THE MISSISSIPPI LEGISLATURE

The Joint Committee on
Performance Evaluation and Expenditure Review

Report # 460

A Review of the Effectiveness of Local Tourism Commissions

Executive Summary

Introduction

In response to questions by a legislator regarding the collection and expenditure of tourism-related tax revenue by local tourism entities, the PEER Committee reviewed the effectiveness of local tourism commissions in Mississippi.

PEER sought to determine:

the description and purpose of local tourism entities;

how local tourism entities are funded;

whether local entity expenditures comply with local and private enabling legislation;

whether tourism programs administered by the Mississippi Development Authority (MDA) and local entities duplicate or complement and the extent to which resource use is coordinated by MDA; and,

the financial impact that local tourism development efforts have on the state as a whole and on counties and municipalities.

As part of the project, PEER examined specific revenue and expenditure information from the forty-eight local government and tourism entities utilizing tourism-related tax revenue for tourism promotion.

The report presents information on the above objectives in question-answer format.

Conclusions

What are the authority and purposes of local tourism entities?

The Legislature creates local tourism entities through local and private laws to meet the specific needs of individual communities.

Since 1972, the Legislature has granted selected counties and municipalities authority through local and private laws to collect a special levy ranging from 1% to 3% on the sales of hotel and motel rooms and restaurants. These special levies were authorized for a variety of purposes, including tourism and convention promotion, economic development, recreation, public improvement, and stadium construction. Currently, forty-eight entities utilize forty-nine authorized special tax levies.

The nature of each tourism entity is unique in that each community has formed an organization based on its specialized needs and available resources. Types of entities authorized to receive special taxes include legislatively created independent commissions and convention and visitors’ bureaus; multifunctional organizations, including chambers of commerce and economic development authorities, that carry out or support tourism programs as well as other programs; and local governments, such as cities and counties.

How are local tourism entities funded?

Local tourism entities are funded primarily with resources collected through special tax levies on restaurants and hotels, with additional funds provided through the Mississippi Development Authority and local sources.

In FY 2002, the special tax levy on hotels and restaurants provided $23,890,863, or 83%, of the revenues for local tourism programs. Other sources of revenue include Mississippi Development Authority (MDA) grants, local government contributions, private contributions, and other sources (e.g., tours and sales at welcome centers).

Do local tourism entities’ expenditures comply with local and private enabling legislation?

The laws creating local tourism entities include varying expectations for entities regarding financial accountability for expenditure of special tax levy dollars. According to reported survey data, these local tourism entities’ expenditures comply with the broad requirements in local and private enabling legislation.

Local and private legislation generally states that the proceeds of the special tax levy are to be used for the purpose of promoting tourism or carrying out programs and activities designed to attract tourism to the area. Likewise, language creating tourism entities typically states that the entity shall exercise authority over matters related to establishing, promoting, and developing tourism and related purposes. Based on self-reported survey data from the forty-eight respondents, these entities expended tourism-related tax revenue in accordance with their enabling legislation.

Concerning oversight of these funds, state law does not consistently charge any state agency with the responsibility of verifying that local tourism entities use their special tax levy revenue in accordance with state law.

How did local tourism entities spend their funds in FY 2002?

For FY 2002, local tourism entities reported expending on average 33 percent for program administration, 12 percent for capital improvements, and 55 percent for tourism programs.

Including revenue from all sources, local tourism entities reported expending a total of $25,644,355 in FY 2002. Local entities reported expending approximately $14 million on tourism promotion programs, the largest category of spending, including approximately $9,600,000 for advertising and marketing campaigns.

Do local tourism programs and MDA’s tourism promotion efforts duplicate or complement each other?

MDA tourism promotion programs do not duplicate, but complement local tourism programs.

State law provides MDA with the authority to promote tourism generally, but does not specifically grant authority or responsibility for MDA to coordinate its activities with those of local tourism entities. In fact, no single authority has the legal mandate to coordinate all tourism activities in the state.

MDA’s Division of Tourism Development is organized so that its staff supports the activities and programs of local tourism entities by providing multiple services such as research, training, and referral, but does not play a direct role in local tourism promotion programs or activities.

What financial impact do local tourism development efforts have on the state and the local economy?

Few local entities gather uniform and comprehensive data on the financial impact and effectiveness of their tourism programs or conduct studies to measure effectiveness of tourism programs. Although MDA compiles an annual estimate of tourism financial impact, it does not estimate benefits derived from local expenditures.

Recommendations

The Legislature should amend MISS. CODE ANN. Section 57-1-59 (1972) to authorize MDA to enter into agreements with local tourism authorities to devise coordinated tourism plans and programs in the interests of both the state and the localities. Also, the Legislature should consider requiring that localities enter into such agreements as pre-conditions to receiving any grants from the state.

The Legislature should consider adopting general legislation requiring local tourism entities designated to receive tourism tax revenue or special levy revenue for capital facility construction, operation, and maintenance to submit an annual audit to the Office of the State Auditor in order to verify that local tourism entities and local governments are utilizing special levies in accordance with state law.

In evaluating future project proposals submitted in the grant application process, MDA should include evaluation criteria that would base grant awards on project merit, including estimated return on investment.

Local entities should consider improving methods of measuring financial impact and effectiveness of their tourism programs by gathering uniform and comprehensive data. Local tourism entities should consider tracking customer service quality factors in order to measure their effectiveness in meeting the requests of potential visitors and service satisfaction among potential visitors.

In compiling its annual estimate of tourism financial impact, MDA should estimate benefits derived from investments made by local tourism entities.

PEER Home Page Full Text PDF (740K)