City audit finds several motel reporting errors; one operator nonresponsive, city readies enforcement

The Willows City Council received a presentation Sept. 9 on a transient-occupancy tax (TOT) audit of local hotels and motels covering 2021–2024, after which city staff said they have begun sending findings letters to noncompliant operators and could pursue liens if records are not produced.

City Manager Martie Brown introduced the report and said the council had earlier approved a one-time audit and asked staff to wait until letters to noncompliant motels had been sent before briefing the council. Carrie Calloway of HDL — the firm that conducted the work — described HDL’s four-month audit process: announcement and records request, virtual review, sample testing against quarterly returns, report drafting and finalization, followed by findings letters and a dispute period.

Calloway said HDL audited eight lodging businesses. Motel 6, Quality Inn and the Willow’s Inn were found compliant. Super 8 had reported-versus-recorded discrepancies in an early draft but the auditor said those were resolved and the motel was later marked compliant. By contrast, Best Western Willow’s Inn did not provide the requested records; HDL said it applies a 20% “markup” in those cases as a conservative estimate of potentially untaxed receipts while continuing to press for actual records. Holiday Inn & Suites had reported-versus-recorded variances that HDL could not reconcile without supporting documents, so the auditor treated the differences as TOT-taxable until the operator documents otherwise.

Calloway reiterated HDL’s role is educational where possible and described the dispute process: properties can request a hearing and supply documentation; if an operator continues not to cooperate, staff said it could turn findings over to the city attorney and pursue collection remedies, including placing a lien or a special assessment on the property.

Council members asked for historical context and timing. Brown and Calloway said HDL previously performed similar audits for the city and that the draft report shared with the council in spring had changed in a few respects — notably Super 8’s finding was corrected after the motel supplied documentation. Staff said three properties had received findings letters and the city attorney had already issued city-generated letters to those noncompliant motels; the city is awaiting responses.

Why it matters: TOT is a revenue stream cities use to support tourism-related services and the general fund. Audit results can lead to recovered revenue and reduce the administrative and public- health burdens caused by underreporting.

What’s next: City staff said they will continue to pursue records from nonresponsive operators and coordinate with the city attorney’s office on next steps, including the possibility of enforcement through liens if documentation is not provided. No formal council action on the audit itself was recorded during the meeting.