Buford investigated over hotel tax use

By Dan Chapman

The Atlanta Journal-Constitution

The city of Buford is being investigated by the state over possible misuse of hotel-motel taxes.

While the amount of money at issue is small, $45,853, the investigation underscores how the state more stringently enforces dispersal of hotel-motel taxes.

Nearly 250 Georgia communities raised $161 million in fiscal 2008 from the tax paid by tourists, businessmen and other travelers.

In this recession-wracked economy, more communities are seeking to capture more of the so-called “bed tax” dollars to replace lost sales and property taxes. Or they’re considering diverting the hotel-motel taxes into other funds or programs -- acts that may be illegal.

“The tax is originally intended to promote tourism, conventions and trade shows, and we don’t have a problem if that’s what it’s really going for,” said Joy Walstrum, president of the nonprofit Tourism Development Alliance of Georgia. “But when the money gets siphoned off for other purposes, we have a problem. This (program) has pretty much been abused since day one.”

Georgia hoteliers pushed for the tax in the 1970s to generate marketing dollars. Communities can impose bed taxes as high as 8 percent of the room rate.

State law requires that much of the money be used for “programs of information and publicity designed to attract or advertise tourism, conventions, or trade shows.” The rest of the money typically goes into a city or county’s general fund.

Over the years, though, the law has been amended to allow the tax dollars to be spent on stadiums, golf courses, amusement parks, hunting preserves and “non-migrating carnivals.”

Unincorporated Cobb County, whose 78 hotels and motels generated $11.1 million in bed taxes during fiscal 2008, imposes an 8 percent tax. The money is sent to the county’s coliseum authority to service debt on the coliseum, exhibit halls and performing arts center.

Brad Bowers, the county’s finance director, said the payments promote tourism and convention business because “people from all over come to the Performing Arts Center and, certainly, the exhibit halls.”

Atlanta’s 7 percent bed tax generated $44.6 million in fiscal 2008, the state’s highest amount. Nearly 40 percent of that amount goes to the Georgia Dome, mostly for debt service, with the rest split between the city of Atlanta’s general fund, the convention and visitors’ bureau and the Georgia World Congress Center.

Buford, with two hotels and one motel, collected $114,632 in fiscal 2008 and was supposed to set aside $45,853 for tourism marketing. A routine audit, though, suggested that the Gwinnett County town didn’t properly comply with rules on how the money should be spent, according to the Georgia Department of Community Affairs.

Buford imposes a 5 percent bed tax. Sixty percent of that amount goes into the town’s general fund; the rest is supposed to promote tourism. Buford could lose the authority to levy the tax if the state’s Hotel-Motel Tax Performance Review Board determines a pattern of impropriety.

Mike Brown, Buford’s finance director, said there was no wrongdoing, only a technical misunderstanding over allocating the money. In the future, he added, the city will likely give the non-general fund money to Gwinnett’s visitors’ bureau .

Last year, complaints were lodged against the cities of Pooler, Rockmart and Dillard. Greensboro and Richmond Hill joined Buford this year.

Mike Bush, director of research for Community Affairs, and others expect more investigations as communities try creative ways to use the tax money in a down economy.

Atlanta and Cobb County, for example, predict bed-tax revenue will drop 16 percent in 2009. In Gwinnett, the drop is expected to be deeper: roughly 33 percent.

“Local governments are strapped for cash right now and everybody is trying to see what money they can legally find,” said the tourism alliance’s Walstrum.