Commissioners plan to strip hotel tax revenue from county tourism to build convention center

Jeff Kotula of the county’s Tourism Promotion Agency warns that the move would be a violation of state law.

Washington County commissioners are weighing changes to the county’s hotel tax ordinance that could shift control of millions of dollars in tourism revenue and put them at odds with the Washington County Tourism Promotion Agency.

At Tuesday’s agenda meeting, Commission Chairman Nick Sherman made a motion directing the county solicitor to repeal and redraft the hotel tax ordinance.

Sherman said the goal is to return to the structure outlined in the original 2001 agreement, which gave county commissioners a role in deciding how hotel tax dollars are spent.

“What we want, and the main goal of the county is to actively pursue the creation and funding of a sports recreation and convention center,” Sherman said. “With $2 million a year, we could fund a significant bond to accomplish this. Ultimately, there is no better way to attract tourists to Washington County, which is what hotels want and why they pay the tax, than to have a destination that brings people and events here.”

Washington County’s hotel tax generates between $2 million and $3 million annually from visitors staying in local hotels.

Under the original agreement, the county treasurer retained 2% of the tax for administrative services. Of the remaining revenue, 25% was allocated to the Washington County Tourism Promotion Agency for salaries and administrative costs, while 75% was to be deposited into a joint account controlled by both the Tourism Promotion Agency and the Board of Commissioners.

Sherman said the agency was required to submit reports to the board outlining proposed tourism promotion and development projects funded by the tax. According to the county treasurer, that joint account was never established.

In 2017, the ordinance was amended to increase the hotel tax from 3% to 5%. The treasurer’s administrative fee increased to 4%, and the remaining 96% of the revenue was distributed entirely to the Washington County Tourism Promotion Agency. The amended ordinance states that “The Treasurer shall distribute to the Recognized Tourist Promotion Agency authorized to act within the County all remaining revenues.”

County Solicitor Gary Sweat said questions regarding how those funds are being used have gone unanswered by the tourism agency, and a recent audit shows millions of dollars currently sitting in a certificate of deposit. Sweat said it is unclear whether the agency is fully complying with county tax code requirements and that, under the current structure, the county has no input into how the hotel tax revenue is spent.

“According to the records we do have, we are paying someone to tell us how to attract people to the county,” Sherman said. “We are paying consulting firms and advertising agencies. If TPA is simply acting as a pass-through, why not eliminate the middleman and put more money toward the actual product?

“When we sit at the table, we often have the same ideas, so why are we spending so much on consulting fees?”

The board is scheduled to vote on the motion Thursday.

If approved, Sweat will draft a revised ordinance that would keep the hotel tax at 5%. Under the proposal, 5% would go to the Treasurer’s Office, 20% would be sent directly to the Tourism Promotion Agency and the remaining 75% would be placed into a special joint account held by the Washington County Board of Commissioners and the Washington County Tourism Promotion Agency.

Spending from that account would require agreement from both parties on which projects receive funding.

With a new draft ordinance, a public hearing would be held in accordance with county code before a final vote on adoption.

The Washington County Tourism Promotion Agency has objected to the proposed changes, saying the commissioners’ plan would violate Pennsylvania County Code if enacted.

Jeff Kotula, president of the Washington County Tourism Promotion Agency, said he was disappointed commissioners did not contact the agency before presenting the proposal at Monday’s meeting.

“We would have advised them that the changes they are seeking will violate state law and could end up in litigation against the county,” Kotula said.

Pennsylvania County Code Title 16, Section 17507 permits counties to enact a hotel tax and outlines how the revenue is to be used.

“Our legal counsel informed us that the County Code is clear on how the hotel tax is to be collected, distributed and used,” Kotula said. “The code states that the hotel tax is collected by the county treasurer — who retains 4% in an administrative fee — and the remaining amount goes directly to the county tourism promotion agency to market the county to leisure and business visitors. The County Code does not permit the county commissioners to retain, redirect or allocate those funds for other purposes. The commissioners do not have the authority to change state law by county ordinance.

“We are certain that when the county solicitor performs his legal due diligence, he will advise the commissioners that their proposed ordinance violates state law and enacting it may result in legal action.” The proposal follows a recent decision by commissioners to end a long-standing contract between the board and the Washington County Chamber of Commerce, which Kotula also presides over.

The 2001 agreement Commissioner Sherman keeps referring to ended in 2002 because the commissioners at the time never renewed it. “Subsequently, state law governing tourism changed several times over those 25 years making the contents of that agreement null and void anyways,” Kotula said. “Solicitor Sweat is incorrect that we are non-responsive to the commissioners’ requests. The commissioners have met with our boards personally to discuss their financial questions and we have answered their questions openly, transparently, and followed up in writing-which Solicitor Sweat was copied.

“In addition, we have informed Commissioner Sherman several times that the monies we have in our bank accounts are being used to provide each municipality in Washington County with a grant for $25,000 for a project in their community to celebrate America’s 250th birthday next year. Further, he sat on our board, receives our audits and is aware of our finances.”

“We are proud of the work we do to attract tourists to Washington County. In fact, Washington County is a leader in visitor attraction in the Pittsburgh region, right behind Allegheny County in attracting visitors. We are concerned that Commissioner Sherman’s stated intent to fund a $2.0 million bond with tourism dollars to fund a convention center will take away money from important local events such as Charleroi’s Little Great Race, Monongahela’s Aquatorium and even promoting small tourism-based businesses.”