TARGET 2 INVESTIGATES: Unpaid hotel room taxes

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APPLETON, Wis. (WBAY) - A Target 2 investigation finds several Fox Valley hotels behind on paying their room tax and reveals just how much money still needs to be collected.

Red Lion Hotel Paper Valley in downtown Appleton (WBAY photo)

Those room taxes have funded a number of high-profile construction projects, including the Fox Cities Exhibition Center with a nearly $32 million price tag.

Tonight we found out the hotel directly connected to the exhibition center owes more than $142,000 in unpaid room tax.

"What kind of message does this send to all the other entities? This is a self-reporting tax by these hotels?" Neenah Mayor Dean Kaufert says.

Appleton city officials say the overdue room tax is for the last quarter of 2018 and was due on January 31.

We reached out to the manager of the Red Lion Paper Valley Hotel Tuesday afternoon. We received a response after this report aired, saying the taxes will be paid "very soon." General Manager Linda Garvey wrote in part, "The hotel continues to have a strong financial outlook and performed well in the fourth quarter. This current delay in paying the fourth quarter room tax is related to a squeeze on cash flow that occurs during the more challenging winter months combined with dollars being directed toward the significant renovations we are currently undergoing and several unexpected and unbudgeted expenses connected to operating the Fox Cities Exhibition Center" (read the complete statement below).

It's been more than a year since the opening of the Fox Cities Exhibition Center, and to cover the cost area communities jointly collect a hotel room tax and use a portion to pay down debt from the construction.

However, a recent revenue report released during a March 18 meeting of the Fox Cities Hotel Room Tax Commission highlights three delinquent hotels -- one of which owes $142,707.94.

"There's certain requirements municipalities are required to do to collect that money, and we are doing all of those things to collect that money," Appleton Mayor Tim Hanna said.

The other hotels owing money include the Days Inn in Kaukauna, which owes $23,207 over a six-month period last year, and the Howard Johnson in Grand Chute. The town says an exact dollar figure for that hotel has yet to be determined.

However, Neenah's mayor says it's the Red Lion that benefits the most from the use of the exhibition center.

"To their credit, they just did a quite big major remodeling, so maybe there's cash flow problems. That's understandable. But at least come up front, be upfront and say, 'Hey, there's a little gap, we're going to work on this, we're going to get caught up.' But the denial on that is getting old," Kaufert said.

As a penalty, municipalities like Appleton have the right to impose a fine of up to one percent per month on hotels who get behind.

"We have not discussed that, so I can't give you an answer on that," Mayor Hanna said. "I think it depends upon how late they are and how often they are late. I think that's something we would discuss, but we've had no discussions about that. We are making an effort to collect what's owed right now."

We also had a number of conversations over the past 24 hours with members of the city council. Many said they had no idea the hotel was behind on paying room tax and were caught completely off-guard.

Linda Garvey, General Manager of Red Lion Hotel Paper Valley, released this statement to Action 2 News Wednesday afternoon:

"The outstanding room tax for the fourth quarter of 2018 is scheduled to be paid very soon. We’ve strived to maintain a strong record on payments related to the increased room tax and other associated costs supporting both an improved hotel and the new exhibition center. The hotel continues to have a strong financial outlook and performed well in the fourth quarter. This current delay in paying the fourth quarter room tax is related to a squeeze on cash flow that occurs during the more challenging winter months combined with dollars being directed toward the significant renovations we are currently undergoing and several unexpected and unbudgeted expenses connected to operating the Fox Cities Exhibition Center. The management agreement between the Fox Cities Exhibition Center and Red Lion Hotel Paper Valley states our company is responsible for 100% of the operating expenses for the exhibition center. Some of the unexpected expenses include, but not limited to, additional labor and equipment rentals in a new facility.

"We have acknowledged the amount owed to the City of Appleton through our regular reporting of the room tax total earlier this year and again at the March 18 Lodging Tax Commission Meeting, accompanied by a progress report indicating it is a top priority to be paid in the coming weeks.

"Our organization, managed by our local team of dedicated hoteliers, will continue to strive for excellence for our guests while honoring our obligation to the surrounding communities in providing a world class guest and visitor experience at the hotel and the exhibition center."