HOT funds for Chamber could leave Kyle cold

Funds for restoration of Kyle’s historic train depot come from the Hotel Occupancy Tax which is currently paying out more than it’s putting in reserve. (Photo by Veronica Gordon)


The Hotel Occupancy Tax, or HOT fund, collected by the city of Kyle each year can legally only be used for tourism promotion. But that fund now risks being depleted unless something changes, warns Kyle Director of Finance Perwez Moheet.

Ray Hernandez, executive director of the Kyle Area Chamber of Commerce, which has the tourism promotion contract for the city of Kyle, told City Council last week that it could approve transferring money from the reserve – or cushion – in the HOT fund to cover the cost of the contract.

“Kyle had a significant reserve fund balance before I arrived,” Hernandez said, who has been at the chamber seven years. “The city has always used those reserve funds to pay its obligation to the chamber.”

City records over the last six fiscal years indicate a trend of higher expenditures than HOT revenue; the past three years includes money committed to pay for part of the restoration of the historic train depot.

The cushion Hernandez referenced appears to be the result of  a lump sum payment of $90,000 in 2004 from the Texas Comptroller’s Office; Moheet said this was a catch-up payment for past due taxes; the HOT fund went into effect in 2000.

The 2010-11 tourism contract with the chamber was for $131,391; the HOT revenue for that same year was $132,765. This year, the contract was for $135,657.41. The budgeted HOT revenue is $125,557.

Moheet said there is not enough money to sustain the current level of funding for the chamber and the HOT funds committed for restoration of the historic train depot, the future headquarters of the Kyle Chamber of Commerce and Visitors Bureau.

“There is a gap of about $30,000,” Moheet told City Council last week.

He estimated the reserve fund will be less than $13,000 by next fiscal year unless one or a combination of several things happen: more hotel bookings, more hotels coming to town, or reduced expenditures.

Kyle’s HOT revenue, an additional seven percent of the room rate, comes from two hotels in the city limits, La Quinta and Best Western.

Hernandez offered a plan of voluntarily cutting his 2012-13 tourism promotion budget by 21.5 percent, for a total of $115,906 – though that reduction would not be a cure-all.

Diana Blank, Kyle economic development director, said some hotel chains have shown interest in coming to town but those plans are at least a year or two away.

Aside from the larger budget issue, council members Samantha LeMense and Ray Bryant also questioned why the contract between the city and chamber doesn’t outline more specific goals in respect to tourism.

“My concern is with the contract; there are no measurables listed,” LeMense said. “I would like to see more.”

Moheet agreed that the current contract is very generic.

“It needs to be more specific and precise,” Moheet said.

A secondary issue is whether or not the chamber has submitted the contract-required quarterly reports to the city; Moheet said he has not received those reports as scheduled.

“The report from the chamber is sporadic in terms of delivery,” Moheet said.

Hernandez told council those reports have been submitted on time.

In a phone interview after the meeting, Hernandez said the discrepancy is the city operates on a fiscal year that begins in September while his organization operates on a calendar year. Moheet sent an email to Hernandez the day after the council meeting outlining the reporting requirements and providing a detailed delivery schedule.

How does the chamber measure its success?
As with any advertising promotion effort, the organization footing the bill wants to see the bottom line return on its investment.

Chamber of Commerce Board of Directors President Herb Dyer agrees the tourism contract with the city of Kyle should be more specific.

“Council’s request is legitimate,” Dyer said in a phone interview. “We need to talk to our counterparts; what metrics do other chambers have in their tourism contracts?”

Up the road, the city of Buda handles tourism marketing in-house. It previously contracted with the Buda Area Chamber of Commerce for tourism marketing. Buda also has several more hotels than Kyle from which to draw HOT revenue.

Overall, Dyer said the chamber board is satisfied with the way Hernandez manages the Kyle tourism contract.

“We’ve developed measurable goals and objectives for his position; those are reviewed quarterly,” Dyer said. “There are things he does very well, like networking and motivating people to join the chamber.”

Dyer would like to see more tangible, measurable goals regarding the tourism contract and said he is waiting to see what the city wants.

Moheet would like to see the chamber provide a way to measure success in terms of advertising expenditures; he said the quarterly financial report doesn’t really describe the performance activities undertaken by the chamber in fulfillment of their contract with the city.

“I can’t tell from the report whether the tourism efforts brought in 200 or 2,000 people to hotels,” Moheet said. “There is no way to gauge the return on our investment.”

Hernandez told council that his organization has won 17 awards for its tourism promotion program, “Simply Charming.” Whether those awards translated to additional HOT funds through more hotel bookings was not clear.

Hernandez told council that measurement is very difficult. He said the chamber is working with community and business partners including hotels, event managers and facilities such as Thunderhill Raceway, but it’s still a challenge to count how many people come to Kyle as a result of tourism promotion expenditures.

“It’s expensive,” Hernandez said. “Rather than counting advertising, it’s better to spend that money advertising and bringing people in.”

Moheet suggested that council define its vision of tourism and put that in the contract with the chamber.

“What should they do with our taxpayers’ money?” Moheet asked. “That answer should not come from the chamber.”

City Council voted to send this issue to the economic development committee for recommendations to further clarify the contract terms based on Kyle’s vision for tourism promotion.

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