand jury said financial staff did not have adequate information to track the number of hotel operators and rooms that contribute to the TOT revenue; that the city — while posting the relevant laws online — provides minimal TOT information directly to new operators; and that the city’s lack of an auditing process is probably causing it to lose revenue.
“Since the city of Napa does not conduct audits, it is impossible to know whether the operators are underreporting TOT as has been revealed in the audits of Calistoga, Yountville and the county of Napa,” the report states.
Napa City manage Mike Parness and Mayor Jill Techel acknowledged that the report made a valid point about the lack of audits.
“We identified that about six or eight months ago as something we have to do,” said Parness. “TOT is an important revenue source and is growing rapidly.”
He said the city is weeks away from getting a bid out to conduct the audits.
Parness said that in his view the internal communication concern noted by the grand jury “hasn’t been a major hindrance.”
He said city staffers meet with new hotel operators and explain their obligations in face-to-face to meetings before the businesses open. Nonetheless, Parness said that that the city is “increasing the communication and formalizing the process” of documenting the opening of new inns and hotels, especially in light of the city’s recent decision to allow several property owners to host short-term vacation rentals in residential areas.
Most of the grand jury recommendations covered all agencies, suggesting the cities and the county more strictly enforce rules on penalties and interest on late TOT payments, provide more information to inn owners and subject them to regular audits.
“Potential revenue from uncollected TOT, interest and penalties in the millions of dollars is being lost throughout the county,” stated the report.
The report commended St. Helena for ”having the foresight to employ up-to-date technology for tracking the collection of TOT.”
In a brief note, the report raised questions about whether cities collect adequate money from rooms rented through online travel services. According to the report, online travel companies negotiate lower rates with inn operators, pay the TOT according to that rate, then charge their customers a premium of 14 percent, which is not reflected in the revenue the government receives.
http://www.napavalleyregister.com/articles/2009/06/23/news/local/doc4a4055a59a4bc051677390.txt
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