Chattanooga Visitors Bureau's spending scrutinized, but tourism officials defend $1 billion industry

Tourism bureau on track to get $7.8 million annually in hotel-motel bed tax revenue

Bob Doak, president and CEO of the Chattanooga Cenvention and Visitors Bureau, talks to guests as a high-definition live video stream from the Tennessee Aquarium is unveiled in the Chattanooga Metropolitan Airport lobby on Tuesday, Mar. 29, 2016, in Chattanooga, Tenn.

Tennessee state Sen. Todd Gardenhire was impressed a couple of years ago when he sat down to eat with hundreds of others at the Chattanooga Convention & Visitors Bureau's annual gala luncheon.

But maybe not impressed the way the CVB intended.

"I thought it was very lavish," Gardenhire said. "They spent a ton of money. I'm sitting there thinking, 'I don't know how this benefits tourism.'"

That luncheon was one thing that inspired the Chattanooga Republican to introduce Senate Bill 665. It and a companion House bill introduced by state Rep. JoAnne Favors, D-Chattanooga, propose to have the state comptroller's office audit the CVB.

CVB officials defended their work, saying that they've been the driver behind the $1 billion that tourists spend annually in the Chattanooga area. The bed tax - paid by visitors, not locals - has been a boon to the economy, they said, providing jobs and spurring construction of new hotels that add to the tax rolls.

"I don't think we'd have five brand-new hotels going up downtown if it was a declining industry," said Keith Sanford, a longtime Chattanooga banker who a year ago became president and CEO of the Tennessee Aquarium, the treasurer of the CVB and a member of the Tennessee Tourism Committee.

But Gardenhire and Favors aren't the only elected officials to question spending by Chattanooga's tourism bureau, which is on track to get an estimated $7.8 million in county hotel-motel tax revenue in the current fiscal year. The sum is almost 20 percent more than the $6.5 million it got in fiscal 2016.

County Commissioner Tim Boyd, chairman of the county's finance committee, has questioned travel expenses by the tourism bureau's staff; the roughly $400,000 the CVB spent to remodel its rented office space on the 18th floor atop the SunTrust building downtown, and the fact that the CVB gets 100 percent of the county's hotel-motel tax revenue.

"Where is this money going? How is it being spent? Is it being spent effectively?" Boyd asked at Wednesday's County Commission meeting, adding that "CVB is spending $25,000 a month on travel expenses on a regular basis."

Money could 'help build elementary school'

If the county decided to keep $2 million a year from the tax and give the rest to the CVB, that would be enough to fund $20 million in bonds. That "would go a long way toward construction of a new elementary school," Boyd said after the commission meeting.

"Maybe we can have a great CVB without them having all of the hotel-motel tax," he said.

Boyd said that in the past, hotel-motel bed tax revenue was used to help fund construction of such buildings as the McKenzie Arena, also known as the "Roundhouse," at the University of Tennessee at Chattanooga.

If anything, the CVB should get more money, said Bob Doak, the CVB's longtime president and CEO, who has predicted visitor spending could reach $2 billion here in less time than the 15 years it took to grow from $500 million to $1 billion.

"We should probably be investing more money in tourism, not less," Doak said. "The more you invest, the more you get in return."

Sanford said, "When you get a 20 times or more return on your money, every dollar helps, because you're really buying ad space in out-of-town markets. Every dollar you spend is going to get more families to come here."

Top-floor office helps lure business

In response to Gardenhire, Doak said the tourism bureau's annual gala lunch covers its expenses through sponsorships and by charging $500 a table.

"It's probably a break-even," he said.

Doak also defended the decision to lease the 7,450-square-foot top floor of the SunTrust building on Market Street for about $146,000 a year, and to spend $404,149 to convert the space from the bank's former cafeteria into offices before the CVB moved there in 2010.

"We were able to get that at a great rate," said Doak, who said the fabulous view allows tourism bureau officials to showcase Chattanooga to visitors who are considering holding events here.

"It's a 360-degree view of our beautiful city," he said.

Boyd questioned that, saying the bureau could have rented space in the same Broad Street building as the Chattanooga Area Chamber of Commerce and show off the city, say, during a meal at the Walden Club. The private club is atop the Republic Centre on Chestnut Street, downtown Chattanooga's tallest building.

"Were those options even considered?" Boyd asked.

CVB welcomes 'deeper dive' into spending

Boyd said he got an inch-thick stack of documents detailing CVB's finances, travel expenses and credit card spending Monday from Hamilton County Auditor Jenneth Randall.

The documents haven't been released to the public - and can't be released - Boyd found out Tuesday, because of a recent change to state law that says "audit working papers" are confidential.

The information that Boyd got Monday is more detailed, he said, than a county audit report of the CVB that county commissioners got at their meeting last week.

"The audit report that was handed out doesn't drill down and give the public the information that I think is necessary," Boyd told commissioners Wednesday.

Boyd and Doak both said they've had a cordial discussion. They plan to meet, and Boyd said he'll direct detailed questions to CVB staff at that meeting.

Sanford said the audit information that he's seen doesn't get down to the level of detail of credit card spending and receipts for such things as hotel rooms and meals purchased by CVB employees.

"I'm sure we'd all welcome [it], if the county wanted to do a deeper dive on it," Sanford said. "We're not hiding anything. So we welcome a look, as a board."

Contact staff writer Tim Omarzu at [email protected] or or on Twitter @meetforbusiness or 423-757-6651.