As the COVID-19 worldwide pandemic shut down the economy and life as everyone knew it, those in tourism worried about the impact this would have on the county’s innkeepers tax as visitors were told to stay home to prevent the spread.

The pandemic has had an impact on the county’s innkeepers tax, a 5-percent tax paid on overnight room rentals in the county, but some months have been better than originally predicted, Jane Ellis reported to the Brown County Convention and Visitors Commission on July 9.

Ellis is the executive director of the Brown County Convention and Visitors Bureau, which is funded by the innkeepers tax.

At the July 9 meeting, Ellis presented the CVB’s 2021 budget, which was set at $660,000. The CVB’s budget has been $712,500. The CVB is tasked with marketing Brown County and bringing visitors here.

Ellis also announced that she had laid off digital marketing coordinator Brooke Weichselfelder and public relations coordinator Aubrey Sitzman. They had initially been furloughed through the end of June.

“I told them, in fairness to them, we don’t know how long it will take for us to regroup and let them move on. Obviously, they can apply for jobs when they come back,” Ellis said.

Ellis is now handling managing the CVB’s website and social media marketing is being done through the Three Sixty Group.

“We’re just kind of riding the wave right now,” Ellis said.

Ellis also presented updated innkeepers tax collection so far and projections for later this year.

In April, Ellis had projected that the county would bring in around $25,000 in innkeepers tax for April, but that number ended up being almost $30,000. Last April, the county had brought in nearly $56,000 in innkeepers tax.

In her projections for April, May and June, Ellis factored in a 40-percent reduction from hotels not operating at full capacity and a 15-percent reduction for cabin rentals, as visitors were choosing to not stay overnight as often during the pandemic.

For the remaining months, Ellis projected a 20-percent hotel reduction and a 10-percent cabin reduction as more visitors begin to come back.

May’s innkeepers taxes came in lower than what Ellis projected. She projected with the two reductions that the county would see around $32,000 in collections for May. The total ended up being around $26,000.

But June brought in around $35,000 in innkeepers tax when Ellis projected that to be around $27,000. Last June, the county brought in a little more than $61,000.

So far, innkeepers tax stands at $242,870.99 with June’s collections. At this time last year, innkeepers tax was at $331,471.11.

“The good news is two months we’ve been up and one month is short, but it’s good to know people are still coming. I think it’s good to know that, I don’t know, it depends on how people are responding. From the business aspect I think it’s very good,” Ellis said.

The innkeepers tax has also been pledged as a backup revenue source for the Brown County Music Center’s mortgage payments if the venue does not bring in enough revenue each month to cover the payments.

Since the venue has had its doors shut since the beginning of March, it has brought in no income. The music venue received a $150,000 loan from Brown County’s motor vehicle highway fund. That money will be used to pay the $35,000 interest-only mortgage payments on the building for April, May, June and July.

At the June 11 CVC meeting, board member Barry Herring told Ellis and CVB Board President Debbie Bartes that until the venue is open again, the CVB should assume a $35,000 monthly draw from the innkeepers tax to pay the interest-only portion of the mortgage.

At the July meeting, Herring said that a meeting with the banks that hold the venue’s mortgage had gone well, and that they would work them on making the interest-only payments until they are able to open again.

“I felt confident we’re going to get interest-only for the rest of the year, a minimum of interest-only, for the rest of year, if not beyond. I think that’s their hot button is getting their interest paid. I think we can always work deals on how you add principal on the backside of the loan and how you get it paid back in years in the future.”

Loan documents allow for the banks to take 100 percent of the innkeepers tax to cover payments, but Herring said the banks said they were not going to do that at the moment

“If July comes in and we’re only 2 or 3 percent off from where we were with the 2019 numbers, they’re not going to be as aggressive as to what they want to grab from the innkeepers tax account. I think it’s going to be something we look at every month. Right now, I couldn’t feel any better about having a good banking partner,” Herring said.

There is also the possibility that the nearly $500,000 the county receives from the CARES Act to cover coronavirus expenses could also cover the loan made to the music center from the MVH fund.

It was also recently announced that the music center would be used to host jury trials and future government meetings to allow for the public attend within social distancing guidelines. This would also mean the county could seek money from the CARES Act to help cover the utility costs for using the venue for those purposes.

The Brown County Council’s budget hearings will take place at the music center on Aug. 17, 18 and 19.

BCMC Executive Director Christian Webb reported at the CVC meeting earlier this month that the venue was starting to get confirmations for shows in 2021 and that their shows originally scheduled for this year, like Willie Nelson and Melissa Etheridge, are set to perform in 2021 to their entire, sold-out audiences.

Webb said the venue did lose two shows that will not be rescheduled for 2021, but that those shows were not selling as many tickets, so it was not a big loss to the venue.

Increase innkeepers tax?

A discussion about increasing the county’s innkeepers tax began at the June meeting of the CVC.

At the July 9 CVC meeting, board members voted to engage in conversations with Rep. Chris May (R-Bedford) about sponsoring legislation in the General Assembly to increase innkeepers tax to as much as 10 percent in Brown County, which is the limit set by state statute. Currently, the rate charged is 5 percent.

A change to the county’s innkeepers tax cap would have to be approved at the state level, then the Brown County Council would work with the CVC to approve an ordinance setting the new percentage collected at the local level and what to do with that additional money.

“That way, we don’t have to go back again and we stair-step it along the way,” Herring said, adding the process to get the cap increased could take as long as nine months.

“Just because we ask for a certain percentage doesn’t mean we have to draw that percentage. It means you have the capacity of charging up to that cap.”

For example, Herring said, the innkeepers tax could be increased to 6 percent and then that 1 percent extra would be set aside in case there is another pandemic.

“If another black swan event happens, we’ll be more ready for it. It only makes sense to increase the innkeepers tax and I think we should set it aside for the future,” Herring said in July.

“I’m not suggesting we take it to 10 percent. That’s as high as we can go per state statute.”

He added that a number of counties in Indiana have increased their innkeepers tax over 5 percent.

The CVC also discussed the possibility of collecting innkeepers tax on campgrounds, which is a change that also would have to be approved by state legislators.

“We might want to go ahead and go for the increase in innkeepers tax first, then if we’re successful with that, come back later with the potential of doing it (collecting the tax on campgrounds),” Herring said.

“We were encouraged to do it in two steps.”

Herring estimated that the number of public camping sites, including sites at Brown County State Park, at a range of $40 to $50 a night, would bring in an additional $300,000 in innkeepers tax.

The CVC unanimously approved engaging in conversations about the legislation. Herring reiterated that the CVC had not officially contacted May yet, so the increase could not be a reality this legislative session.

“Even though we pass this today, we could call Chris May and he say, ‘There’s just no way this session I can get this done.’ Then this whole vote means nothing,” Herring said.

“The conversation with Chris May is where the action will come.”

Increasing the percentage of innkeepers tax collected would also help protect the CVB and the music center, since both use the innkeepers tax.

Herring said the music center could use the additional 1 percent collected, or whatever amount is decided, along with the $1 entertainment tax charged on each ticket purchased to cover future mortgage payments.

Currently, the county’s innkeepers tax ordinance does not apply to the state campgrounds, and under accommodations, campgrounds in general are not mentioned.

“I’m not saying it’s not possible. I’m just saying let’s do it later. I think we should still pursue it at some point in time,” Herring said about campgrounds.

Ellis said cabins could also be included in the ordinance even if they do not have a bathroom.

The CVC also discussed the possibility of working with the county treasurer’s office to better track the collection of innkeepers tax without revealing any owner information, like using a numbered system of different sized cabins or hotels.

In the past, the CVC was aware of some lodging establishments not paying it.

The treasurer’s office could assign the properties numbers and could then print a report out for the CVC on how much innkeepers tax was paid for the different sized properties, but CVC President Kevin Ault said it would take time to start tracking how much properties are paying in innkeepers tax.

The county does have properties that pay their innkeepers tax on a quarterly basis, which could affect the total paid each month.

“Just like the collection for the month of June, I really question how much of that was for the month of June because May was so far down. … I know I had a lot of Airbnb and VRBO in the month of May,” Ault said.

“Then all of a sudden in the month of June pay July, we get $16,000 (from the state). That’s the problem. There’s no reporting.”

Bartes suggested auditing innkeepers to keep people honest and make sure they are paying their tax. “We need to do something to put some teeth in it and the teeth are already there. We just don’t take advantage of it,” she said.

Herring said that the auditor could be paid from the money they found.

“Here’s the incentive to dig deep. … I wouldn’t look at audits costing a lot of money from the CVC fund. I think there’s ways, there’s people who wouldn’t put a big dent in our budget,” he said.

Ault said they should discuss auditing innkeepers when they work with the county council on reworking the innkeepers tax ordinance if the state approves an increase.

“You only have to audit one. You don’t have to audit a lot of people,” Herring said.

“It will keep everybody on the straight and narrow,” Bartes added.
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