September 11, 2019 830 PM
MARFA – Shortfalls in Hotel Occupancy Tax revenue for this fiscal year alarmed Marfa City Council and left Mayor Manny Baeza proclaiming, at a budget workshop last week, that perhaps Marfa and its tourism had already peaked. Upon prompting by Councilmember Buck Johnston, the city investigated the shortfall and discovered the Hotel Saint George was delinquent on all hotel tax payments for 2019 as well as two in 2018. Additionally, the hotel did not file state tax payments in July.
In documents obtained from the city and the state comptroller, a payment from the hotel in March of 2018 covered the January 2018 tax, one month behind its due date. By January of 2019, the hotel was cutting a check to cover August 2018’s tax payment, four months after the due date.
City council became aware of the late and missing payments on September 5; as did the hotel’s owner, Tim Crowley, who promptly cut a new check to cover the month of February 2019. However, City Attorney Teresa Todd, at the September 5 budget meeting, informed the public and council that the check would need to be applied to the oldest delinquent payment: November 2018.
Now, the hotel is hoping to catch up before the end of the city’s fiscal year on Monday, September 30, according to Hotel Saint George General Manager Emily Williams. Payments for December 2018 and January through August of 2019 are projected to total well over $100,000, explaining why the city of Marfa was not reaching its projected HOT revenue target this year.
“Through December 31 of last year, Presidian Management was doing our accounts receivable and accounts payable,” Williams explained. Since parting with their management company, the responsibilities for payments have been brought in-house.
Williams acknowledged, “We are behind on some payments,” but said the hotel is working with the city’s accountant and former mayor, Dan Dunlap, to assess the situation and remedy it.
Attorney Todd said, “It is a very significant problem for the city and it is damaging our ability to carry out our programs that we do with HOT funds.” She added that the late tax payments weren’t just affecting the city’s budgeting process for next year; the late payments are impacting the city’s current funds, limiting the city’s ability to spend on its HOT programs.
During the September 5 meeting, Attorney Todd also noted that per the city’s HOT ordinance, delinquent payments incur a 5% fee every 30 days they’re late. That fee compounds every month, meaning the total fees for delinquent taxes may be truly staggering for the hotel. Today, the city attorney plans to assess the numbers and make a plan for going forward.
Each delinquent payment is a Class C misdemeanor, though those are usually dismissed once the payments are made. Todd plans to have council review its ordinance, because its penalties are currently weaker than what the state allows.
Texas permits collection of interest on late fees, in addition to fines, because it is money that would otherwise accrue interest for the city if it were being held in their accounts. The state also allows the 5% penalty to escalate higher if payment delinquency persists for months. The city’s ordinance doesn’t utilize either of these penalties currently.
Following the September 5 revelations, city accountant Dan Dunlap wrote a letter to the hotel, informing them of their current record of payments.
Hotels, motels and short term rentals that bring in over $10,000 a month are required to make monthly payments to the state and city on their taxable income. The hotel’s filings with the comptroller reveal its taxable receipts are between $100,000 and $300,000 every month since January 2018.
Councilmember Yoseff Ben-Yehuda commented, “Now that this has come to light, it’s important that we improve the system to ensure that we’re collecting all of what’s due to the city in a timely fashion.”
In the city offices, Dunlap explained, “The way the HOT tax operates is that it’s run on the honor system. We don’t know what their receipts are, so we can’t invoice them.”
City Secretary Rachel Whatley spoke of a couple chronic issues. Several hotels, motels and short term rentals turn in their payments without the required City of Marfa Hotel Occupancy Tax Report attached to the check, while others turn in checks with blank memo lines, not explaining which month the check is covering.
Todd’s experience collecting HOT taxes for Jeff Davis County has taught her a few lessons on the complexities of collecting. “It takes getting way down in the weeds to figure it out, and it’s worth it, because it’s not fair to the people that pay when other people don’t pay,” Todd said. “And it puts the city in a bind. We’re in the red on HOT tax because of this.”
“Hopefully it’s remedied sooner and not later,” Todd said.