Should executive pay be considered in awarding bed-tax funding?

December 5, 2009 

Members of Hilton Head Island's Accommodations Tax Advisory Committee sift through reams of documents as they ponder how to dole out money to scores of local organizations for fireworks displays, festivals, theater, eco-tourism programs and more.

In the words of vice chairman John Diamond, the committee is responsible for making "damn sure" the public's money is well spent.

In addition to judging how many visitors each proposal is likely to attract, committee members look at several years worth of plans, budgets, financial statements, balance sheets and past performance as they weigh which requests are worthy of funding from the so-called bed-tax, a 2 percent state tax on overnight lodging designed to help communities build and enhance tourism.

One thing they won't consider Wednesday when making recommendations to the Town Council on the latest batch of requests: how much the top executives of organizations seeking money are paid.

Committee chairman Willis Shay thinks they ought to.

Shay suggested last year that such data be included in the application process after he became chairman of the advisory committee. He suggested organizations submit their federal tax forms, which list executives' pay.

Along with the other factors the committee already considers, Shay said knowing how well agencies manage their own money would help him decide if they should get public money.

"That's the sort of information I would like to be developed openly," Shay said. "Are they wasting money or are they spending it appropriately?"

Town Council did not support his suggestion.

"I think they had the feeling that was just prying too much into private matters," said Shay, who plans to bring the issue up again during the committee's annual review of its application process.

As a result, the committee looks only at the total amount each organization spends on employees' compensation, rather than individuals' pay.

Equitably allocating bed tax money this year has come into sharp focus because the tax has produced less revenue than in the past, so groups are vying for slices of a smaller pie.

Shay implored applicants to trim their requests, warning them they might need to explain how they've cut their own budgets.

Only two organizations cut their requests, leaving the committee to choose which groups to disappoint and to what degree.

Should individual executives' compensation be a part of the debate?

Others involved in the process aren't as sure as Shay.

Diamond said market forces should keep executive compensation in check.

"If it ever became an issue, we would ask for it," he said.

David Tigges, board chairman of the Hilton Head Island-Bluffton Chamber of Commerce, one of thelargest recipients of bed tax money, said the committee is entitled to ask for the information, although he doesn't believe it's relevant.

"I don't see a direct connection," Tigges said.

EXECUTIVE SALARIES

If the advisory committee had looked at the pay of executives of the five agencies requesting the most money this year, they would have seen a wide range.

Other than the town itself, which requests money for town operations and building projects that support tourism, the largest requests the committee will consider Wednesday came from: the Arts Center of Coastal Carolina, $414,542 to be funded in 2011; the chamber, $391,000 for 2010; Coastal Discovery Museum, two requests for a total of $265,000 for 2010; Hilton Head Symphony Orchestra, $20,000 for 2010 and $175,000 for 2011; and the Hilton Head Hospitality Association, $125,000 for 2010.

Ann-Marie Adams, executive director of the hospitality association, is being paid $53,500 this year, a figure she voluntarily cut from $55,000 after she took her job in 2007, she said.

Bill Miles, president and CEO of the chamber, was paid $315,627 in 2007, the most recent year for which data was available on federal tax forms. Miles said he volunteered to forego raises for the past 14 months.

Miles, who has led the chamber for more than 20 years, said he was unsure of his current compensation but said it was still close to $315,627.

The latest available compensation figures for the other three organizations are:

• Kathleen Bateson, president and CEO, Arts Center of Coastal Carolina, $147,000 (2007)

• Michael Marks, president and CEO, Coastal Discovery Museum, $106,723 (2006)

• Mary Briggs, executive director chief operating officer, Hilton Head Symphony Orchestra, $81,000.

Jim Brennan, senior associate at the Economic Research Institute, a Redmond, Wash., firm that compiles executive compensation and salary surveys, said Miles' compensation appears to be among the highest when compared to that of leaders at other South Carolina chambers.

"I'm not finding a chamber executive director as high or higher," Brennan said. "There are reasons that may be proper, but it is the high end."

A sampling of pay for chamber leaders in other tourist markets in the area showed the following:

• Beaufort Regional Chamber of Commerce, $103,517

• Myrtle Beach Area Chamber of Commerce, $141,038

• South Carolina Chamber of Commerce, $271,551

• Savannah Area Chamber of Commerce, $301,322

• Charleston Metro Chamber of Commerce, $303,500

• Jacksonville Regional Chamber of Commerce, $325,885.

In some cases, the figures include contributions to employee benefit plans and deferred compensation plans, and expense accounts and other allowances.

Pete Smith, a consultant based in McLean, Va., who helps nonprofit organizations determine executive compensation, said Miles' pay is in line with the chamber's budget.

"For that level of expense budget, $300,000 is not egregious," he said. "It doesn't on the surface sound egregious."

Tigges, the chamber board chairman, said Miles' pay is appropriate. It doesn't make sense to compare salaries among organizations that do different things, he said.

Chamber officials provided a 2008 U.S. Chamber of Commerce survey that showed the total cash compensation for chief executives of chambers with incomes of $4 million or more was $260,500.

They also point to several awards and honors the chamber has won under Miles' leadership.

Among those, the chamber was named National Chamber of the Year by the American Chamber of Commerce Executives in both 2000 and 2006. It is also one of only about 100 chambers nationwide to receive four-star accreditation by the U.S. Chamber of Commerce.

The chamber's Visitor & Convention Bureau is one of only about 100 in the nation to be accredited by Destination Marketing Association International.

Miles is a member of the Chamber of Commerce Committee of 100, a group of chamber executives that advises the U.S. Chamber.

PERFORMANCE STANDARDS?

Despite that distinguished record, some town officials say they want a better understanding of whether the chamber is making the highest and best use of the bed tax money it gets.

During a workshop last month, Town Council members briefly discussed subjecting the chamber to increased scrutiny through "performance standards and review."

Council member George Williams spoke in favor of the idea, but said this week nothing has come of it.

Williams said it's difficult for the council to know whether the town gets its money's worth from funds distributed to any of the private groups receiving bed tax funds.

"I think we've all asked that question and quite frankly struggled with how you judge it," Williams said. "Unless it's conventions or groups or something, it's hard for us to really judge."

At a meeting Thursday, Diamond asked chamber officials for more specific data to justify its most recent $391,000 request.

The chamber complied, sending what Diamond described as "a ton" of information.

The $391,000 would be on top of money the chamber already is assured of getting under the accommodations tax law. As the town's "designated marketing organization," its statutory allotment came to about $1.2 million last year; this year it's expected to be about $1.1 million.

The chamber also regularly applies for additional discretionary grants for specific projects. Earlier this year, the chamber received an extra $200,000 from a town crisis fund, and town officials have invited the chamber to ask for another $300,000 if necessary to keep tourists coming during the recession.

Diamond noted that the chamber has received a steadily increasing percentage of bed tax funds in recent years and continues to request more as the amount available dwindles.

"As we deal with a shrinking amount of money and an increasing amount for VCB, somehow those two things have to be reconciled," Diamond said after the VCB made its pitch Thursday.

If the chamber's full request is funded this year, it would receive about 17 percent of the town's estimated available discretionary bed tax money, up from 6 to 8 percent about five years ago, Diamond said.

VCB vice president Susan Thomas said the chamber asks for more than its statutory allotment because it plays a key role in attracting visitors, the lifeblood of many local businesses.

"We think it would be a disservice to all of those stakeholders if we didn't come before you and ask for the adequate funding to market the destination," Thomas told the committee.

Tigges said the chamber spends accommodations taxes responsibly.

"Under the statutory regulations, I think they get excellent results for the dollars they're given," Tigges said.

Chamber officials say designated marketing organizations elsewhere in the nation often receive larger percentages of bed tax revenues than Hilton Head's chamber does.

"The need for marketing to stay competitive is great, greater than ever," Thomas said.

Like other groups that seek bed tax money, the chamber doesn't always get the discretionary money it asks for. Last year, for instance, it requested grants of $355,500 for that year and $90,055 for this year. It received $297,600 and $68,000, Shay said.

Shay said today's circumstances are considerably different than those only a few years ago, when the bed tax revenue rose so consistently the town could afford to approve some organizations' requests a year in advance.

Is the committee equipped to adjust?

Diamond said it is deliberately composed of people with a variety of professional backgrounds and asks for plenty of information to evaluate whether requests are worthy before making recommendations.

"We're constantly probing to make absolutely sure," he said. "At the end of the day, we hope we're successful."

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