2016-2017 Mariposa County Grand Jury Report on the Mariposa County Tourism Bureau and Business Improvement District
Our intention was to understand the various organizations and roles involved and to determine if:
1) all sources of public funding for this effort were appropriately accounted for;
2) contracts between the County and the Bureau and the TBID were in order and consistent with the statutes;
3) reporting was occurring both pursuant to the county agreements and consistent with the management report establishing the TBID;
4) the marketing effort was sufficiently transparent.
The Jury was not attempting to determine if there was a link between the efforts of the marketing program and the receipt of Transient Occupancy Taxes (TOT) by the County. The Board of Supervisors has initiated an assessment of such a review in a separate action.
A private non-profit Yosemite Mariposa County Tourism Bureau was established in January 2007 and took over operation of the former County tourism program. The County has supported this tourism industry initiative through annual grants made to the Bureau in the budget process. Those grants have ranged from $275,000 for that initial partial fiscal year, to $600,000 in one year. Typically, the agreements have provided $500,000 per fiscal year. The Board of Supervisors has annually renewed the contract, and the Board has appropriated and granted County General Funds totaling $4,960,000 to the Bureau over the ten-year period ending April, 2017. Determination of the amount to be granted each year is made by the Board of Supervisors during the budget process. A contract is subsequently executed and funds transferred based on that contract.
The annual contract between the County and the Bureau that provides for the county grant requires that the Bureau conduct marketing, provide two public reports on those marketing efforts, and provide financial reporting. The financial report is "of the Contractor's activities with an annually compiled and reviewed [emphasis added] financial statement prepared by a Certified Public Accountant." The contract only addresses the annually appropriated County funds.
In early 2008, the Bureau recommended to the Board of Supervisors that the County establish a Mariposa County Tourism Business Improvement District. A "protest proceeding" was conducted and a majority of the affected lodging businesses Countywide supported the imposition of an assessment on short-term rentals equal to one percent (1 %) of gross short-term room rental revenue. The TBID was established pursuant to Streets and Highways Code §36600 at. seq. on April 1, 2008 (Resolution 08-129) for a five-year period. It has subsequently been renewed (Resolution #13-162). While the assessment (not a tax) is imposed following a protest hearing, and can only be imposed if the majority of lodging business owners subject to the assessment agree, the assessment is actually imposed by action of the Board of Supervisors and is collected by county officials. The imposition and collection of the assessment is inherently a governmental function and could not be conducted without the County's participation.
The TBID was formed consistent with a Mariposa County Tourism Business Improvement District Management District Plan dated March 24, 2008. That Plan anticipated annual revenues to the TBID of $920,000 in that first full year of operation based upon a proposed 1 % assessment, and continued annual contributions from the County based on total TOT collected by the County. In the most recent fiscal year (FY2015-16), assessments totaled $1,448,021. Total disbursements to the TBID during the entire period have been $10,439,105, as of April 2017.
Pursuant to the management plan, these funds cannot be used for any other purpose. The funds transferred by the County to the Bureau equal to the TBID assessment are not reflected in the County budget, and they are not disclosed by the County even though the Management Plan clearly obligates the County to impose and collect the assessment and have a fiduciary role in the administration of those funds.
The value of the assessment and the General Fund contribution from the County were anticipated to increase annually based on actual TOT receipts. The effectiveness of the TBID's activities was to be evaluated based on actual TOT receipts.
In addition to the Board of Supervisors task of conducting hearings and establishing the TBID, by adopting the management plan the County agreed to collect the assessment on a monthly basis and to transfer the funds to the TBID. In exchange, the County could charge a 1% fee on funds collected.
The Bureau has the responsibility to conduct the activities of the TBID and is the designated "owners' association" pursuant to the Management Plan, page 11. Streets and Highways Code §36651 requires that the County "shall contract with the designated nonprofit corporation to provide services" as outlined in the management plan. No such contract has been executed.
The Grand Jury was provided documents by the County that were made available from the Clerk of the Board of Supervisors, the County Administrative Officer, the Treasurer-Tax Collector and the Auditor. The Jury conducted interviews with each of these officials, and asked related questions of the members of the Board of Supervisors when meeting with those officials. Members of the Jury reviewed the statutory requirements contained in the Streets and Highway Code relative to the establishment and operation of a Tourism Business Improvement District and monitored previous and current Board of Supervisors actions relative to the establishment and renewal of the Bureau agreement.
F-l The contract between the Bureau and the County fails to address the entirety of the funding made available to the Bureau from both General Fund and TBID resources. The County only considers the use of General Fund resources.
F-2 The County has never taken any action executing an agreement as contemplated in Streets and Highways §36651.
F-3 The financial reporting as required in the contract between the County and the Bureau (annually since 2007) was provided to the County after the Grand Jury asked for copies of those documents. The Tourism Bureau has not complied with its agreement to provide "A financial report of the Contractor's activities with an annually compiled and reviewed financial statement prepared by a Certified Public Account."
F-4 The County continued to disburse funds and to renew contracts despite the absence of appropriate financial reporting.
F-5 The financial reports that Jury members did obtain were all dated January 6, 2017 and covered the years 2010-2011 - 2014-2015. They included the statement from Spinardi and Jones, Accountancy Corporation: "We did not audit or review the financial statements nor were we required to perform any procedures to verify the accuracy or completeness of the information provided by management. Accordingly, we do not express an opinion, a conclusion, nor provide any assurance on these financial statements."
This does not meet the standards established in the contract with the County.
The Grand Jury did not evaluate nor concern itself with the advertising and promotion efforts of the TBID or the Bureau, and has no opinion as to the effectiveness of these activities, except to say Transient Occupancy Tax revenues continue to increase significantly more than other revenue sources that fund the operation of County government.
The Bureau has failed to provide to the County the financial reporting required under its current or prior agreements with the County for use of General Funds, and the County has not enforced all the provisions of this agreement. Further, assessments imposed by and collected by the County are a fiduciary obligation of the County, and should be treated as such - that is, reported through the budget process even if only in a reconciled trust fund. The Grand Jury holds the position that transparency is an essential part of good government.
The County has not formally designated the Bureau as the "owners' association" as contemplated in the Streets and Highways Code, and contracted with the owners' association for the use (and accountability) of the TBID assessment.
R-l The County Auditor should cease paying from the General Fund until the type of financial reporting required in the existing contract between the County and the Bureau is provided by the Bureau.
R-2 The County Administrative Officer should review the Management Plan and ensure that the services provided by the Bureau are consistent with the level of funding provided both from the County contribution and the Tourism Business Improvement District combined.
R-3 The Board of Supervisors should propose a comprehensive agreement with the Bureau to replace the existing annual agreement, and ensure that all funding is accounted for, including the TBID assessments, and that the appropriate reporting be monitored.
R-4 The County Auditor and County Administrative Officer should implement a reporting mechanism to ensure that the public has sufficient information about the operation of the Bureau and Tourism Business Improvement District, most likely through the annual budget process.
Required to Respond
Mariposa County Board of Supervisors
Mariposa County Auditor - Controller
Invited to Respond
Mariposa County Administrative Officer
Yosemite Mariposa Tourism Bureau
Source: Mariposa County 2016-2017 Grand Jury Report