Audit finds ‘intentional abuse’ by Grand County, which defends tourism tax spending (2024)

On Aug. 21, Grand County commissioners addressed the Utah State Legislature’s Revenue and Taxation Interim Committee regarding a recent state audit that accused the county of misusing tourism-related taxes.

The June 21 audit, presented by the Utah State Auditor’s Office at the state capitol, identified a “consistent pattern” of Grand County using restricted tourism tax revenues for unapproved purposes, suggesting this indicated “intentional abuse rather than uninformed error.”

The tourism taxes include Transient Room Tax (TRT), a levy imposed on lodging accommodations to generate revenue used to promote tourism, fund convention facilities and support local economic development. The audit also found misuse of funds generated by the Tourism, Recreation, Cultural, Convention and Airport Facilities Tax (TRCC).

In their formal response below the audit, the commission acknowledged some errors and outlined corrective actions but contended that many issues stemmed from “differing interpretations” of the TRT and TRCC statutes.

A 2019 audit had previously highlighted a desire among counties, especially ones with national parks like Grand County, for greater flexibility in using TRT funds. Although some changes have been made, Commission Chair Jacques Hadler and others in the county believe more flexibility is needed for tourism mitigation and broader spending purposes.

“When you bring a whole bunch of people into town, there’s going to be an impact,” Hadler told The Times-Independent. “You’re going to create more garbage, there’s going to be more incidents, they’re going to need to be rescued more, so whatever we can do to help alleviate those through TRT is very useful and necessary.”

At the meeting, which also included several other presentations, state Sen. Dan McCay stressed the importance of ensuring compliance with existing laws before considering any changes. He added the results of the audit would serve as a model for other Utah counties on proper use of tourism funds.

“If [you] start paying for things with extracurriculars that aren’t allowed in the ordinance or in the statute, then you’re going to lose a lot of respect, a lot of trust and the idea of adding items that [TRT] can pay for – I don’t know that it will get very far,” he said.

The commission voted no on July 16 to formally accept the audit’s findings and implement its 13 recommendations.

Commission Vice Chair Kevin Walker argued that accepting the recommendations would shift the tax burden from tourism to property taxes, but the county has agreed to take some corrective actions already.

A follow-up audit is likely to happen around four to five months from now to verify compliance with previous recommendations, according to Seth Oveson, local government manager of the state auditor’s office.

Audit report presentation

In their presentation to the committee, State Auditor John Dougall and Oveson said the audit raised concerns that Grand County has underinvested in tourism promotion and overspent on mitigation efforts.

They cited examples such as trail ambassadors and etiquette videos, which they said were misclassified as promotional activities rather than tourism impact management.

Later in the meeting, state Rep. Rosemary Lesser suggested that it’s a matter of interpretation what category they fall under.

“Lots of marketing happens on social media these days, so if you have a Tik Tok of a trail ambassador that goes around the world, who knows how many people are going to be seeing that sort of thing?” she said.

The audit also found that Grand County inappropriately used tourism promotion funds for economic development salaries, as well as inappropriately using TRCC funding for the Grand Center.

Dougall and Oveson noted in the meeting Grand County failed to follow Generally Accepted Accounting Principles (GAAP) for prepaid expenses, which were expended for future periods just before the sunset of the county’s economic diversification program in June 2023.

Oveson explained that Grand County mistakenly believed they had to spend the funds by June 30, rather than simply stop collecting them.

Dougall clarified that the county had invested money into a revolving loan fund at the time, so economic development activities could and still can use these funds raised under the old rules until fully expended.

“If that’s not what the Legislature intended, then a clarification of statute in terms of a spending restriction rather than a taxing restriction would be beneficial,” he said.

(Screenshot) State Auditor John Dougall and Local Government Manager of the state auditor’s office Seth Oveson presenting their findings from a June 21 audit into Grand County.

Commission response

In his response at the meeting, Walker said Grand County had tried diligently to adhere to GAAP principles and sought clarification from the state auditor’s office. They told them to consult their attorney, who advised them to spend the funds earmarked for economic diversification before the program ended.

“We did work with our accountants, and they assured us it was applying with GAAP principles,” he said. “I think that strikes me as a relatively narrow, technical disagreement, but certainly, we were trying to spend funds in the way that they were earmarked correctly.

During discussion, state Sen. Lincoln Fillmore implied the differences of opinion from the auditor’s office and commission might stem from “reasonable interpretations of the statute that might be unclear.”

Walker also pointed out in his presentation that the statute governing TRT expenditures covers a broad range of tourism activities, not just advertising.

“It’s not purely an advertising budget – it’s the full package for tourism,” Walker said.

According to the statute, funds can be used to establish and promote tourism, which it defines as “an activity to develop, encourage, solicit, or market tourism that attracts transient guests to the county, including planning, development and advertising …”

As an example, Walker added planning and developing can include communicating to potential visitors to come to Moab to stay on the trail and take enough water to avoid overwhelming Grand County Sheriff’s Search and Rescue.

He pointed out that many counties, including Washington, Weber and Summit recently told them they are using the TRT promotion funds for similar messaging. This type of messaging, Walker argued, also aligns with the state’s “Forever Mighty” program, which encourages responsible tourism.

Hadler argued for greater flexibility in using TRT funds, especially for rural counties like Grand County, which face significant tourism-related infrastructure strains. He added in the busy season, it can turn into a county of 40,000 to 50,000 people.

Under the current statute, tourism mitigation includes solid waste disposal operations, emergency medical services, search and rescue, law enforcement and road repair.

“The ability to use mitigation funds for things like that is crucial to us,” Hadler said.

He proposed legislative changes to increase the portion of TRT funds used for mitigation, clarify statutory language, and maintain flexibility in expenditures from money raised by TRT.

Legislative committee discusses TRT

State Rep. Brady Brammer said he sees a “pattern of disregard for state law by Grand County officials.” He pointed out that the county had sought more flexibility in its use of TRT funds in 2019.

However, even without Grand getting the changes they wanted, he argued the county proceeded with its intended expenditures anyway.

“You pushed the envelope on this and did what you wanted, even though you didn’t get your way [in 2019] and you spent the money in a way that you weren’t supposed to do,” Brammer said.

(Screenshot) Utah state Rep. Brady Brammer giving his thoughts on the findings of the recent state audit into Grand County.

He added that he is looking into “enforcement mechanisms” due to what he perceives as a “hostile approach” to the state code on tourism-related taxes.

“For someone who ignores the law or at least tries to act on the fringes … why would we listen to their recommendations on changing the law to their benefit?” he said.

McCay echoed Brammer’s concerns but broadened the scope, warning against overreliance on TRT for funding public safety and infrastructure projects across Utah.

“TRT is the ultimate fulfillment of the age-old adage, don’t tax you, don’t tax me, tax the guy behind the tree,” McCay said.

Ultimately, Dougall said Grand County had “walked up to the line” of acceptable use for TRT funds and sometimes stepped over it in terms of tourism promotion versus mitigation.

Hadler told The Times-Independent that the county has walked up to the line because they’ve wanted to do everything possible to use the TRT funds in different, necessary ways, but argued they have sound counter arguments to the audit.

“I would strongly push back that we’ve stepped over the line,” he said. “… We’ve made every effort to comply with the letter of the law.”

This story was first published by The Times-Independent.

Audit finds ‘intentional abuse’ by Grand County, which defends tourism tax spending (2024)
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