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story.lead_photo.caption Texarkana, Texas, City Hall, 220 Texas Blvd., is shown in December 2015. Photo by Gazette Staff

TEXARKANA, Texas — The City Council is considering hiring a staff-recommended auditing firm to find any uncollected or misallocated tax payments.

Chicago-based Azavar Government Solutions Inc. would scrutinize the city's collection of sales taxes, hotel occupancy taxes including those paid by short-term rentals, and franchise fees from utility companies. With the exception of a flat hotel auditing fee required by state law, the firm would not be paid unless it finds untapped sources of revenue, a representative told the Council during its meeting Monday.

"You should get every penny you deserve and not a penny more," Azavar Senior Vice President Ted Kamel said.

A contract with the city's previous hotel tax auditor, Avenu Insights and Analytics, expired Sept. 30, and staff chose Azavar as a replacement because of competitive pricing, city Chief Financial Officer Kristin Peeples said.

Kamel said he was previously employed bay Avenu, has audited the city's hotels multiple times before and has good relationships with local hoteliers. Azavar would not audit hotels unless a problem is apparent, he said.

"There's no sense spending that fixed fee money if we feel that they're doing it correctly. Part of what we do is monitor and look at the numbers, and if we think that there's a problem, or if the city calls us and says 'this hotel's behind six months,' then we'll come in and do those audits," he said.

Discussions with the city's Budget Advisory Committee led to a desire to take a closer look at franchise fee revenues, which utility companies pay to local governments as compensation for using public property, Peeples said.

In examining sales tax revenues, Azavar would review state comptroller tax return records, not business records, in search of irregularities.

"We don't go into businesses and audit your businesses. We're auditing the comptroller's reports. The businesses report to the comptroller. Every month we're looking at their reports that they provide to the city, and we're looking for errors in reporting, misallocations," Kamel said.

Short-term lodging rentals — the renting out of private residences through services such as Airbnb — can cause tax-collection and other problems for cities, he said.

"Short-term rentals is a growing problem with cities, not just ensuring that they comply with your lodging tax ordinance, because you're losing a lot of revenue on the table, but also through online travel companies," Kamel said. Companies such as Travelocity and hotels.com often underpay taxes based on discount short-term rental rates, he said.

"I don't think you have a major problem here, but I think it's incumbent that you would want to know what is the issue out there. Is there any tax dollars that are on the table? It's only fair to your standard brick and mortar hotels that everyone's playing by the same rules," he said.

Azavar can provide the city with sample ordinances to regulate short-term rentals, such as restricting them to certain areas, requiring that properties' owners reside there or enforcing compliance with public health and safety rules. Other problems with short-term rentals can include "party houses" that cause neighborhood nuisances. Azavar would also offer a hotline where such matters could be reported.

The City Council will conduct a public hearing and vote on approving a contract with Azavar during its next meeting, scheduled for Nov. 23.

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