Ouray city officials have severed ties with the Ouray Tourism Office, saying the shutdowns triggered by the COVID-19 pandemic will leave them without the money needed to market the city to visitors and citing concerns about the nonprofit organization’s financial stability.
The city’s three-month contract with the OTO – an interim agreement put into place at the end of last year so the two sides could try to work out a longterm pact – ended Tuesday. The city took over opera...
Ouray city officials have severed ties with the Ouray Tourism Office, saying the shutdowns triggered by the COVID-19 pandemic will leave them without the money needed to market the city to visitors and citing concerns about the nonprofit organization’s financial stability.
The city’s three-month contract with the OTO – an interim agreement put into place at the end of last year so the two sides could try to work out a longterm pact – ended Tuesday. The city took over operations of the Visitors’ Center on Wednesday.
City Attorney Carol Viner on Sunday sent a letter to OTO Board President Chris Hinkson and board member Mark luppenlatz noting the city and OTO had been unable to come to an agreement on certain terms of a new contract. She asked them to coordinate with Finance and Administrative Services Director Melissa Drake on transferring utilities, passwords and other information to the city.
“Council has been concerned with the financial stability of OTO and the lack of an executive director and other leadership,” Viner wrote in the letter.
In a news release issued Tuesday, the OTO board of directors said it found the city’s reasoning “puzzling,” noting the council had recently voted on a contract that would pay the OTO $25o,ooo to provide marketing services and $16o,ooo to operate the Visitors’ Center.
The audit, which was supposed to be delivered to the city by June 30 of last year, wasn’t provided to the city until the end of last month.
“The Audit found that the OTO was in full compliance with the terms of it’s agreement with the city and no defic iencies were found with OTO contract compliance,” the OTO board said in the news release.
The board also claimed the city knew about the OTO’s fin ancial cond ition and lack of an execut ive d irector when the council ini tia lly decided to continue its relationship with the OTO.
Council ors, however, made official approval of the contract contingent on receiving a clean audit of OTO’s expenditures in 2018. And the accounting firm that conducted the audit, Cedaredge-based Blair & Associates, cited several areas of concern with OTO’s finances.
The six-page audit report showed the OTO was nearly $150,000 in debt as of the end of 2018, with $29,249 in assets and $175,934 in liabilities. Of the total liabilities, the OTO owed $108,945 in accounts payable and $57,266 in loans. More than $68,000 of the accounts payable were over 90 days old.
“Conclusion is that the OTO financial year-end report for December 31, 2018 shows major concern on the financial stability of the non-profit,” the report said.
The auditor came up with a series of recommendations, incl uding that OTO management and the city administrator review financial data on a quarterly basis, that the OTO review its accounts payable to see if anything should be excluded or written off, and that the oro review quarterly reports and come up with a plan to reduce its negative balance and liabilities.
“They had to have a clean audit for us to continue. I don’t know that anybody who looks at that audit would see something they think is clean;’ Mayor Greg Nelson said in an interview Tuesday.
The OTO’s contract with the city called for the 2019 audit to be delivered to the city by June 30 of this year.
With a statewide stay-at-home order in place until a t least the middle of this month and Ouray hotels, campgrounds and other short-term lodging rentals shut down under a Ouray County public health order u ntil at least April 30, city officials know revenue from the city’s 3·5 percent lodgi ng tax will d ry up for the foreseeable fu ture. Nea rly 87 percent of that tax goes into the ci ty’s tourism fund , which is cur rent ly in the red, which is then used by the OTO to provide market ing services and run the Visitors’ Center. Under last yea r’s contract, the city paid the oro $38,724 each month.
“We didn’t have that kind of money to be paying them each month. We had concerns about the audit results from 2018. The world has just changed, honestly. Money is going to be tight moving forward with the city and we need to think outside the box,” Nelson said.
The OTO stopped active marketing efforts in mid-March, and in the short term, city staff will field any calls that come into the Visitors’ Center. In the long term, city officials plan to turn both duties back over to another entity. What that work looks like – and who will perform it – remains to be seen.
“We have to look at what we wa nt to do with tourism marketing going forward ,” Nelson said . “The City Council is not saying we want to stop marketing. The City Council is saying we’ve got to be more cost-effective with our marketing, we’ve got to be more strategic given how our tourism market is going to change as a result of this.”
Nelson said he isn’t ruling out working with the OTO in the future, but that “we just don’t know what that may be.”
The end of the contract would appear to put OTO’s six full-time and part-time employees out of a job, since the vast majority of the OTO’s funding derived from lodging taxes. OTO board members though, who held an emergency meeting on Monday after receiving the city’s letter, say the organization isn’t going anywhere.
“OTO is not going away. We are still there. We are still going to be servicing our members,” OTO board member Ryan Hein told members of the city’s Community Economic Development Committee during a meeting on Tuesday.
Using membership dues and grants, OTO board members say they will shift their focus from traditional tourism marketing to advocating for hospitality and tourism. Last week, the OTO acquired a 2020 Jeep Wrangler – paid for with proceeds from last year’s Jeep Raffle – and said in tends to conduct the raffle as normal this year.
“We look forward to working closely with the City of Ouray and all local stakeholders to help the town recover from the recent shutdown and health crisis,” the OTO’s news release concluded.
The city’s relationship with the OTO has been shaky since at least last summer, when city councilors briefly entertained holding back a monthly payment to the OTO because the city’s tourism fund was in the red, forcing the city to pull money from other funds to cover those expenses. The council ultimately chose to continue remitting tax revenue to the OTO, and the tourism fund rebounded in to the black.
Then, based on a policy change, city leaders chose to issue a request for proposals for marketing services and Visitors’ Center operations. The city received four bids, ultimately sticking with the OTO even after Executive Director Kat Papenbrock resigned to take a job with the state. City councilors, however, made it clear they intended to have more of a say in how the lodging tax revenue was spent and institute a series of benchmarks and metrics they expected the OTO to meet.
The council in December approved a three-year deal with the OTO while extending the 2019 contract for three months to give both sides time to work out the details of the new agreement.
But the city and OTO struggled to agree on new terms. City Administrator Justin Perry recommended bringing in a marketing expert from the Colorado Tourism Office to assist with negotiations. Councilors also made it clear a new contract wouldn’t be finalized without a clean 2018 audit. Ultimately, the city and OTO weren’t able to bridge that gap.