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Placer County Powerhouse

County grows alongside revenues as NLTRA’s former responsibilities are divvied up
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It’s been just under one year now since Placer County stunned the North Lake Tahoe Resort Association with the announcement that it was cutting the organization’s duties in half, and in turn drastically reducing its funding. In truth, it was the culmination of more than a decade of cutbacks to the resort association’s contract with the county, and long simmering tensions boiled over. The latest cutbacks were staunchly opposed at first, but in the latest contract and the upcoming fiscal year, the changes are sticking. The dust has settled, and while the relationship between the resort association and the county appears by all means to be amicable, there is no doubt the county has firmly established control.

Of the association’s original three departments — marketing, transportation, and capital projects — the latter two have been eliminated and the responsibilities associated with them divvied up, leaving NLTRA primarily as a marketing organization, now dubbed “tourism development.” The entities that will fill the gap in the resort association’s former duties will have a primarily advisory role in the county’s allocation of its rapidly growing fund of lodging tax collections. For the county, the changes signal success in restructuring an organization it believed was incapable of handling its duties. For many locally, the newest hierarchy represents a shift of tourism-related tax funds away from the community and an unnecessary and expensive divide-and-conquer strategy to oversight.

A Change of Heart

The relationship between the two entities was not always strained. When the NLTRA was founded in 1996, the county wasn’t the powerhouse it is today and benefited greatly from the association’s on-the-ground work to enhance North Lake Tahoe’s competitiveness as a visitor destination. Over the last 20 years, for example, the NLTRA spent $37 million in Transient Occupancy Tax (TOT) dollars and secured $265 million in matching grants to improve the regional infrastructure. Today, Placer wields a budget of more than $866 million, employs about 3,000 employees on a $288 million payroll, and has whittled its former partner down to essentially its name and a fractional allowance.

“The resort association was established in an era when the county was a true partner and believed in the importance of community-based decision making,” said former NLTRA CEO Steve Teshara, who came to the resort association in 2003, about three years before the county began scaling it back. “Over time decisions have become more centralized in Auburn. One example is the size and power of the County Executive Office … Bit by bit, but very deliberately on the part of the county, they have gone in and basically now, 23 years later, have disassembled the resort association.”

The county contends this disassembly was an effort to shoulder responsibilities it didn’t believe the association was capable of handling. “We have, over time, taken on some of the more typical government duties,” said Placer County Deputy CEO-Tahoe Jennifer Merchant. For example, the county has significantly changed how it provides funds to the association. Originally the county provided all the funding for the NLTRA’s budget contract up front, but discontinued that process after only a few years because they couldn’t track expenditures as easily as they desired, Merchant says. The monthly payment plan that followed was similarly scrapped, she said, because the NLTRA was “retaining such a large balance in their accounts that they were exceeding FDIC limits.” This led to the funds being held by the county and only allocated to the NLTRA when they were requested and eventually invoiced.

One former employee of the NLTRA who asked to remain anonymous stated that many of the county’s contracts with the association included “tripwires” that led to the association almost constantly being in violation of one thing or another, and therefore giving the county a license to initiate many of their changes to the budget. Every violation became another reason for the county to further disarm the NLTRA.

The county also asserts that the resort association wasn’t able to fulfill its fiduciary obligations. In one case, an audit revealed the NLTRA was not under contract with all of the organizations it was funding. In a Moonshine Ink interview with former NLTRA CEO Sandy Evans-Hall conducted last May, however, Hall said no audits had ever revealed financial mismanagement and that the organization was working collaboratively with the county to comply. She also said many of the contract infractions involved obscure details like failing to draft an exemption form for the California Highway Patrol’s traffic management during Ironman because no other group could provide that service, making a public bid unnecessary.

In spite of this, the county made an initiative to ensure all funds were under contract, and just last year took responsibility for all of those contracts when it cut the association’s transportation and capital projects duties.

“At this time we’re contracting for over $20 million in grant funds for capital projects so it’s pretty significant, and really to expect a nonprofit organization with a small staff to manage that size of effort, it was expecting a lot,” Merchant said.

Cash Cows and Forensic Accounting

Many of the changes to the NLTRA coincided with the county’s growing influence in its eastern region, as well as the growth of revenues created here. The region’s total property, sales, and TOT revenue grew by more than $23 million in the last 10 years, according to data provided by the county. At the same time, the county has stressed the fact that North Lake Tahoe is not a “cash cow,” and released a video two years ago to illustrate this claim and explain in layman’s terms how revenues are generated and spent in the region. The majority of the funds spent in North Lake Tahoe are from the county’s expansive general fund, and it would take what Merchant calls “forensic accounting” to determine exactly what is funneled where. The county declined Moonshine Ink’s request for a breakdown of specific expenditures but offered a broad-strokes explanation similar to the aforementioned video.

“Today, the county spends an inordinate amount of time and resources trying to convince people how well they are spending the revenues generated in Eastern Placer County and how it is in our interest they do so,” Teshara said. “I still believe in the importance of more community-based decision making.”

According to Erin Casey, senior management analyst for Placer County, the general fund is allocated to a wide range of county responsibilities ranging from health and human services, to the sheriff’s office, animal control, snow removal, etc., as well as many services that affect the region yet don’t have local offices, such as the tax treasurer or county clerk’s offices. While it’s the county board that makes decisions regarding how general fund monies will be spent, Casey stresses that budget approval is a public process open to feedback by the community.

To appease inquiries by community members about the county’s expenditures, Placer approved a formal initiative last October to spend 100 percent of lodging taxes collected in Eastern Placer County in the region. The county said this has already been a long-standing practice, and held a series of community outreach events centered around the question, “How would you spend $18 million in North Lake Tahoe?”

The figure of $18 million refers to TOT taxes, which have grown significantly over the last decade, from $6,870,314 in the 2006/07 fiscal year to $17,697,228 in 2016/17. Property taxes in Eastern Placer also grew during that time period, from $17,340,506 to $29,544,949 — a striking fact considering that median home prices in the area dropped drastically during that time and are currently very near what they were 10 years ago. One of the main reasons for this climb, according to Merchant, is the development of resort properties.

In spite of the county’s open call for input on TOT monies, the community will only have a say on a portion of these funds, as 40 percent are lumped into the county’s general fund, described above. The other 60 percent are devoted to a Lake Tahoe Tourism and Promotion Fund. The path of these funds, from an estimated revenue of $10.5 million for 2017/2018, is more transparent — about $2.7 million for transportation, $3.7 million for the NLTRA, $2.5 million for capital project development, with remaining funds for other services like the purchase of  Tourist Accommodation Units to incentivize development. Tack on almost $10 million of carryover fund balance from last year and the total fund sits at $20.4 million, $11.9 million more than last year.

The New Order

Same as ever, the difficulties in deciding how this growing budget is allocated revolve around the question of representation. The desire for better local control led to the creation of the NLTRA in 1996, and ironically, it has become the county’s reason to wrest duties from the very same organization after years of productive partnership. Merchant stated that a major goal of the most recent contract with the NLTRA was to create a “direct connection with the community and not through one organization that largely represents a business perspective.” The resort association, however, has for many years attempted to broaden the membership of its board with concerted efforts over the last two years. It even completely redrafted its bylaws in January to add additional seats to its board of directors.

One of the most significant changes to the new order is the creation of the Capital Projects Advisory (CAP) committee, also designed to create a more inclusive community forum.

“That process was all going on already,” said NLTRA board member Gary Davis of JK engineering. “Now we’ve spent all this time and money and we’re in the same place we were two years ago actually, fulfilling what the resort association had already put in place to start happening.”

After a year of mediations and exhaustive negotiations, as well as the drafting of multiple short-term contracts with the NLTRA — which Davis calls an “incredible waste of resources” — the CAP committee was pushed forward by the county and a final contract with the NLTRA was approved. The search for seats to chair the 13-member CAP committee are currently underway, coinciding with the search for applications to the NLTRA’s upgraded 17-member board, which Davis said the association might have trouble filling due to a lack of committed interest.

Before last spring, a large role of the NLTRA was to target capital projects, and once contracts were drawn up the county would transfer money to the association to fund those projects. Examples of this include the recently completed Kings Beach Commercial Core Improvement Project and the Fanny Bridge Revitalization. The CAP committee will now fulfill this role, but strictly in an advisory sense. Recommendations will be made by the committee, but the county will have complete control over the funds and their allocation.

Additionally, the county also transferred the NLTRA’s responsibilities in North Tahoe’s transportation sector to the Truckee North Tahoe Transportation Management Association (TMA). The TMA has shared many of these duties with the county and the NLTRA since it was founded, and Casey said it will continue to work closely with both.

With a new contract written up, and an exhausting and expensive year of mediation with the county in the rear-view mirror, the NLTRA is looking forward — it’s the only choice it has. Almost the entirety of the resort association’s funding comes through regional TOT collections allocated by the county, and as a result of the language of its updated contract, any “disputes” between the two organizations are grounds for the county to withhold funds from the NLTRA. According to County Counsel Gerald Carden at the January board of supervisors meeting, the association would “feel those disputes.”

“I am focused on implementing the organizational changes that the NLTRA board and valued community partners recommended during their intensive two-year review process,” wrote NLTRA CEO Cindy Gustafson in an email to Moonshine Ink. Cindy was hired by the association last July in the middle of the negotiations with the county, after former CEO Sandy Evans-Hall resigned.

“It was not initially a very easy process and a bit of a challenge for us at first but I think we ultimately were able to work together to come up with a plan and a process to move forward and identify the best partnership we could to best represent the community,” Erin Casey said. “Really we all have the same goals.”
 

 
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Reader comments so far...

TruckeeCS | Truckee
"The county declined Moonshine Ink’s request for a breakdown of specific expenditures but offered a broad-strokes explanation similar to the aforementioned video." This information should be publicly available no? @Moonshine have you pursued this any further? FOIA perhaps? I'd love to see that breakdown. Placer County's reticence only seems to re-iterate my feelings that the eastern portion of the county doesn't care what we think - they just care about the money we feed them. Public feedback? Yea right. It's tough to have an impact what we want up here in Tahoe when the votes always go down 4-1 against.

kt22mike | Olympic Valley
The problem as I see it is that TOT funds are "targeted" only to projects that generates more tourism. But the area is desperate for employee housing so we have the employees to "service" tourists. There is $6M available in Placer and the BOD should allocate a good portion of it to solve the housing problem. No employees.... no tourists.

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October 11, 2018