It has been almost 50 years since the first Kentucky statutes authorizing local tourism and convention commissions (TCCs) were enacted. Since 1968, the numerous amendments to these laws show that the General Assembly has revisited them many times. Unfortunately, many cities can't say the same. Some TCCs have existed for decades without oversight and direction from the local governments that created them.
Think about it: If you buy a car, and never consult the operator's manual or take it in for service, would you expect it to take you where you want to go? Would you take your hands off the wheel and hope for the best?
TCCs can be an effective vehicle city governments can use to promote their communities, but only if city officials and TCC members all have a clear understanding of how the commission is supposed to work.
So let's dust off the statutes and your local ordinances, and start by taking a look at the fuel that keeps the whole thing running: the money. State law establishes certain funding and financial requirements, but also leaves some decisions to the local government that created the TCC. It's important to know the difference.
KRS 91A.390 is the statute that largely governs tourism revenue, including where it comes from and how it is distributed. Here are some of the basic rules you need to know to comply with the law. (NOTE: Consolidated local governments, urban county governments, and multicounty TCCs may have different requirements and should consult the statute.)
1) Annually, every TCC must submit a request for operating funds to the local governing body or bodies that established it. This is a mandatory, and very important, part of the funding process. While the local government is required to include the TCC in its annual budget, it needs the TCC's request to be submitted before the budget is enacted so that it can consider the TCC's needs when allocating funds.
2) The legislative body of the local government(s) that established the TCC is required to enact a transient room tax, and use revenue from this tax to fund the TCC. The tax rate cannot exceed three percent. If the legislative body wishes, it can impose an additional special transient room tax of up to one percent to fund operating expenses of a convention center.
3) The local government body or bodies must enact an ordinance providing for enforcement and monthly collection of the transient room tax. The details of who collects the tax and how it is enforced are completely within the discretion of the local government. While a TCC is required by statute to have its own treasurer to manage the funds allocated to it, the law does not require the TCC to be the collection agent, so cities may feel free to collect the tax themselves. However, there is one limit on collections: hotel and motel operators who are subject to the tax may not receive a collection fee for collecting the tax.
4) In addition to funding the operation of the TCC, transient room tax revenue can also be used to fund costs associated with acquiring and operating facilities that are useful in promoting tourism and convention business. The statute requires the local governing body to determine the amount to be used for this purpose, with the advice and consent of the TCC.
5) The remaining balance of the transient room tax revenue must be used only for developing and promoting convention and tourist activities and facilities. It is important to note that, unlike restaurant tax revenue discussed below, the law does not require the transient room tax revenue balance to be turned over to the TCC. This means the local governing body could itself utilize the remaining balance, as long as it is using the money for tourism-related purposes. However, the transient room tax proceeds may not be used to subsidize any hotel, motel, or restaurant.
6) If the TCC does not spend all of the funds allocated to it during the fiscal year, the money must be used to make up part of the TCC's budget for the following year.
7) In addition to the transient room tax, cities formerly classified as fourth or fifth class as of January 1, 2014 may enact a restaurant tax to provide tourism revenue (check the Department for Local Government registry for qualifying cities). The tax may not exceed three percent of the retail sales of all restaurants in the city. Unlike the transient room tax, money collected from the restaurant tax must be turned over to the TCC. Any portion of an ordinance that restricts the use of the tax revenue is in danger of being voided by a court. However, cities and TCCs can and do enter into consensual agreements regarding how the revenue will be spent.
8) All money collected from both the transient room tax and the restaurant tax must be kept in a separate account.
Ultimately, it is important that city officials recognize that TCCs are creatures of city governments, funded primarily by city tax dollars. As such, the city has the responsibility to ensure its tax revenue is properly managed and its TCC continues to be a valuable resource for the community.
So there's your TCC finance tune-up. Get in the driver's seat, and see how far your city can go.
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