Judge issues preliminary injunctions on taxing entities funding TCLA, CVB

DAN FIELD
Lake Sun Leader

Business as usual may come to a halt for the TCLA and CVB next spring after a judge issued a preliminary injunction against two of the taxing entities that fund the organizations.

Camden County Circuit Court Senior Judge Deborah Daniels issued the injunction in favor of plaintiffs Laura Salamun and Pointe View Management, LLC., who filed in Camden County, and in favor of Gail Griswold, et al, who filed a similar request for injunction in Miller County.

The injunctions order that before the Lake of the Ozarks Area Business Districts of Camden County and Miller County can spend any money after June 30, 2021, or adopt a budget for 2022, they must meet certain requirements.

Salamun and Pointe View Management are among the lodging establishments that comprise the Business District of Camden County and that collect lodging tax that supports the Tri-County Lodging Association and Lake of the Ozarks Convention and Visitor Bureau. Griswold is similarly representing lodging establishments in Miller County that are part of that Business District.

The Business District of Morgan County and Morgan County Collector are not included. In theory, according to Judge Daniels’ order, the Business District of Morgan County could continue to do business with the TCLA and CVB.

According to the TCLA’s website, the lodging tax is collected in portions of three lake-area counties -- Camden, Miller and Morgan. Each county has a Business District in which that tax is in effect. And within each county there are two representatives for each size of lodging tier: large, medium and small.

In the Camden County case, the Business District of Camden County was named as the defendant. The Camden County Clerk, the Tri-County Lodging Association and Sue Westenhaver, chairman of the TCLA executive committee, were also named as co-defendants. In the Miller County Business District injunction filed by Griswold, only Miller County and the Miller County Collector were named as defendants.

Background

The TCLA came under public scrutiny in 2019 when it asked voters to approve a lodging tax increase in Camden, Miller and Morgan counties. That lodging tax increase would have been used to build a tournament soccer complex in Osage Beach, which many residents and lodging owners felt was beyond the purview of the TCLA’s bylaws.

Some residents of the three counties within the TCLA launched a social media campaign alleging illegal practices and other improprieties. Camden County Prosecutor Heather Miller was asked by the Camden County Commission to investigate the TCLA’s operations and allegations from the public. She recused herself and handed it over to the Missouri Attorney General's Office.

The Attorney General's Office found no evidence of illegal activity. The State Auditor's Office said the investigation was out of its jurisdiction unless there was a petition from each county that contributes to TCLA.

Criteria

As part of the preliminary injunction, Judge Daniels said the Camden County District and the Miller County District – and not the TCLA, CVB or an accountant -- must:

•Adopt a comprehensive marketing plan (not just approval of the TCLA budget).

•Designate a budget director.

•Demonstrate the active involvement of the members of the governing body of the county in the decisions about spending collected taxes.

•Identify officers for the Board.

•Report to the court on whether the Business District has developed any rules, regulations or bylaws to carry out its duties.

A hearing is set for January 2021 to evaluate the progress.

Complicating that process is the resignation of two key personnel: TCLA Executive Director Jim Divincen retired in February. CVB Executive Director Tim Jacobsen resigned earlier in November to take a similar position in Arkansas.

Original motion

Petitioners Salamun and Pointe View Management filed a motion for a temporary restraining order on June 26, 2020, to prevent the collection of a lodging tax in the District of Camden County. The court denied that motion and the petitioners quickly filed a motion for a preliminary injunction on July 15 to prevent the District of Camden County from spending any tax revenue and prohibiting the distribution of any lodging tax. Because of COVID-19 hearings weren’t held until Aug. 24, Sept. 2, Oct. 2 and 1.

Griswold filed her petition for injunction about the same time and because the two cases were substantially the same, they were conjoined.

The petitioners argued that a preliminary injunction was warranted because taxpayer money was being used to find two non-governmental associations – the TCLA and CVB in violation of the Missouri Constitution. Despite clear constitutional restrictions on the use of public funds for private purposes, the TCLA and CVB – the primary fulfillment arm of the TCLA – expend tax money to promote their primary purpose, e.g. the Lake of the Ozarks, according to the petitioners.

The judgment

According to the judge’s order, the court believes that the current decisions made to spend tax dollars collected by the Districts of Camden County and Miller County and their Advisory Board are not consistent with state statutes. The procedures result in a “commitment to spend tax dollars” based on an historical analysis rather than on taxes “collected” as required by the statute. The “commitment” is recorded in the approval of a budget by a private entity – the TCLA.

The court found that the current “bookkeeping scheme” establishes the TCLA – a non-for-property entity -- as the decision maker for the budget, expenditures and financial balances rather than the seven-member Advisory Board. This “bookkeeping scheme” violates state law because it establishes a “commitment” to spend public funds before they are collected and creates a scheme where the funds are “advanced” to the TCLA as a credit or as an escrow payment that is only reflected as a credit to the Business District.

The court also found that adoption of a budget, which forms the “commitment” to pay money before the funds are collected, is also a violation of state statute.

The accounting scheme, according to the court document, means that the Advisory Board, with an elected official on its Board, transfers its statutory responsibility to the TCLA Board and TCLA employees that have the private members of the Advisory Board represented but not the elected officials. In addition, the TCLA staff creates the budget and not the designated budget officer for the Business District.

The court says that the public interest clearly lies in allowing the Business Districts to continue advertising and promoting tourism pursuant to their stated purpose.