Request By:
Mr. Harry W. Ryan, Jr.
Vice Chairman
Morehead State University
UPO 1150
Morehead, Kentucky 40351
Opinion
Opinion By: Steven L. Beshear, Attorney General; By: Charles W. Runyan, Assistant Deputy Attorney General
In your letter you raise several questions concerning the Morehead Recreation, Tourism and Convention Commission. The questions specifically relate to the City of Morehead's administration of funds collected through the 3% hotel-motel tax.
Question No. 1:
"Who or what body decides what percent of the tax collected goes to the Tourism Commission? We anticipate $30,000 to be collected and we have been budgeted $15,000 by the city council. Should the Tourism Commission oversee the money?"
We assume the Tourist and Convention Commission was established by the city of Morehead, a city of the 4th class. KRS 81.010(4), pursuant to KRS 91A.350(2). Under KRS 91A.390(1), the city of Morehead has imposed a transient room tax of 3% of the rent for every occupancy of a suite, room or rooms, of motor courts, motels, hotels, etc. The distribution of the tax money is covered in KRS 91A.390(2):
"A portion of the money collected from the imposition of this tax, as determined by the tax levying body, may be used to finance the cost of acquisition, construction, operation and maintenance of facilities useful in the attraction and promotion of tourist and convention business and shall include athletic stadiums. The balance of the money collected from the imposition of this tax shall be used for the purposes set forth in KRS 91A.350. Proceeds of the tax may not be used to provide a subsidy in any form to any hotel, motel or restaurant. Money not expended by the commission during any fiscal year shall be used to make up a part of the commission's budget for its next fiscal year. "
Subsection (2) of KRS 91A.390 permits the city legislative body of Morehead to exercise its sound discretion in taking "a portion" of the tax money to finance the cost of acquisition, construction, operation and maintenance of facilities useful in the attraction and promotion of tourist and convention business, including an athletic stadium. The balance of the tax money goes to the Tourist Commission for the purposes established in KRS 91A.350 (purpose of promoting recreational, convention and tourist activity). Thus the statute establishes no precise or arithmetical figures as to the distribution of the tourist room tax proceeds.
Question No. 2:
"If the Tourism Commission only receives $15,000 of the tax can the city legally charge the full 3%? The difference supposedly goes to the city park. "
Under KRS 91A.390(1), the city has the authority to impose a room tax not exceeding three percent (3%) of the rental of rooms. Once the tax is established, the distribution of the tax proceeds is governed by KRS 91A.390(2), as explained above. We assume a proper distribution has been provided. A city park would be a legitimate expenditure by the city under KRS 91A.390(2).
Question No. 3:
"If the difference between the Tourism Commission's budget and what is allocated to the city park is legal, does not the city have to break this money out of the general fund to show that it was actually spent at the city park and what it was spent for?"
In connection with the city's expenditure of the tax money for the city purpose mentioned in KRS 91A.390(2), the city is required to segregate this tourist room tax as a matter of financial accountability. Thus its records must clearly show the amount of the tax spent by the city to promote tourist and convention business (here a city park) and the amount turned over to the tourist commission under that statute.
Question No. 4:
"What budget items can the city park use this money for and not use it for; i.e., salaries, lights, gas, equipment?"
The room tax money to be expended directly by the city may cover a city park and any items reasonably necessary for its proper establishment, maintenance and operation, provided that the city park would be so constructed and maintained as to be useful in the attraction and promotion of tourist and convention business. The recreational concept is a part and parcel of the tourist and convention concept expressed in KRS 91A.350(2). See
Second Street Prop. v. Fiscal Court of Jefferson County, Ky., 445 S.W.2d 709 (1969) 715. In that case the court said:
"From a realistic standpoint, Jefferson County, containing the city of Louisville, is the principal convention center in the Commonwealth due to its size and facilities. The legislature could reasonably determine that the Commission's function there should be limited to the promotion of tourist and convention activity. It also may have considered that the recreational facilities in that area are sufficiently financed from other sources. On the other hand, the development of recreational facilities in less populated counties may have appeared equally as essential for the attraction of tourists. "