Consultant to Check Fort Bragg’s Tax Receipts

Mayor Lindy Peters and Councilman Will Lee are generally on the same page. The great love of Mayor Peters’ life is to wield convivial authority. This works well with Councilman Lee's genetic instinct to enthusiastically endorse authority wherever it welcomes him.

Mr. Lee has discovered a remunerative life calling as an apologist and booster for both the Hospital and the City Council. The Councilman is a strong spokesman for the great job and fine performance of what he thinks are two deeply trustworthy institutions. The Mayor is the self-appointed standard bearer for uncritical consensus. This compatibility of outlook has made the amiable pair natural allies. Policy, program innovation, and specific direction are not their thing, and as they see it, not their job.

On a cold and wintery Wednesday, midday in the work week, Lindy Peters and Will Lee sat in on their own Finance and Administration Committee meeting to hear City Manager Tabatha Miller proceed once again in her relentless and systematic program to modernize and streamline City financial administration.

Victor Damiani, Fort Bragg Finance Director, opened it up with a confession/discovery of a possible Fort Bragg tax scandal of possibly long duration. The facts are only beginning to emerge, but the suspicion of hotel TOT (Transit Occupancy Tax) underpayment was enough for the City Manager to bring on board an out of town tax consultant, Muni Services, to hash the numbers and look closely at the actual cost of rooms and the corresponding transit occupancy tax declarations. The worry is that they may not match.

It was an uncertain bombshell delivered in cautious tones. In a polite mutter, Damiani explained that the verifiable cost of a hotel room in Fort Bragg as they showed up in his Google search, often seemed to be 300% to 400% more than the value per room rented and reported to the City for the TOT assessment. (The city is supposed to get 10% of the room rate on top of the room rate.)

For example, Damiani used hotels advertising rooms for $168 a night online, but seemed to be paying transit occupancy tax as if the room only cost $38. Based on the 10% TOT that would mean the city gets $3.80 instead of 16.80 for that night’s stay. It was just one suspicious example.

Fort Bragg’s current city budget shows that TOT represents almost $2.8 million, or almost a third of the city’s tax revenues.

Numbers at this time, of course, cannot be conclusive, but the suspicion was enough for the City Manager to engage an outside consulting firm to review Transit Occupancy Tax income, and perhaps incidentally, provide general advice on other city tax revenues.

As the meeting progressed, the information emerged that up to now, no evaluation of the advertised price of a hotel room and the corresponding reported TOT (Transit Occupancy Tax) has ever been "undertaken." “When was the last audit?," asked the Mayor brightly. “Never,” replied Damiani and the City Manager Miller in unison.

City Manager Tabatha Miller sat quietly as the financial integrity of the TOT was gently probed, and made no remarks as her new consultant Thomas Adams, sketched the range of his firm's consulting expertise and soft-peddled the possibility of scandal. Everyone was very cautious not to express outrage or make a direct accusation.

City Manager Miller credited Finance Director Damiani with uncovering the possible tax evasion. How long this skeleton has laid moldering in the city books was not clear.

Victor Damiani has been a whistleblower in municipal affairs before this, outing his own department’s illicit practices without causing undue distress or bringing down the law is something of a specialty. When former city manager, Linda Ruffing, systematically withdrew $3 million over a term of years from the sequestered Water Enterprise Fund for happier applications at her own discretion in the General Fund, it was Victor Damiani who eventually explained it away as a “bookkeeping error.”

It was a whopping error extending over years through a series of major budget discussions — but then mistakes do happen. The term “coverup” was scrupulously avoided. What the Mendocino Grand Jury will say about the $3 million remains to be seen.

But the news Wednesday afternoon that Fort Bragg hotels may have been cheating the city combined with the difficulty of checking the room prices against the tax receipts has drawn the attention of our new Fort Bragg City Manager.

Better tell the night managers.

As the City Hall administration bustled back to their appointed tasks and the Finance and Admin team took off for lunch, I contemplated the missed opportunity for a little salutary recrimination. The Mayor loves to bang his gavel at his critics in the Council Meetings. A stern admonition and a little banging might possibly have been healthy for City Hall administrative probity but perhaps not so much for the reputation of his own Finance and Admin committee. In any event, no gavel banging occurred. The Mayor and his Councilman sheepishly retired; the City Manager exited the room without the thanks due her for her quiet, effective reform.