Langley, chamber develop plan to sort out accounting error

The city of Langley has been working with the Langley Chamber of Commerce to straighten out financial confusion exacerbated by the COVID-19 pandemic and errors in accounting.

The city has found a way for the chamber to pay back money when it was mistakenly given more than its fair share, but a solution is still being sought when it comes to overdue rent payments.

Additionally, an unexpected tax is complicating the rental agreement the city is trying to finalize with the chamber.

During a city council meeting in early September, Langley Finance Director Monica Felici brought to the council’s attention that the chamber received more than what was owed for the contract it has with the city.

Under the contract, the chamber receives 1 percent of the city’s 4 percent lodging tax, referred to as the hotel/motel tax.

Felici, the finance director since April, said the chamber was overpaid $10,447.63 in the first quarter of 2020.

Because of the emergence of the coronavirus, the revenue from the lodging tax decreased.

The budgeted amount, rather than actual amount, was paid to the chamber. Felici said the city may also have issued a small amount of money in the second quarter to the chamber, which added to the overpayment.

During the council meeting Monday night, Felici reported that the chamber’s debt had shrunk to $7,363.52.The chamber is able to give back its shares of the lodging tax to the city that are received during the rest of this year in order to cancel out the overpayment made during the first quarter.

“I’m really optimistic that will be zero by the end of the year,” Felici said during the meeting.

Additionally, the city’s tourism committee proposed that the city allow unused funds not given to other tourism organizations to be redirected to pay the remainder of the chamber’s bill.

This includes $5,000 that wasn’t used to produce the Island Shakespeare Festival this year. It also may include $7,500 that wasn’t used by Whidbey Island Center for the Arts if the funds are needed by the chamber to pay the debt.

The council unanimously approved the proposal.

The city is also in the process of negotiating a new lease with the chamber.

The chamber is renting a building owned by the city.

A state auditor reported in June that the city should be charging the chamber a leasehold tax of 12.84 percent.

The audit found that the city owed $4,505.32 for the leasehold tax that was not collected from the chamber, so therefore wasn’t paid to the state Department of Revenue.

The tax was never previously billed or put in the chamber’s lease agreement.

Inge Morascini, executive director of the Langley Chamber of Commerce, said the group intends to renew the lease, but the cost on the rental agreement was shifted several times.

An error in the accounting program used by the chamber is the reason for the arrears of rent, she explained.

That error was not caught until 2020.

Felici said officials may have thought the tax didn’t apply to a nonprofit, but according to the audit, anyone who rents a government building must pay it.

The city agreed to keep a “fair market value” monthly rent of $675 for the chamber, plus an additional 12.84 percent of that price that goes towards the leasehold tax.

According to Felici, the chamber’s lease should have been signed at the end of 2019, but still isn’t finalized.

The chamber is also behind in rent and owes $1,725 for 2019.

Felici said the chamber currently has no other revenue coming in that the city can deduct for the late lease payments. She said she will be adding the back lease owed to the amount of overpayment to the chamber.

In a previous memo to the city council, Felici had suggested fundraisers and membership fees could help supplement the chamber’s revenue. Apart from Langley Mystery Weekend, Morascini said the chamber doesn’t participate in many fundraisers because they haven’t netted a lot of funds in the past.

She said the yearly fee each member business pays is $199 for a regular business and $249 for lodging businesses.

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