When Globe City Council approved the budget for fiscal year 2018-2019 on Tuesday, July 24 (after press time), the rules for distribution of the bed tax to five local nonprofit organizations were set to change, as the city attempted to institute more stringent requirements for the yearly disbursement of funds.

One of the main changes will be a voting member on each board as a contingency for funding.

“We want to be as streamlined and consistent as possible,” City of Globe Economic Development Director Linda Oddonetto said. “We are stakeholders and the largest and only funder for some entities and we have a fiscal responsibility to our taxpayers. In order to be accountable, we have to know what’s going on.”

Members of the so-called bed tax group are the Southern Gila County Economic Development Corporation; Globe-Miami Chamber of Commerce; Globe Downtown Association; the Cobre Valley Center for the Arts, and the Gila County Historical Society.

While each organization has an “ex officio” member representing the city, a member that may or may not have voting privileges, the new rules would give the city at least a modicum of say in the actions and policies of entities whose functions are to bring economic activity to the area.

The 2016-17 bed tax revenues were about $150,000 and were distributed in a pre-determined split of Chamber and EDC, 22.5 percent each; Downtown Association and Center for the Arts, 20 percent each, and the Historical Society received 15 percent.

History of the bed tax

The bed tax is a 3 percent charge to local temporary housing such as hotels and motels that is earmarked specifically for economic development.

The tax was set in policy in January 1994, but its true beginnings took place in the late-1980s, according to a City of Globe public service announcement dated Dec. 16, 2005.

Prior to the enactment of the tax, local economic development organizations would request funding from the city’s general fund during the yearly budget process. In order to simplify the process and allow the city to more efficiently track the disbursement of funds, the City of Globe instituted a tax that most municipalities in Arizona have in place.

“Practically every city in Arizona has a bed tax, so it’s not unusual,” former Mayor and long-serving Councilmember Stan Gibson said. “These organizations would beg council for funding every year, so we thought if they had a regular source of funding, it would be easier to keep track of.”

Gibson, who turned 89 on July 22, is a Globe native who spent 40 years on Globe City Council and was mayor for 10 of those years. He was also a business owner on Broad Street as longtime proprietor of Ortega’s Shoes.

In 1989, the city contributed more than $140,000 directly from the general fund to economic development, and so began the process of enacting the tax. While most businesses were either for the tax or ambivalent about it, the motel and hotel owners were unhappy about it, but Gibson helped allay their frustration by explaining it was income they never saw anyway.

“As a merchant downtown, I heard a lot of resistance [to the tax],” he said. “The only outcry was from the motel owners, though. They thought 5 percent was too high.”

After hearing complaints about the rate for several years, the city lowered the rate to its current 3 percent in July 2001, although there was a brief period from 2003 to 2005 when the rate was raised to 4 percent to make up for shortfalls experience by the CVCA and the Main Street Historic Program, part of the Globe Downtown Association.

Clearing up misconceptions

From the time of its enactment the bed tax has drawn criticism, sometimes due to rumors spread throughout the community, leading the city to release clarifications of the purpose and dispersal of the funds.

The 2005 PSA featured a heading titled, “A few real facts about the City’s bed tax,” in order to offset “a large volume of misinformation related to the City’s bed tax.” The PSA laid out the history and distribution of the tax. That year, there was $78,000 in the fund in addition to $100,000 the city invested in the development of Besh-ba-Gowah.

In 2016, current City Manager Paul Jepson, released a full report on the tax, again recounting the history and disbursement of the funds.

According to that account, in 1998 the city passed “individual performance agreements,” meant to more effectively track spending and results.

“When you pay out taxpayer money, you need accountability,” Gibson, who was still on council at the time, said.

The agreement also required each member organization to implement an annual budget and action plan, provide copies of each to the city; file quarterly reports of receipts and expenditures with the city; provide the names and addresses of all board members and officers, as well as bylaws; financial statements to disclose all assets, obligations, and donations both public and private, and performance reports to describe activities, expected results and program effectiveness.

Evolving agreements

So now, the city has revisited the previous agreements and will put additional requirements on funding.

In order to address the bed tax situation, the city created a bed tax subcommittee comprised of councilmembers Charlene Giles and Freddy Garcia with Lerry Alderman acting as an alternate.

“[Mayor Al Gameros] wanted a deeper understanding of what is happening,” Oddonetto said. “We went to each member of the bed tax group and let them know what we were thinking.”

Oddontto pointed out that at the heart of the matter, the city is interested in solidifying a mutually beneficial relationship.

The new stipulations include several contingencies including that 100 percent of funds will be budgeted for “qualifying activities.”

Additionally, distribution of funds will be dependent on satisfaction of the following requirements to qualify for payment (from a presentation to City Council on May 1, 2018):

Quarterly request by Agencies for distribution of bed tax funds will include: Board approved financial documents, Board approved activity reports, organizational document updates, and minutes of Board approval;

Agencies must provide a City membership with full voting rights on Board and Executive Committee by designated City Council Member with support of Economic Development Director Linda Oddonetto or designated City representative;

Agencies must hold a minimum of one meeting per quarter;

Agencies must adopt Arizona open meeting law standards in the four areas of agendas, 24-hour postings, meeting order, and minutes;

Agencies must maintain compliance with their Articles of Incorporation, By-laws, and Arizona Revised Statutes; and,

Qualifying request for reimbursement by Agencies must be received within 60 days of close of quarter to receive payment for that quarter.

“In the larger picture, we’re only one vote on the board,” Oddonetto said. “But we want to be a more active stakeholder.”

She added that the city will also propose training for nonprofit boards in the near future.

Precedent already set

But a voting member on bed tax boards is not a new concept. Ex Officio board member and the city’s liaison to the CVCA Giles has at times been allowed to vote at CVCA meetings.

Additionally, the EDC, which provides “gap funding” to small businesses and recently partnered with the Copper Corridor EDC in Superior to do a food hub study that led directly to USDA funding to expand farmers markets in the region, has a voting member representative on its board.

“We have a voting member from the City of Globe and the city has been a good and valuable partner,” EDC Executive Director Karalea Cox said. “We [also] want to make sure we have small business representation on a well-rounded board. The City of Globe has a seat as does the Town of Miami and the County as well, although they have not appointed anyone to fill their position.”

Sheldon Miller, director of the Gila County Historical Museum, said the museum board is “okay with it.”

“From the perspective of the museum, the biggest thing we need from the City of Globe is information and clear communication,” Miller said. “The voting part is meaningless: leadership and communication will make a difference.”

In order to allay fears of “government overreach,” Oddonetto pointed to the requirements to get grants from private and other government agencies require specific guidelines and accounting.

“Look at the requirements to get funding from the mining interests,” she concluded. “They are very stringent.

“We are stakeholders and the largest and only funder for some entities and we have a fiscal responsibility to our taxpayers,” she said. “In order to be accountable, we have to know what’s going on.”