DiCienzo suit rekindles criticism of Percy, NTCC
The city bed tax is being collected “erroneously, illegally and/or unconstitutionally” according to the Article 78 action brought against the city by the DiCienzo family and their company, NFNY Hotel Management.
The suit, filed on the DiCienzo’s behalf by local attorney John Bartolomei in Niagara County Supreme Court, seeks the return of $285,808 collected by the city between June 30 and Sept. 30, 2015 from the Sheraton at the Falls and the Days Inn at the Falls.
On Dec. 15, 2015, the company formally asked city Controller Maria Brown for a refund of the tax money, which is charged to guests at the hotels. Brown refused the request on January 5, the suit states.
While the DiCienzo’s acknowledge the right of the city to collect the tax, the questionable performance of the Niagara Tourism and Convention Corp., which receives nearly $1 million a year in bed tax money, is brought sharply into focus in the suit.
“The contract under which the not-for-profit (NTCC) receives and expends the funds received from the collected taxes does not provide for sufficient oversight and control to assure that the funds received by it are expended for the statutory purpose of promoting tourism in Niagara County,” the suit states.
The suit alleges the NTCC engages in “ill conceived and extravagant travel,” that it carries “excess payrolls and benefits to untrained and unqualified staff,” that it makes “contributions to other not-for-profit entities,” undermines the marketing efforts of local tourism businesses, illegally maintains a “huge” reserve and, in general, fails to apply “the funds to the designated statutory purpose of marketing Niagara County tourism business.”
Because the statute states that a portion of the bed tax money can be used for “any city purpose,” it is, in fact, and hidden income tax, the suit alleges. Further, because the funds are being spent for things other than marketing tourism here, collecting the tax is illegal and unconstitutional.
“(U)nlawful and unconstitutional expenditures have been made both by the city and the NTCC in violation of the statutory authority and in derogation of the constitution,” the suit declares. “
In her denial of the DiCienzo’s request for a refund, Brown wrote that “the expenditures made by the NTCC are not subject to the review or approval of the city as the language to fund the NTCC from portions of the occupancy tax is directory and not discretionary.”
“The Respondent Brown’s argument that they cannot review or approve the NTCC expenditures is laughable,” the suit states. “The City is collecting this tax and distributing it to a not-for-profit, yet they cannot review what it is spent on. The City still has a duty to use the funds for the promotion of tourism in accordance with the authorizing statute no matter whom they give the money to.”
The suit asks that the city bed tax be declared unconstitutional, that all funds collected pending a judgement in the case be frozen in a separate account and not disbursed and that the judge in the case rule that the city has an obligation to scrutinize NTCC expenditures down to the smallest detail.
Finally, it also seeks the return of the $285,808 collected at the two DiCienzo hotels last season, whether the tax is found to be unconstitutional or not.
The DiCienzo action levels many of the same charges made by city Council members when they managed to temporarily defund the agency in 2013, and by the Niagara Falls Reporter almost since the NTCC was created in 2002.
Finally, the important questions raised then and now will be answered, under oath, in court.
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DiCienzo suit rekindles Reporter
fueled criticism of Percy, NTCC
By Mike Hudson
The Article 78 claim against the city filed on behalf of Michael DiCienzo — whose family owns and operates the Sheraton at the Falls, Days Inn at the Falls, T.G.I. Friday’s, the Rainforest Cafe, Starbucks and the Sweet Treats Ice Cream Shop here – and seeking the return of nearly $300,000 the hotels have paid the city in bed tax money brings up an argument that the Niagara Falls Reporter has been making for years.
That money given the NTCC is essentially wasted. In 2013, a majority of the city Council thought this as well, and funding for the company was temporarily suspended. Intervention by Mayor Paul Dyster got it restored.
Nearly $1 million a year is collected in bed taxes here, and the bulk of it is turned over to the Niagara Tourism and Convention Corp., a private entity that critics have charged lacks accountability insofar as to how the money is spent. By contract, the NTCC has to generate $15 in business for every dollar given it by the city.
In addition to the bed tax money, the NTCC collects another $1 million a year from the city’s share of slot machine revenue at the Seneca Niagara Casino.
While the company and its CEO, John Percy, have steadfastly refused to disclose how they spend taxpayers’ money, they do provide a quarterly report which attempts to demonstrate how they help the city.
Over the course of the year, various people make some sort of contact with NTCC — by email, visiting their website or Facebook page, or by phone. If an NTCC representative answers the phone, if someone is sent an email or if someone visits their website, the person is counted as “serviced.”
The NTCC claims it “serviced” 1,004,295 people in one recent year. About 90 percent were visitors to their website with whom they had no actual contact. Percy then claims that 46 percent of these “serviced” people actually come to Niagara Falls on the basis of their visit to the website, the phone call or the email, bringing their families along with them as a result.
Based on that formula, Percy then reported that a total of 461,976 people came to Niagara Falls because of the NTCC, and claimed that each person spent $445 here, a total of $205 million. According to Percy, none of the 461,976 would have come to Niagara Falls had they not called the NTCC, received an e-mail or surfed onto their website.
“These findings are not just pulled out of the sky,” Percy told the council when questioned about the veracity of these figures. “They are factual and solid numbers.”
But there is no actual proof that any of these almost half-million people even came to Niagara Falls, because the NTCC does not track the names of people who visit their website. They simply presume that if someone visits their website, 46 percent of the time that person will be “converted” and decide to come to the falls, and that he or she otherwise would not have come.
No analysis or conclusive data that shows whether any of these people who happened to visit this website came to Niagara Falls as a result of visiting that website, or if these people that came to Niagara Falls weren’t already planning to come and only visited the website to find out more information. Likewise, no analysis or data exists that would suggest that 46 percent of the people who visited the website actually came to the Falls at all.
In sum, based on these assumptions, NTCC takes nearly $2 million from the taxpayers every year for having a website and answering the phone.
And how does Percy spend the money?
To begin with, he pays himself $133,000 a year plus another $145,000 for travel expenses – according to the IRS filings for the organization.
See NTCC IRS filing here: ntcc 990 2014
The nature of much of this travel seems suspiciously like pleasure travel. Percy flies first class, has a yen for hotel rooms starting at $500-a-night rooms and spends lavishly at restaurants and other entertainment venues.
He has been to Delhi, Mumbai, London, Prague, Berlin, Geneva, Milan and other places that he chooses not to reveal, all on the taxpayer’s dime. One four-day Indian jaunt cost hoteliers of Niagara Falls $18,579.
But he has steadfastly refused to provide receipts or other documentation that would verify what the money is spent on.
“I’ve been hired to produce positive results for this destination and want to do that effectively,” he told the Niagara Gazette in an interview. “I don’t need to be criticized by every little receipt that is provided.
And, while Percy claims credit for increases in hotel occupancy here in recent years, an improving American economy and the plummeting cost of gasoline may have something to do with it as well
“Explore Niagara Falls USA” is the official Facebook page of the NTCC. Of the nearly 155,000 worldwide who have visited the page, 63,036 have “liked” it and receive regular updates regarding tourist attractions and activities here. The preponderance of postings promote the Niagara Falls State Park and Glynn’s Maid of the Mist boat ride, in fact, fully 20 of the most recent 27 postings over the past two months in some way promote the park and boat ride, the other 7 touching on attractions elsewhere in the city and Niagara County.
All this and more has been grist for the Reporter’s mill almost since the founding of the NTCC in 2002. DiCienzo’s Article 78 suit, filed by prominent local attorney John Bartolomei, brings up many of the same points.
It questions the city’s “specific performance” for the use of the tax money for the promotion of tourism, and asks for the court to order the city to review expenditures related to the NTCC. The petition argues that the contract under which NTCC receives and spends the bed tax money “does not provide for sufficient oversight and control to assure that the funds received by it under the contract are expended for the statutory purposes of promoting tourism in Niagara County.”
It charges the NTCC has “mismanaged, misappropriated and expended the funds received” on a number of questionable items, including: “ill-conceived and extravagant travel expenses purportedly for marketing purposes; excess payrolls and benefits to untrained and unqualified staff; making contributions to other not-for-profit entities; paid staff undermining marketing efforts of local tourism businesses; illegally maintaining a huge reserve for the purpose of securing staff positions and severance funds and general failure to apply the funds received to the designated statutory purpose of marketing Niagara County tourism business.”
Needless to say, Percy dismissed the charges.
“The accusations are absolutely ridiculous and quite frankly shocking,” Percy said. “We’re surprised.”
