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Deborah Fisher: No tax-supported entity should get secrecy in spending

Deborah Fisher • Updated Apr 27, 2017 at 4:00 PM

A shadowy situation has emerged in Chattanooga with an organization that manages millions of taxpayer dollars with no transparency and such a surprising disregard for accountability that one wonders what it would take to wake up elected officials who are supposedly in charge.

Welcome to the Chattanooga Area Convention and Visitors Bureau, whose lawyer threatened to sue the county after a commissioner dared to shed a little sunlight on how it spends tax dollars.

The Chattanooga CVB is on track to get $7.8 million in hotel/motel tax this year via a pass-through arrangement with the Hamilton County government.

The Chattanooga CVB gets almost all of its funds from the Hamilton County government pursuant to a 2007 agreement that funnels it the proceeds of the county’s 4 percent hotel/motel occupancy tax.

This year, the CVB is estimated to receive $7.8 million, and the CVB’s CEO says, if anything, they should be getting even more because of the good job they are doing.

Despite taxpayer money making up most of its income (84 percent in fiscal year 2014), the CVB claims it is not subject to the Tennessee Public Records Act and its spending records are confidential.

The CVB also claims that a county commissioner who got spending documents related to a CVB audit is prohibited by law from sharing such information with the public.

Such secrecy is misguided and an insult to citizens who expect and deserve accountability with the spending of tax dollars.

Some might remember a similar issue in Knoxville five years ago. A battle over public records there eventually resulted in exposure of a $400,000-plus annual compensation package for the Knoxville Tourism and Sports Corporation CEO – generously funded by hotel/motel tax pass-throughs not unlike the one in Chattanooga.

When the lavish salary was outed, so was the CEO. It prompted Knoxville’s top tourism organization to reshape the way it did business.

But the desire of quasi-governmental organizations to obscure the way they spend taxpayer money is not new.

In a 2002 ruling, the Tennessee Supreme Court said that “…the public’s fundamental right to scrutinize the performance of public services and the expenditure of public funds should not be subverted by government or by private entity merely because public duties have been delegated to an independent contractor. When a private entity’s relationship with the government is so extensive that the entity serves as the functional equivalent of a governmental agency, the accountability created by public oversight should be preserved.”

In that case, the Commercial Appeal in Memphis and the state comptroller both sought financial records of a private day-care agency that matched children with providers and received its operating funds from the state.

Since then, five lawsuits have been filed seeking public records of private entities that have taken over a government job. In all but one, the courts have ruled that the entities are the “functional equivalent” of government and subject to the Tennessee Public Records Act. The most recent was the Tennessee Secondary School Athletic Association in 2014.

In light of this precedent, how has the Chattanooga CVB chosen to respond?

After county Commissioner Tim Boyd produced a report based on a snapshot of CVB’s financial documents, the county was threatened with legal action. 

The report, which Boyd shared with fellow commissioners in a public meeting, raised questions about CVB travel spending, which amounted to $314,000 in one fiscal year and included items such as $400 to $500-plus dinners in Atlanta. The report also questioned the $400,000 cost to move CVB to the 18th floor of the Suntrust building in 2011, where the lease totals nearly $1 million through 2020. And it points out millions of dollars spent without competitive bidding and thousands in bonuses to two of its executives.

The release of the financial information so alarmed the CVB that its lawyer wrote a letter to the Hamilton County attorney. “Please understand that should the Hamilton County Commission allow any further breaches of confidentiality to occur, we will pursue the action necessary to protect our client’s interest.”

That the CVB who gets it funding from the county would consider using that funding to hire a lawyer to sue the county is not only ironic, it’s repugnant and reveals the depth of entitlement for spending tax dollars that appears to infect the CVB’s leadership.

Boyd, for his part, is doing the job he thought he was elected to do, including responsible financial stewardship. His report recommends reducing the CVB’s allocation of the county’s hotel-motel tax and diverting a portion instead to service debt for construction of facilities that promote tourism.

He also is asking to amend the hotel/motel tax resolution to require the CVB follow Hamilton County government’s procurement and travel policies, and make clear that its financial documents are subject to the public records act.

“[W]hen any agency is entrusted with the responsibility of managing tax dollars there must be the highest level of accountability and transparency,” Boyd wrote in the report. “This does not seem to be the case with the CVB when they are repeatedly asked for copies of all of their financials by the media and refuse to share the information.”

For the county commission to accept less than full public transparency from the CVB is as much a blemish on their reputation as the agency that threatened to sue them over it.

Deborah Fisher is executive director of the Tennessee Coalition for Open Government.

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