Banking & Finance and Government

Committee checking into taxcollection process

September 9, 2012
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Members of the Kent County Finance Committee focused on some overdue tax payments last week. According to a report they received from Experience Grand Rapids, two hotels on 28th Street owe the county about $270,000 in back lodging-excise taxes.

“How are we going to get our hands around that?” asked Commissioner Dick Vander Molen. “There has got to be a hammer somewhere in this thing.”

Commissioner Roger Morgan pointed out that the hotels have collected the 5 percent county tax, which is assessed to every guest’s bill at checkout, but haven’t forwarded the revenue to the county. “There doesn’t seem to be a whole lot of eyes on the (collection) process,” said Commissioner Tom Antor.

County Administrator and Controller Daryl Delabbio said the Treasurer’s office can add late fees to the tardy taxes, but he noted that most hotels and motels in the county pay the assessment on time.

County Corporate Counsel Dan Ophoff told the committee the commission can designate someone to monitor the tax fund and the collection process.

“We will make that request to the Treasurer,” said Commissioner Harold Voorhees, who chairs the Finance Committee.

Morgan suggested that Voorhees meet with County Treasurer Kenneth Parrish to discuss the matter, and Voorhees agreed to do so.

A lack of revenue from the tax has been an issue for the county for years. The recession that followed the terrorist attacks 11 years ago this week lowered the local occupancy rate and reduced the revenue the county received from the tax. A few years later, the ongoing recession wiped out the account’s fund balance, or reserve.

To combat the revenue loss, the commission agreed to subsidize the tax fund with money from general operations and has done so for at least the past three years. The county is expected to subsidize the fund again next year.

The county counts on the tax revenue to finance the local hospitality industry and to make the annual bond payments for much of the construction of DeVos Place, the city’s convention center. This year’s bond payment is $5.8 million; the tax is also expected to total $5.8 million.

Kent also uses that income to fund Experience Grand Rapids and the West Michigan Sports Commission, the groups that market the county to meeting planners. Experience GR is expected to get $855,000 from the fund this year, with $100,000 going to WMSC.

Commissioners transferred $1.4 million from the general fund to the lodging-tax account in 2011 and set aside another $841,000 for it this year. The plan is to transfer nearly $1.3 million to it next year, as next year’s general fund budget currently stands. Tax revenue to the fund, though, rose recently. So did the hotel-occupancy rate and hotel-room charges — two good signs for continued growth in that revenue.

Committee members also discussed the budgets for six funds that have $69.28 million in expenditures and the same fiscal year as the state. The state’s fiscal year begins Oct. 1, while the county’s starts Jan. 1.

The funds cover child-care programs through the county’s 17th Circuit Court and the Department of Human Services. The county’s Health Department, Friend of the Court, Veterans’ Trust Fund and a special projects fund are the others.

The county is expected to transfer slightly more than $25 million from the general fund into five of the budgets, with the remaining $44 million to come from Lansing. All but the Veterans’ Trust Fund is set to get county money. Much of the state money comes from federal grants.

County commissioners will have a work session on the budgets this week and are expected to adopt the spending plans Sept. 27. The budgets will come back to the Finance Committee for further review next week.

“We want to get the Oct. 1 budgets out of the way before we tackle the Jan. 1 budget,” said Delabbio.

This week county commissioners will decide whether to amend a reimbursement plan for a letter-of-credit the Gerald R. Ford International Airport has with Fifth Third Bank. In 2007, the bank issued a letter of $11 million to fund the debt service for two airport bond issues. In 2009, the amount was changed to $10.8 million and the agreement expires Thursday. But the bank has offered to extend the letter-of-credit for three more years.

Airport Finance and Administration Director Brian Picardet said the new contract raises the interest rate from 20 to 30 basis points. “(But) it’s still a really good deal,” he said.

Committee members approved the amendment last week and recommended that the board do the same. The new letter-of-credit will cost the airport $32,588 annually; the money will come from the aeronautics budget.

Commissioners also will decide this week whether to take $140,000 from the capital improvements fund to buy hardware and software for a transition project that is transferring control of John Ball Zoo from the county to a new governing entity. Commissioners made the transition effort a top priority.

“Since this is a board directive, I can support this,” said Morgan of the monetary transfer.

Assistant Administrator Mary Swanson said the county would own the zoo property and the IT hardware and software, which will integrate the zoo’s various applications, after the transition is done. A transfer would leave the CIP reserve with roughly $200,000.

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