Podcast: Hot Topic on HOT Funds

In this episode of Weaver: Beyond the Numbers, our hosts discuss how you can use hot funds to accomplish some of the objectives they’re really wanting to accomplish.

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Detailed Description of Weaver: Beyond the Numbers, Hot Topic on HOT Funds

00:00:00
Morgan: We’ve been talking about hot funds in a bunch of our projects recently, and I know personally, I had no clue about all the different ways that we could use them. And when we were talking about it, you kind of brought up, this is the government’s secret weapon for community development. So why don’t you share a little bit about what you meant by that, and how our clients can actually use hot funds to accomplish some of the objectives they’re really wanting to accomplish?

00:00:26
Kiley: Absolutely, Morgan. Yeah, let’s start by, what are these hot funds? I think all of our agencies that are allocated hot funds should know what they are. But the secret weapon part is that they’re usually hidden kind of in the back of your budget allocation and sometimes even in the back of your financials.

Hot funds are hotel occupancy tax funds, and they are allocated to certain local government agencies based on taxes that are levied on hotel use from your constituents. The fun thing about these funds is they can be used for beautification efforts, and they’re actually restricted to do so, but they’re not scary restricted funds. And I want to make sure that our government entities stop staying away from them because they have the word restricted on them. I think there’s a lot of creative ways to use them.

So where are they in your budgets and your financials? You should have a particular fund for these, and it’ll say hotel occupancy tax. And I would say, from a previous finance director at a very large precinct and a very large county, make sure that allocation is consistent every year, because you never know where the issues can occur with budget allocations. I also want to share that the restrictive use of hot funds is really anything that makes people want to travel to your particular geographical area that your local government serves.

00:01:51
Morgan: So, it sounds like by anything, could I use it to put like the world’s largest monkey wrench?

00:01:59
Kiley: If you would like to place that monkey wrench as a monument in the middle of your town hall, absolutely. I would actually recommend that local government agencies focus their hot funds on things that are unique to their city or their county, such as a monkey wrench in their town square. I think that, for example, if your geographical area is very heavy in history, you can use this to enhance your historical markers. You can use it as beautification projects that are around your city or your county, or even in some of your parks. While your budgets are purposely needed to fill potholes and to make your parks beautiful and to pay your staffing needs, there’s nothing better than having this side fund over here that you can use for the things that make your constituents want to walk out into the community and enjoy it. And not only that but bring their family and their friends and grow the presence in your local community.

00:02:56
Morgan: And talk to me a little bit about using it for synergies, like for infrastructure. How does that work?

00:03:02
Kiley: Absolutely. I think one of the best ways that you can use these, if you have a savings of hot funds or a larger allocation, community centers and museums and things such as that, that you can help build in your area. It can absolutely be used as that. So, anything that promotes that draw for travel or tourism into your local area is going to be a great purpose for these hotel occupancy tax funds.

00:03:29
Morgan: I love the creativeness. So, if I’m an organization and I look back over the past 6 or 8 months and I go, shucks, I did a bond for this that I could have used hot funds. Did I just miss the boat, and I have to make another project?

00:03:42
Kiley: No, absolutely not. That is the other wonderful thing about hot funds is you can actually use them in conjunction with other funding sources, such as bond funds and on bond activities that also have a purpose of promoting tourism and higher activity in your area.

I would actually recommend making a point to look further into these uses. You can go to your comptroller’s website for the state and there’s also tons of articles out there. And it’s actually something that we can help local governments do to find ways to utilize those that will serve. Whether it’s a current project that you have going on, bond projects specifically, or it’s a grant that you have that you need just a little bit of the cash match for, that also serves the same purpose. I would recommend really diving into those ideas and becoming a professional on your hot funds.

00:04:31
Morgan: Well, thanks, Kiley. I really appreciate you sharing that and helping educate myself and all our clients on how to use these hot funds.