October 2, 2019 830 PM
MARFA — After quickly approving the 2019-2020 budget, tax revenue and tax rate increase last Friday in the Casner Room, Marfa City Council reconsidered their enforcement policy for the Hotel Occupancy Tax Ordinance. The conversation was ignited when earlier budget workshops revealed a sizeable delinquent tax bill for the Hotel Saint George, but that evening, council also learned of 30 short-term rentals currently operating in Marfa that are unregistered and delinquent on taxes.
City council first approved their 2019-2020 budget, putting into effect a balanced budget with ambitious goals to invest in Marfa infrastructure this coming fiscal year. After enduring 15 meetings over the past 30 days, council showed a unified front on Friday when they unanimously voted to approve the proposed budget items.
The elected officials also ratified $28,474 in additional tax revenue this year and levied a $0.47800 tax per $100 of taxable property value, increasing the tax rate by 7.66 percent over last year.
Council then addressed the state of their 2019 HOT revenues with an agenda item to take “appropriate action regarding delinquent HOT tax account of the Hotel Saint George.” City accountant Dan Dunlap’s calculations indicated the Hotel Saint George owed over $175,000 when the tax issue was discovered on September 5. In less than a month, Dunlap said HSG hotelier Tim Crowley had operated in good faith, providing over $73,000 in payments, with more expected imminently.
Councilmember Yoseff Ben-Yehuda presented a calculation of what fines would look like if the current ordinance was enforced, resulting in over $36,000 in fines for the hotel. City Attorney Teresa Todd pointed out that the ordinance oddly required a Class C misdemeanor conviction in court before fines and fees could be applied and recommended against that course of action.
Rather than pursuing it in court, Councilmember Buck Johnston suggested that council send a demand letter requesting the remaining payments within a time period, perhaps 60 to 90 days, and only if the hotel failed to make its payments should late fees be applied. Johnston asked Attorney Todd what enforcements of the HOT ordinance looked like in the past.
The city previously summoned six short-term rental Airbnbs to municipal court, and Todd stated, “I would not say that was a positive experience.” Rental owners, some unaware of their delinquencies, “lost it” when they received the citations, according to Todd.
For those rental owners, the city agreed to dismiss the cases if the tax payments were settled before the scheduled court date –– all six owners paid before court. “As a lawyer, I can tell you it was extremely effective,” Todd told council, however, “I don’t think it did the city any favors doing it that way.” The attorney instead suggested, “As long as good faith continues, I don’t think there should be any kind of summons to come to court, but I do agree with [Johnston] that there needs to be a timeframe.” Todd did note that none of the previous delinquencies matched the magnitude of the one now at hand.
Councilmember Natalie Melendez proposed sending a demand letter requiring payment be rendered in 60 days. If not met, the hotel would incur the proposed late fees.
Council voted four to one to approve Melendez’ motion, with Councilmember Ben-Yehuda dissenting. He wanted the demand letter to include a requirement for ordinance-mandated documentation along with the payments. Attorney Todd said the documents would be required anyway under the current ordinance.
Once council had determined how to handle the specific hotel at hand, the next agenda item opened the door for council to consider revising the entire HOT ordinance, which Todd said did not currently fall in line with requirements in the state statutes.
Councilmember Irma Salgado said, “We’ll have to go with what we have until we get a new ordinance,” but Melendez disagreed, saying that if there’s not a way for the city to enforce the ordinance in a way that “feels most appropriate to us, then we shouldn’t enforce it.”
It was then that Dunlap informed council, “I have on my desk 30 short-term rentals that are not registered with us and not paying.” Minerva Lopez, director of the visitor center said that unchecked short-term rentals were taking advantage of the rental market without contributing to the tax, noting they could afford the 7% HOT tax. Todd added that rental owners usually passed the cost on to their customers anyway.
Attorney Todd again proposed a solution that council grasped onto: the city could send the 30 delinquent and unregistered Airbnbs notices to pay their taxes within a certain window, or face penalties and enforcement under the ordinance, using the new precedent set by the demand letter to the Hotel Saint George. Council agreed that other delinquencies should be handled in consistency with the new Hotel Saint George directive, with Ben-Yehuda dissenting.
Mayor Manny Baeza said revising the ordinance was a priority for council, hoping Todd could prepare a revised ordinance to vote on by January 1.
“A big chunk of our budget is reliant on this one,” Johnston said.
One looming question that had been unanswered was how the city would manage hotel tax collections going forward. With staff spread thin, delinquencies are currently slipping through the cracks and keeping track of the ever-increasing short-term rentals online is burdensome.
“When I spoke with hotel lodging association today, they suggested we turn this over to someone else to collect,” Ben-Yehuda said. “I think it makes a lot of sense with how many Airbnbs we have. We could pay for it with these funds.”
Todd agreed. “I think this would be a great thing for that because we don’t have staff. This is how we got so far behind.”