The City of Huntsville is now overseeing the management of the Huntsville Visitor’s Center and Gift Shop next to the Sam Houston statue off state Highway 75 South.

The city took control of the two operations from the Huntsville-Walker County Chamber of Commerce as of 1 p.m. Tuesday.

The Chamber has managed the two since July 26, 1994, when the Chamber and the city entered into an agreement, but the city owns the properties and contents.

Mayor J. Turner said management of the two now falls under the city’s Community Services Department, which also oversees the Wynne Home.

“This action has been taken due to preliminary results of the Hotel Occupancy Tax audit, along with the documents provided by the Huntsville-Walker County Chamber of Commerce, which have revealed that the Chamber is not in compliance with certain provisions of the Texas Tax Code and the contract that govern use of HOT funds,” Turner said Tuesday afternoon.

The City Council at its April 21 meeting approved The Alvarez and Marsal Team of Houston to conduct an audit of Hotel Occupancy Tax funds, which included a compliance review and organizational assessment.

The council went into executive session during its June 2 meeting to discuss the HOT funds audit status and the Chamber’s HOT fund management, usage and compliance with contractual provisions and with Texas Tax Code Chapter 351.

When the council returned to the open meeting, council member Charles Forbus made the motion to “direct staff to appropriately address issues identified in the audit and with the contract in reference to the HOT funds and Chamber.”

The motion was approved 9-0.

Forbus chairs the HOT board.

“The City of Huntsville considers this action part of its fiduciary responsibility to Huntsville taxpayers and the first priority of city staff will be the fair and legal use of taxpayer dollars,” Turner said. “It is not anticipated that those employed at the Huntsville Visitor’s Center and Gift Shop will be affected during this transition.

“We are taking these steps in order to protect the public assets that have been invested in tourism over the years. We are following the advice of our staff and counsel on this. A couple of weeks ago we ordered them to take the necessary steps and I think that is what they did.”

“Effective today, the Huntsville-Walker County Chamber of Commerce no longer maintains a Contract for Tourism Services with the City of Huntsville,” Todd Armstrong, chairman of the Chamber’s board of directors said in a prepared statement.

“The Chamber has enjoyed the management of the tourism programs for more than three decades and is somewhat disappointed in this action, however, is pleased to see that the city will continue the operation of the Sam Houston Statue Visitor’s Center and Gift Shop,” Armstrong said.

“We intend to do everything possible to make this a smooth transition as we know that the business of tourism is very important to the local economy,” he added. “As always, we believe that the business of tourism affects everyone in our community and continue to believe in its value.

“We are disappointed, yet hopeful that the success of tourism will continue to be a highlight of the Huntsville community in its new format.”

Turner said he spoke with the auditors and that he has seen documents that support the Chamber’s not being in compliance with the contract.

Turner said issues involved were the commingling of funds and how money was spent.

“I have seen canceled checks that are very difficult to explain and the proper use of money as outlined in our contract and state law,” Turner said. “Any compliance or lack thereof would be with the Chamber because that is the entity we have the contractual relationship with.

“There were sufficient grounds to be concerned. It goes back to this aspect that if you have commingling your level of concern is higher to make sure you protect your assets.

“It was the conditions of the contract that we were concerned were not being met.”

Turner said “tourism is an important component to the success of our city without a doubt. We are not trying to shut down an important component to our city. We are trying to protect our assets to make sure this is a component that thrives.”

A letter, dated July 23, from city attorney Leonard Schneider to Armstrong and Dee Everett, president and CEO of the Chamber, listed instances of non-compliance and breach of contract by the Chamber.

• Records produced indicate that the primary source of visitor’s center funds is hotel tax funds contributed by the City of Huntsville. Records produced by the Chamber also indicate/show that the visitor’s center funds are commingled with funds from the gift shop in one bank account.

• Records produced by the Chamber indicate/show the use of hotel tax funds for items that are not provided for in the contract. An example is the purchasing of gifts using hotel tax funds for items to be distributed at a Chamber of Commerce banquet and/or dinner.

• Records produced by the Chamber also show and indicate that the Chamber has incorrectly identified and overstated the percentages of administrative costs and salaries that the hotel tax may be applied to.

• Records produced show improper use of hotel tax funds to purchase advertisements of various events that have no relation to the authorized purposes of Section III of the contract.

• Failure of the Chamber to maintain complete and accurate financial records of each expenditure of hotel tax funds and to timely and promptly produce Chamber records when requested by the city.

The letter also stated that the Chamber will be notified when the final audit report is submitted to the city.

“Based on the above, the city asserts the Chamber has not complied with the contract, has breached the contract and has failed to exercise the appropriate fiduciary duty owned by the Chamber to the city and to the public to use the hotel funds in a correct and authorized manner,” Schneider wrote in the letter. “As such, the city will not fund the July 2009 payment to the Chamber.

“Further demand is that all hotel tax funds in the possession of the Chamber be immediately given back to the city for administration and distribution to the Chamber on a ‘as need basis.’ Failure to return said funds may be considered further breach of the contract and fiduciary duty and appropriate action will be taken.

“If the Chamber requires use of hotel tax funds after the date of receipt of this letter and in the future months during the remainder of the current fiscal year (and if the contract is renewed), the Chamber shall submit a written request with explanation to the city manager, Bill Baine, and the finance director, Winston Duke, and upon approval from the city, said funds will be made available.”

During the June 2 City Council meeting, council member Forbus gave a report on the status of the audit and said it was not the intent of HOT board members to attack the Chamber.

Forbus said he had heard HOT board members had an antagonistic reason to attack the Chamber “and that’s not true.”

“It is the fiduciary responsibility of respect revenue provided by the city to the Chamber under this contract that the fiduciary responsibility should be taken care of and it is our responsibility as the HOT board to make sure those fiduciary responsibilities are fulfilled,” Forbus read from a prepared statement.

“It’s not an attack on anybody,” Forbus said. “It’s the fact that we’re looking for information and the truth about how funds are being used. Don’t take it as anybody trying to get somebody. OK.

“I just want you folks to know we are not out to get anybody. No one on this board is an evil person. They just want to do their fiduciary responsibility to the residents of Huntsville.”

During his report, Forbus talked about “an abundance of expenditures of HOT funds unrelated to the purpose of putting heads in beds; since the inception of the HOT board, the Chamber has not responded in a timely manner for requests of documentation of expenses; on numerous occasions, the board has allowed the Chamber to set the date for furnishing information requested and the board has had to extend the deadline or didn’t get the items asked for.

“There have been many expenses paid for out of HOT funds for the gift shop that appeared not to have been reimbursed; the problem is that the visitor’s center and gift shop accounts are commingled. That is they are of the same account, which is expressly forbidden by state statue and the contract between the city and the Chamber.”