Although the Dallas Convention and Visitors Bureau got new life from the city council on Wednesday, its problems are far from over: The agency continues to struggle with accurately reporting the $40 million it receives each year, most of it from the city’s hotel tax.
The agency, now known as VisitDallas, was also hit last week with a citizen’s complaint to the IRS, asking that the bureau’s tax-exempt status be examined in light of numerous findings of misspent funds.
In response to a Texas Monitor story last week on VisitDallas’ tax report for fiscal year 2017, the agency noted several errors on the report, including the omission of a $275,000 annual payment to the American Airlines Center for a hospitality suite.
The agency also said that while the return shows the number of six-figure employees almost doubled between 2016 and 2017, from 16 to 30, the figures on which that finding is based were incorrectly reported to the IRS.
A spokeswoman said that, despite what the agency itself reported, 27 employees received salaries of $100,000 or more in 2016, and 30 employees were in that category the following year.
The agency also disagrees with its own reporting for the previous year. According to its 2015 tax return, the number of employees receiving a salary of $100,000 that year was 15. The agency now says that figure should have been 24.
The IRS and state agencies use federal tax returns to help assess the financial standing of nonprofit groups to ensure they deserve their tax-exempt status.
“We’re reviewing the discrepanc[ies] on the 990s with our outside tax preparers,” spokeswoman Stephanie Faulk said in an email.
The Dallas City Council voted to divert around $600,000 that was supposed to go to the bureau to other arts promotion. And in a vote earlier this year, the council changed its contract with VisitDallas to require that the city more closely scrutinize the agency’s operations.
VisitDallas will receive $19.9 million in hotel occupancy tax funds for the last year of its contract, which ends in October. The agency also receives roughly $18 million a year from a separate tax on hotels with over 100 rooms.
The contract continuation deal includes changes in the agency’s reporting requirements, put in place after a city audit found the agency had been reckless with its spending and provided performance metrics that could not be verified.
The amount of funding the agency receives is contingent in part on performance, most importantly on how many visitors are brought to Dallas through its efforts.
“I want them to operate transparently as we move forward,” said city council member Jennifer Staubach Gates, a supporter of VisitDallas and one of two council appointees to the board of the agency.
Gates noted that hotel taxes can be put to other uses and that the contract between the city and VisitDallas could be further changed next year when it comes up for renewal.
The agreement came the same day as the federal complaint targeting VisitDallas was filed by George Mifflin, who alleges that the salaries paid to officers at the agency exceed IRS rules.
The complaint claims that several findings from the city audit constitute instances of financial mismanagement in violation of state and federal law.
“The IRS should immediately and without delay commence a public investigation into former CEO Phillip Jones, former CFO Matthew Jones, current and previous VisitDallas executive leadership [and] the VisitDallas Board of Directors,” to find if laws for tax exempt groups were violated, the complaint says.
Phillip Jones resigned in May; Matthew Jones was fired at the same time.
“I was seeing how various high-ranking Dallas officials were having a hard time making VisitDallas accountable,” Mifflin said, of watching the events over the past 11 months.
“Folks like us, if we did something to violate out agreement with our employer, they would not give you another chance, they would get rid of you right away,” he said. Mifflin does marketing for a software company in Dallas.
The complaint outlined problems detailed in news reports this year, including a $225,000 loan from VisitDallas to Phillip Jones. The loan was noted on tax returns but without detail. Jones later said he used the money to pay for health care for his disabled son.
Then-Chief Financial Officer Matthew Jones told Texas Monitor in February that a full accounting would be provided on the agency’s tax return for fiscal year 2017. However, there is no mention of the loan on the return, which was recently made public.
“State law does allow nonprofits such as VisitDallas to make loans to their officers when it, ‘may reasonably be expected to directly or indirectly benefit the [nonprofit],’ ” Mifflin said in his complaint.
Faulk, the VisitDallas spokeswoman, said the loan was paid off in 2019, “so you won’t see them on the 2017 990 [which covers fiscal 2018].”
Council members will vote on another contract for VisitDallas next year, unless foes of the group can rally enough votes to kill the existing contract before then.
Councilmember Lee Kleinman suggested near the end of the nearly two-hour discussion of the VisitDallas contract that the agency might not make it to the expected end of its current contract next October. He asked city staff about the cancellation clause in the contract and was told it could be done with 60 days’ notice by either party.
“We could terminate today, and they could clear out and we could put out a [request for proposal],” he said.
So far, he has only two other potential backers on the 14-member council for such a move.
The agency signed a contract in July with a national firm to search for a new CEO. Among the priorities listed in the ad: “Immediately get engaged in contract discussions.”
Steve Miller can be reached at [email protected].