Baxter stops lodging tax dollars for Visit Brainerd

BAXTER — The November lodging tax revenue and future installments will not be sent to Visit Brainerd after Baxter City Council members stated no progress was made since issues were raised in June.

The move wasn’t anticipated as the payment was part of the consent agenda, which allows the council in one motion to approve regular business and items not deemed to be controversial.

At the meeting Dec. 17, Council member Zach Tabatt asked for the payment of bills to be removed from the consent calendar because of a payment to Visit Brainerd.

“I’m not suggesting we make a change at this meeting, necessarily, but I felt compelled to pull this item tonight,” Tabatt said, noting fellow Council member Jeff Phillips raised questions in June with specific ideas on changes to where the lodging tax goes. At the time, Phillips said there wasn’t a written contract with Visit Brainerd, which the city requires, so he recommended withholding the lodging tax revenue from the nonprofit until they worked out those issues.

“We don’t have clear resolution on anything that was brought up at that time so there is further room for discussion on the items that Mr. Phillips brought up, but right now I’m concerned that we haven’t resolved the contracted resolution requirement that was brought up in the legal memo from our city attorney,” Tabatt said.

City attorney Greta Bjerkness provided a draft resolution for the council in her memo requiring Visit Brainerd to submit an annual marketing plan and budget to the city for city review. She recommended the city pass a resolution outlining the duties and responsibilities with explicit directions on the distribution of the 95% and 5% of the tax collected.

There was a joint powers agreement between Brainerd, Baxter and the Brainerd-Baxter Lodging Association, which Baxter decided to exit in 2006 and it previously wasn’t clear if any agreement continued after that to meet the city ordinance.

On Dec. 17, Phillips said he objected to the concept of a hand shake or gentleman's agreement with Visit Brainerd. Now that the city knows it is not in compliance with its own requirement, Phillips said that puts the city on notice to act with urgency.

“I won’t be back to fight this for two more years,” Phillips said, indicating for the first time at a council session or in interviews that he plans to run for a Baxter City Council seat again. Phillips, who was appointed to the seat two years ago, was unsuccessful in his election bid this past fall.

Council member Mark Cross said when Mary Devine Johnson, Visit Brainerd executive director, made a presentation to the council the organization appeared to have quite a bit of cash on hand.

“My big issue here is getting all the code compliance issues in order, I’m not necessarily ready to say that there would be a different vendor or to bring it in-house — that’s a whole other conversation,” Tabatt said. “I’m just trying to clean up all the compliance issues that I see based on that memo.”

Tabatt said over the past six months, he feels there hasn’t been enough movement in that direction. Cross said he agreed a mechanism needed to be in place to guarantee that everything the city has given Visit Brainerd has been handled appropriately.

“There are a few questions I have on a few items,” Cross said, adding that needed to be part of the temporary resolution.

There was discussion on whether the city should stop the lodging tax revenue from going to Visit Brainerd now, or stop the money in January or March.

Mayor Darrel Olson said they need to start talking about this immediately.

“It’s a serious issue and we’re all in agreement with that, the contract isn’t right,” Olson said.

Tabatt said when he first brought up a March 1 deadline, it was to make sure the city was acting professionally and being kind to a partner but not having a resolution in place when one is needed makes it harder to make payments for three months while details are worked out.

“The June meeting should have put Visit Brainerd on notice that we had concerns they haven’t been resolved since then,” Tabatt said. “It doesn’t seem as though it’s been top of the priority list to get that resolution. I mean all that was public information. The discussion about we need a resolution was public in June — so at a certain level there has been six-months notice.”

The council voted to keep the current November payment and do a temporary resolution at the first council meeting in January and then come up with a plan and accountability measures for one more year. The city would then have discussions before a decision is made on whether to move forward with other ideas the council previously discussed for the lodging tax and marketing measures.

Cross said he wanted to work through it and have a longer lasting resolution by March 1, to be clear they weren’t starting that process on that date. Lyscio and Olson agreed with the timeline.

“So we are kind of giving ourselves notice also,” Cross said.

Phillips brought up the issue of Visit Brainerd earlier this year . He was critical of lodging tax dollars from hotels in Baxter going to an organization with Brainerd’s name, which has a physical storefront in Brainerd. The lodging tax money is paid by those staying at 10 hotels in Baxter and Brainerd, with the lion’s share in Baxter.

In 1995, the lodging establishments sought out the addition of the lodging tax as a way to generate dollars to be used to market the two cities and advance tourism and they created the lodging association that would later take on the Visit Brainerd name. The nonprofit organization is funded primarily by a 3% lodging tax that is added to the bill when someone stays at Brainerd or Baxter hotel. From the lodging tax collected, 95% goes to Visit Brainerd to promote the communities as a destination and tourism in the two cities. The other 5% goes to Baxter for administering the tax.

Contributed / City of Baxter

In October, Phillips said he wasn’t trying to rebrand Visit Brainerd and understood the value of marketing the area, but said a lot of tax dollars in Baxter could be used to directly benefit the city of Baxter . He said it was prudent for the city to have a marketing director that was a city employee and instead of all funds going to one entity, there could be a competitive process where different organizations lobbied for those funds.

At the October council work session, Tabatt said he hadn’t seen a meaningful marketing plan as the council reviewed their attorney’s memo on the lodging tax and Visit Brainerd.

“We're not looking to rebrand this to be the Baxter lakes area, but at the same time, as elected officials for this city, we're one of a few groups of people who have an absolute obligation to Baxter and not the spillover of the rest of the county and then hoping that our tax dollars flow back through from other areas,” Tabatt said in October. “So those are my big picture concerns. A plan that has distinct ties to that each and every expenditure language, a tie in a plan directly to how are we getting people to stay within the city limits or to go to the businesses in Baxter, specifically, would be what I'm looking for.”

At Tuesday’s meeting Tabatt said he wasn’t suggesting immediate action but was comfortable suggesting March 1 if something wasn’t in place the city would pause payments until a contract was there and minimum accountability standards. A lot of the things that came up in June are still unresolved on a longer term, Tabatt said.

But short term, Tabatt said they were obligated to take better care of the tax dollars by following through on the city attorney’s memo. Olson said the March deadline was probably generous. Tabatt said that was just a start of the conversation but he was fine going shorter for a timeline.

Renee Richardson, managing editor, may be reached at 218-855-5852 or [email protected]. Follow on Twitter at @DispatchBizBuzz.