The Rockport City Council, at its regular meeting Tuesday, Sept. 10, approved entering an agreement with Azavar Government Solutions (AGS) for professional services for administration, discovery and collection of Hotel Occupancy Taxes (HOT).
Director of Finance Katie Griffin told council members the discovery option is part of the agreement the city is most interested in due to the amount of HOT revenue that is not being collected.
“They will discover and collect from those lodging establishments that are not doing so,” said Griffin.
City Manager Kevin Carruth said city staff was able to leverage the company’s desire to enter the Texas market, and AGS has agreed to waive indefinitely its 25 percent commission fee.
AGS will also work with the city to develop a new HOT ordinance.
Carruth noted city staff isn’t set up to track down and identify those individuals and/or companies that are not currently paying the seven percent hotel tax.
“It has been a major weak point in our system,” he said. “The county is dealing with (this same issue), as well,” he said.
It was noted the agreement also includes the capability of discovering online travel companies that are not paying the HOT.
Griffin, in backup material provided to the council, said the city’s HOT collection efforts are minimal and based on the honor system of the city’s lodging establishments.
“The well-established hotels, bed and breakfasts, and short-term rentals self-report and remit HOT payments on a monthly or quarterly basis,” said Griffin. “There is currently not sufficient staff to research and contact those that are not self-reporting.”
Carruth noted hoteliers want this action to be taken because they want an even playing field.
The agreement will cost the city $2,900 up front to set up the system, train employees, etc.
All expenses associated with the agreement can be paid with HOT funds.
The city, as well as lodging establishments will have access to the Localgov platform on which they can make payments, via ACH/EFT/eCheck at no additional cost, or with credit card for an additional three percent processing fee payable directly to the credit card processor at the time of payment. Each filing costs $8, and can be passed through to the HOT taxpayer.
“That fee is a small cost for us to be able to allow hotels to pay online,” said Griffin.
The portal also provides reporting capabilities as designed by the city.
If an outlet is suspected of not paying its HOT, or underpaying its HOT, the city can ask AGS to perform a hotel audit for $950.
Councilman Mike Saski asked Griffin what is the one thing AGS can do the city can’t do.
“They have access to data we don’t have,” said Griffin.
“I can see where audits (and other services AGS provides) would be a good tool,” said Saski.
He asked what happens when an outlet is caught not paying HOT.
“They’d have a chance to take corrective action,” said Griffin.
The new HOT ordinance will address penalties, the city’s ability to look at a lodging establishment’s books, etc.
Councilman Bob Cunningham asked about a timetable for when AGS will start working with staff to develop an ordinance.
“You need to approve the agreement first, and then I will talk to AGS (and set up a schedule),” said Griffin.