PRLA_Winter17

•

PENNSYLVANIA

RESTAURANT & LODGING

matters

•

Winter 2017

LEGAL

DOCKET

The Attorney

ask

Ruminations re: Act 18-2016

–Amendment of Enabling

Legislation for 57 Counties–Part II

Keith A. Clark, Esquire

SHUMAKER WILLIAMS, P.C.

General Counsel, Pennsylvania

Restaurant & Lodging Association

Keith A. Clark

This is a continuation of our column in the

Fall/Winter 2016 issue of Pennsylvania

Restaurant and Lodging Matters,

discussing several issues raised since

the effective date of Act 18-2016 on

April 20, 2016.

The new

Section 1770.10

of Act 18 is

intended to replace the old

Section

1770.2

. Although there are differences

between the two sections, there are many

provisions which remain the same.

The differences include: (a) tax rate

allowed (up to 5 percent); (b) purposes for

which hotel room taxes may be expended;

the TPA present to the county an annual

audit or financial statement; (e) mandatory

conflict of interest and recusal provisions

for TPA board members, officers and

employees; (f) increase in administrative

fee which may be retained by the County

Treasurer (up to 4 percent of tax receipts);

(g) adding cabin to the definitions of hotels;

and (h) adding new definitions.

Part I

, we began the discussion of grants.

When a TPA provides a grant to

an entity, it should implement a

process to assure that the grantee is

spending funds in accordance with

Act 18.

One way of doing this is to initiate

a grant application process in which the

applicant specifies how the funds will

be applied in accordance with Act 18,

and requires a verification by the grant

recipient after the monies are spent (

e.g.,

affidavit under penalty of perjury or grant

audit) reflecting that funds have been

spent in accordance with Act 18.

It would not be uncommon for a

grant application to require statistical

information reflecting annual visitor

attendance of the applicant and the

distances which visitors traveled to the

applicant. TPAs find such information

helpful in comparing grant applications

from various entities.

Grants may

not

be used for purposes

which compete with private sector tourism

or travel efforts. The term ‘private sector’

is not defined. In our opinion, the term is

not limited to for-profit entities but also

includes non-profit entities. For example,

the investment industry frequently looks

at the private sector as composed of

organizations which are privately owned

and not part of the government, including

both profit and non-profit entities. Private

sector organizations are those not owned

or operated by the government.

The TPA should keep in mind that while

being accountable/responsible for the

distribution of the funds as a body, it

also may be deemed responsible for

developing and recognizing precedent. If

a TPA is asked for a grant for a specific

project and interprets Act 18 to allow

such project, it should expect that other

organizations who request funds for

similar purposes may expect to be treated

in a reasonably equal fashion. Accordingly,

a TPA should keep in mind that its funds

are not bottomless, and it may need to

set guidelines that provide clear lines of

demarcation between Act 18 allowed and

not allowed purposes. They also may want

to set maximum amounts that will be

granted per recipient or per application.

Although many applicants are not

accustomed to doing this, they may be

able to find compliant Act 18 expenditures

within their operating expenditures if they

tear apart their profit and loss statement

on the expenditure side.

The check and balance systems between

the county and the TPA under Act 18

are the provisions that: (1) require the

TPA to provide annually an audit report

financial statement as determined

by the county in consultation with the

Recognized Tourism Promotion Agency;

and (2) the provisions setting the rules for

counties certifying and decertifying their

Recognized Tourist Promotion Agency.

In summary, Act 18 not only sets statutory,

legal parameters for the County Ordinance

implementing the tax, but also places

a fiduciary responsibility on the TPA

Board to assure that it only spends hotel

room taxes in compliance with the Act.

Counties cannot expand the purposes

for which money is expended beyond the

authorization provided in the enabling

statute.

If you have any questions concerning

this or other legal issues, please

contact Keith A. Clark (717-909-1612

kclark@shumakerwilliams.com

) at

Shumaker Williams, P.C., PRLA’s General

Counsel.