Short-term rental fees, delinquent utility payments and HOT funds discussed at city budget meeting

MARFA — City council gathered for budget meetings twice in the past week, fine-tuning a budget that has seen significant cuts, in part due to expected revenue shortfalls related to COVID-19.

As the mayor estimated revenues and expenses with his budget, council began checking under the proverbial couch cushions for any loose change. Last year, the city budgeted $25,000 in income from late fees on utilities payments. While those fees were suspended during the early COVID-19 lockdown, council began discussing when it would be appropriate to bring back those charges for late utilities payments. Council directed the city staff to produce a report on how much money the city was waiting to collect on unpaid bills.

The report that arrived in council’s inbox “kind of surprised” them, Councilmember Yoseff Ben-Yehuda remarked at the Tuesday night meeting. The document provided to city officials revealed $570,625.56 in utility bills that residents had not yet paid to the city, with $361,145.39 of that being more than 90 days delinquent.

“It feels a little bit like we haven’t been keeping up on it. I know we had a city manager on his way out,” Ben-Yehuda said. “Nobody’s pointing the blame at anybody, but I think we need to figure out how to get more traction on this and hopefully recoup some funds, or else write it off to a collections agency.”

The city is still getting a full handle of the situation at hand, with Mayor Manny Baeza pointing out at the meeting that many of those accounts could be from people who are deceased, moved away or connected to properties willed to heirs who are not in the area any longer.

While it is still uncertain how the city reached that point of non-collection, the mayor is hoping to sit down with City Utility Clerk Lori Flores before Labor Day weekend to go account by account and determine what debts are likely to be within the city’s ability to collect, and what might need to be turned over to collections.

Also in the mayor’s proposed budget was a prediction for another year of low natural gas sales, due to an impending warmer winter. Homes are expected to use less city-provided gas for heating, but hotels, “should they stay open,” said City Accountant Dan Dunlap, will help bolster that income. Like many other lines on the budget, revenue estimates were done conservatively, taking into account the exceptional uncertainty of the coming year, with officials hoping the city exceeds those revenue targets rather than fall short of them.

Council also saw unexpected costs ahead in order to run two elections in one fiscal year: the delayed city elections this November, and the regular city elections the following May, which raised the budget item to nearly $18,000 on elections for 2020-2021.

The Hotel Occupancy Tax, which has previously netted over $600,000 for the city, is expected to be reduced in income by one-third, projected at $400,000 this year due to a slow in tourism during COVID-19 and economic uncertainty ahead.

Those HOT funds must be spent on reinvestments into the tourism industry, which can take the form of improving city buildings for tourism, supporting events and organizations that bring in out-of-towners, and, for a 10-year period that began in 2019, supporting the county’s Marfa Municipal Airport.

The city set aside funds for the museum and recommitted to spending $86,000, or even more, in banked funds on the USO building, which is also the Marfa Visitor’s Center. $35,000 designated for historic preservation of buildings will go toward the Presidio County and Marfa Museum, since the building is owned and maintained by the city.

Marfa Lights Festival and Chinati Weekend, two legacy festivals that receive support from the HOT fund, both canceled their in-person gatherings for Fall 2020 but were already paid by the city, so their checks will roll over to 2021.

Council had previously agreed to create yearly registration fees of $150 for short-term rentals, but at the Tuesday meeting, council unanimously voted to add a revenue line item of over $14,000, indicating their intention to begin requiring those registrations in the new fiscal year.

“People are coming and definitely these short-term rentals are being used,” Councilmember Buck Johnston said. “It’s time for us to say that ‘Hey, if you’re going to make this revenue…,’” she trailed off, and Councilmember Raul Lara finished the thought, adding, “It’s time to pay the piper.”

One topic that stirred discussion among council members was the city’s decision to continue making payments from HOT funds to the county to help pay down county debts from improving the county airport.

Councilmember Irma Salgado stood firm that the airport should receive some funds, even if it did not measure up to the $35,000 in city HOT funds that were sent to the county last year.

Each year, the county sends around $45,000 to the city to pay Marfa EMS for serving residents in unincorporated Presidio County, and the city sees the HOT payment for the airport as a gesture of good faith for that financial support.

Councilmember Ben-Yehuda called the exchange of airport funds and EMS funds “a wash” and said EMS was an extremely valuable service the city provided for the county. When Councilmember Salgado proposed $30,000 to the airport this coming year, Ben-Yehuda questioned “why we’d do 90% on the airport but 0% on these other programs,” referencing event and advertising funding which began at $0 under the mayor’s advice.

“I was thinking during this whole budget process that we should focus on our buildings,” Mayor Baeza said, hoping to use the down-time during COVID-19 to do construction and improvements, so that when people return to Marfa, the city will offer “nicer venues.” He estimated gatherings will likely be shut down for at least half the fiscal year, which begins October 1, which is why he doubted funding any events grants, setting those line items at $0.

Council discussed adding some funding back to the mayor’s budget for event advertising, in case the possibility of public gatherings improved in 2021. They voted to halve grant funds for event advertising to $20,000 this coming fiscal year, with Councilmembers Salgado and Raul Lara dissenting.

With COVID-19 still looming large in council’s mind, they did decide to allocate a much smaller share of funds to events, unanimously giving $2,000 for sports event promotion, which the mayor remarked was one of the best, most spaced-out activities during the pandemic.

Ben-Yehuda suggested raising arts and culture promotion from $0 to $30,000, which the mayor called “fair, because it’s only half” of the previous year’s $60,000. “If you want to show consistency across the board on this HOT fund,” Baeza said, “I think it’s fair.” Council unanimously agreed.

Circling back to airport funding, Ben-Yehuda asked the council, “What do you all think about reducing the airport amount? Like the mayor just said, reducing to 50% is fair.”

“Most of the time,” retorted Baeza. “The airport is still open every day.”

“We’re not funding the airport being open every day, we’re funding the airport putting heads in beds,” the council member replied. Still, councilmembers Lara and Salgado emphasized that funding the airport was not very negotiable for them, settling at $30,000 for this fiscal year.

Legislation that allows Marfa to spend HOT funds on the county’s airport requires the City of Marfa to enter into a memorandum of understanding with Presidio County “to ensure adequate control over the funds such as to ensure that the funds accomplish a public purpose, and that the city protects the public’s investment and ensures a return benefit, in this case the benefits associated with encouraging tourism to the area.”

But as council members asked for numbers on airport usage putting “heads in beds” – one of the criteria for HOT fund spending where visitors should be booking stays at local short-term rentals, hotels or motels – City Accountant Dunlap said, “Nobody at the airport keeps actual numbers.” Councilmember Johnston called the lack of data collection absurd.

“People that fly out here don’t like to be met at the airport, asked questions and counted,” Dunlap said. Ben-Yehuda pointed to local nonprofits who receive HOT funds having to track and report their visitor data, noting it is not easy, but “it’s required by the state for us to be responsible with those funds.”

The city attorney was not aware of an MOU agreement and the mayor confirmed on Wednesday that the city does not have an memorandum of understanding with the county at this time.

At a county commissioners court to discuss the budget last Friday, airport manager Chase Snodgrass said the county had “seen a significant drop in airport traffic” and that they were chopping their revenue projections down this year, estimating a 37% cut to revenue and a 38% cut to expenses.

At the Tuesday night meeting, as the debate over airport funding reignited, Councilmember Natalie Melendez urged her fellow council to seek out a conversation with the county about their wants and needs for the airport this coming year.

“I think the pragmatic approach is we need to have more of a dialogue with the county before we hit the ‘OK’ on the amount we’re allocating this year to the airport,” Melendez said. “I would rather have some kind of dialogue, some kind of representation from the county before we go full speed ahead.”

The meeting adjourned, with council planning to revisit the budget at a future special meeting that is not yet on the calendar. There will be a regular city council meeting today, Thursday, August 27, at 6 p.m.