ELY — The Ely Area Lodging Tax Joint Powers Board postponed all funding decisions until Dec. 30, extending a months-long dispute that has raised questions about board oversight and governance. Those include questions about why the board wants to defund a tourism bureau that lodging business owners say is performing well.
“In 20 years of business, some of the best branding and marketing materials I’ve seen anywhere have come from the tourism bureau,” Jason Zabokrtsky, owner of Ely Outfitting Company, told the Ely City Council in November.
The postponement comes as the board, including city of Ely representative Paul Kess, has proposed redirecting tourism marketing funds to pay city utilities and Chamber of Commerce staff salaries at the new trailhead building.
A board that collects and distributes
The Ely Area Lodging Tax Joint Powers Board has a specific role, to receive lodging tax revenue from participating jurisdictions and distribute it according to state law. Minnesota Stat. 469.190 requires that 95 percent of proceeds be used “to fund a local convention or tourism bureau for the purpose of marketing and promoting” the area.
The Ely Chamber of Commerce created the Ely Area Tourism Bureau in 1986 to serve as that designated entity. The bureau operates with its own board of directors made up of lodging business owners and outfitters, people who directly benefit from the marketing and often collect the tax from their customers. That board oversees the bureau’s budget, operations, and strategic decisions.
For years, this arrangement functioned with the joint powers board distributing funds while the tourism bureau’s board governed how those funds were spent.
At the November joint powers board meeting, that changed. Kess supported a plan giving three requesting entities — the tourism bureau, the city, and the chamber — two-thirds of their funding requests. This would reduce the bureau’s budget from a requested $315,000 to roughly $210,000, with the city receiving $20,000 for trailhead building utilities and the chamber receiving up to $53,000 for visitor center staffing.
The joint powers board postponed that decision Tuesday after multiple people challenged the split funding approach.
“So many different perspectives were brought to the table,” Abby Dare, executive director of the tourism bureau, said in an interview with the Timberjay. “There were people in the room today from Minnesota state tourism agencies who would advocate that those requests are not actually legal. There were also people in the room who were like, ‘OK, I don’t care that your attorney said that was OK. I need you to think wisely about this choice.’”
Questions about
contractor wages
For his part, Kess appears to want more financial oversight of the bureau. He referenced a lack of transparency on wages. The bureau spends only about a third of its budget on direct advertising.
“I had asked Abby to provide to the lodging tax board a list of the contractors that they had, their responsibilities, and the compensation that they get,” Kess told the council Tuesday. “This is public money, tax dollars.”
Dare declined.
“We declined to share personally identifiable contractor wage information in a public forum,” she told the council. “It’s not appropriate, it’s not standard practice, and it falls outside the scope of the lodging tax joint powers board’s oversight responsibility.”
The request raises questions about the scope of a joint powers board’s statutory authority. Is its function to act as a regulatory authority, or is that the purview of the tourism bureau’s board?
Tourism business owners have appeared at city council meetings defending the bureau’s work. Edith Renner, owner of Motel Ely, noted that Kess didn’t follow city council direction at the November board meeting. The council had voted 6-1 in October to direct him to maintain the bureau’s 95 percent allocation while using reserve funds temporarily for city and chamber requests. Instead, Kess supported the two-thirds compromise.
“He did not present that plan, and he did not vote for that plan. So, he failed to follow your direction,” Renner told the council. “I’m a little concerned that he shouldn’t be going with his gut when you guys sent someone to represent you.”
Councilor Emily Roose attempted to replace Kess after he failed to follow council direction, arguing that the city’s representative should follow the council’s votes. The council voted 6-1 to postpone that decision until January.
Mayor Heidi Omerza had appointed Kess as the city’s representative on the joint powers board. When asked via email for a comment about the situation, Omerza said she didn’t attend the joint powers meeting. When asked whether the city is dissatisfied with the tourism bureau’s performance, a question that might explain the push for oversight and funding changes, she declined to respond.
Kess defended his approach Tuesday, saying he understood his role was to advocate for “a more balanced approach” to lodging tax spending and that the compromise reflected months of effort.
What the statute requires
The statute requires that 95 percent of lodging tax proceeds be used “to fund a local convention or tourism bureau for the purpose of marketing and promoting” the area. The remaining 5 percent can be used at the joint powers board’s discretion.
The proposed split raises questions about whether operational expenses like building utilities and visitor center staffing qualify, and whether the statute’s requirement to fund “a local convention or tourism bureau” allows money to be divided among multiple entities.
Dare said state tourism officials who attended a recent meeting argued the city and chamber funding requests don’t meet the statutory standard, though Kess told the city council that the joint powers board has a legal opinion stating otherwise, and the impending legal battle could have statewide implications.
“State tourism officials are actively reviewing what’s happening in our region and that process isn’t over,” Dare told the council Tuesday.
Dare has avoided arguing the requests are illegal, saying she “stepped away” from that debate after recognizing all parties had obtained legal counsel. Instead, she has focused on governance questions about who has authority to decide how tourism marketing dollars are spent.
“The tourism bureau has a board of directors, and they are all lodging business owners throughout our region, and they have absolutely the full oversight of our budget and decide what we do,” Dare said.
Operational impact
The funding uncertainty has forced operational changes at the tourism bureau. Marketing director Whitney Woods earlier told the council the organization has eliminated two contractor positions, reduced hours for others, and cut video production, podcasts, and most print advertising.
Some contractors have moved on to other clients rather than wait for budget resolution. Advertising agencies have been requesting 2026 commitments for months, with deadlines for media buys and campaign planning already passed.
The tourism bureau operates on annual contracts with marketing partners and independent contractors — photographers, graphic designers, PR specialists, and podcast producers, most of them local residents. Without knowing its 2026 budget just days before the new year, the organization cannot make commitments or plan campaigns.
“This is not theoretical harm,” Dare told the council Tuesday. “It directly affects our ability to market the region effectively and responsibly.”
She described the prolonged process as “extremely painful.”
“The level of tension, public conflict, erosion of trust between entities has been significant,” she said. “While the pause is now in place, the relational damage is real.”
Questions about efficiency
Underlying the dispute are questions about organizational structure. The chamber has operated a visitor center for years without requesting lodging tax funds. Its request for financial support has raised efficiency questions.
“I don’t think having two separate organizations receiving lodging tax is efficient,” Dare said. “We only have so much lodging tax. The list of things we need to cover to maintain our tourism economy. We need marketing, we also need a visitor center, we also need events. But I don’t think having two separate organizations receiving lodging tax is efficient.”
Dare has called for the board to develop a strategic plan before making permanent changes, a request she says hasn’t been seriously considered.
“Smart leadership, strategy, and accountability is required when determining how these dollars must be spent,” she told the council in October. Her proposal called for using reserve funds — the discretionary 5 percent — to meet city and chamber requests temporarily while developing a comprehensive framework for 2026.
The joint powers board will meet Dec. 30 to make final funding decisions for 2026.