Council asks for strict restructuring plan after director dismissed
The Valdez Convention and Visitor’s Bureau (VCVB) is in trouble.
Members of its board, and paid staff, appeared in a work session with the Valdez City Council a week ago Wednesday, November 2, asking for emergency funding from the city after admitting its financial records were in a shambles and its executive director had been dismissed.
The VCVB operates the city’s visitor center on the corner of Egan and Chenega Streets and is also charged with marketing Valdez as a tourist and convention destination. It receives the lion’s share of its yearly budget from the city’s bed tax and earlier in the year had requested over $400,000 for its 2012 budget.
By statute, the bed tax is designated for economic development and is not spearheaded specifically for the VCVB.
Colleen Stephens – a 12-year member of the VCVB board, appeared telephonically at the work session to give council “…the meat and potatoes of where we are today.”
The problems came to light nearly a year after John Hozey, city manager, cut off regular funding to the organization after it had failed to produce mandatory audits as required by city statutes during 2011 budget hearings. At the time, Hozey complained the organization had failed to produce an audit in five years and was in violation of city statues that mandate organizations provide a clean audit yearly. The city later provided cash for vital services periodically through the year after the organization produced - what was called at the time - a clean audit for 2009.
Fast forward to the 2012 budget hearings and the organization’s board of directors had found numerous problems with its books when it found it could not complete a 2010 audit as planned during the month of October.
So how did the organization get into this mess?
“It’s fair and it’s expected that you are going to ask that question,” Stephens said when addressing the council, looking for guidance and a way to continue its operations. “The financial statements provided to the board did not properly or clearly reflect the current situation.”
The board did not name who was responsible for providing financial statements or why what was provided was inaccurate. However, it is clear the board did indeed fire or layoff former executive director Dave Peterson on October 11, one day before a scheduled visit by an auditor from the firm Altman and Rogers.
“It became immediately apparent that the organization was not in a situation to complete the task,” Stephens said verbally and in a written report to council.
The board found it would be unable to keep its doors open without a cash influx from the city.
“We have bills to pay to clean up the current situation,” Stephens said, noting much of the crisis involved printing costs for current and past yearly editions of its visitors guide. It also had unbudgeted expenses related to fines, and back payroll taxes for 2008/09.
“Not paying bills on time, not filing taxes correctly and accumulating fees to go with that,” incurred more expense than planned, Stephens said.
The board needed $55,000 to keep minimal operations going until the end of the year or $153,000 to wipe the slate clean until a reorganization plan could be implemented.
With a cash infusion of $55,000, the board would be forced to lay off VCVB staff and it would not be enough to pay off all bad debts, including $40,000 in back payroll taxes owed.
It would need $153,000 in forward funding from its 2012 to clear the slate, keep its employees and begin anew in 2012, with a revamped, city-approved reorganization plan.
The $153,000 includes funding to wipe out all outstanding financial obligations known “to the best of our ability” Stephens said, but warned other bad financial news could rear its ugly head, but “we believe we have uncovered everything.”
Council agreed by consensus to forward fund $153,000 under strict provisions. It later directed Hozey to deduct the forward funding amount from the VCVB 2012 budget request.
First, a committee or task force comprised of stakeholders, including elected officials and members of the public, would need to be formed to create a reorganization plan – including strict financial accountability measures. The current board of directors will act in place of an executive director and program cuts be made.
“I’m not going to bail them out and say go fourth and do good,” without major restructuring and accountability guarantees, Mayor Dave Cobb said.
However, he and other council members were eager to move forward and avoid a gap in marketing Valdez as a tourist destination, noting the likelihood of a negative outcome for numerous small businesses without VCVB type functions.
“I think we have to move ahead” Cobb said. “The problem has already happened,” but council – and the VCVB board – needs to make sure it doesn’t happen again.