Niagara Gazette

August 1, 2013

NTCC suing the Falls over bed tax funds

By Joyce Miles
Niagara Gazette

Niagara Gazette — LOCKPORT — The Niagara Tourism and Convention Corporation this week filed a lawsuit against the city of Niagara Falls, seeking to make it turn over bed-tax receipts that are owed to the tourism promotion agency.

The suit, filed Tuesday in state Supreme Court, asks a judge to order Niagara Falls to surrender bed tax money to the agency that it collected in the months of June and July.

"It is unfortunate that we were forced to bring this proceeding in order to receive the funding plainly authorized by law — funding that was regularly paid by the city without objection and pursuant to the tax law since February 2003," NTCC officials said in a statement. "NTCC looks forward to continuing to expand the economic benefits of tourism in the city of Niagara Falls and throughout Niagara County as it has for more than 10 years."

A 10-year agreement between the city and the agency, pledging monthly surrender of 80 percent of city bed tax receipts toward Niagara County tourism promotion, expired May 31. The city reportedly is holding bed tax collected after May in escrow, pending a new agreement with the agency. The city council is divided on whether to continue supporting NTCC and the majority voted last month to table Mayor Paul Dyster's proposed one-year extension of the old contract.

The extender mirrors one OK'd in mid-June by the Niagara County Legislature, whose members also appear divided, along party lines, on the question of whether NTCC is living up to contract terms including performance benchmarks and reporting to funders.

The tourism promotion agency is funded mostly from bed tax, a surcharge on all hotel/motel room rentals that is collected by the cities of Niagara Falls, Lockport and, elsewhere around Niagara, by the county.

The county's 10-year agreement with NTCC expired June 1 and Republican lawmakers refused to approve a new 10-year pact. The one-year extender is portrayed as "buying time" for the county, the cities and NTCC to work through differences and secure a mutually satisfactory long-term agreement; without the extender, NTCC would not be authorized to receive bed tax money.

State tax law allows municipalities to charge and collect bed tax only for the purpose of promoting tourism/economic development. The law also says that 75 percent of collections within a county are supposed to go the tourism promotion agency or agencies that are under contract with the county. NTCC asserts in its suit that, because it is still under contract with Niagara County, until June 2014, Niagara Falls must continue turning over bed tax receipts to it. The agency is owed $133,000 and change for the months of June and July, the suit said.

So far it appears NTCC is not pursuing legal action against the City of Lockport, which has held all of its 2013 bed tax collections in escrow. Lockport's 10-year agreement, which committed it to quarterly payments to the tourism promotion agency, expired this past February.

City Attorney John Ottaviano acknowledged agreement with NTCC's stance in the Falls suit, however. Because the county has a contract with the agency, Lockport is "obligated" to turn over its bed tax receipts, he said — and it will, as soon as some sort of agreement is in place between it and the agency.

Ottaviano said he recommended the escrow arrangement "not as a protest, but because a red flag is raised to auditors if the city pays out money to a vendor with whom we don't have a contract."