Lodging tax revenue has been described as the bright light in the city’s finances, but that doesn’t mean it comes without controversy.

On Monday, members of the Community Relations Committee unanimously passed a proposal aimed at limiting conflicts of interest within the Lodging Tax Advisory Committee (LTAC), the group that recommends how lodging tax revenues are spent.

As outlined by state law, LTAC is setup to be a conflicting system comprised of two, two-member voting blocs, a voting chairperson and two non-voting community members. One of the voting blocs must represent groups that are eligible for lodging tax funds (nonprofits such as the Chamber of Commerce and Bainbridge Arts and Humanities Council), while the other bloc should be comprised of lodging business owners who are not eligible for funding (lodging tax comes exclusively from lodging businesses).

Together the committee is supposed to carve up and distribute lodging tax revenues in a way that benefits both local business and the hospitality industry.

Except, there is an apparent problem – the majority of local lodging owners are part of their own nonprofit, Bainbridge Island Lodging Association (BILA), which is eligible for lodging tax funds. In 2008, BILA received the largest single grant ($30,000) from LTAC’s annual budget that now exceeds $110,000.

“There is a provision of the state law that says if you represent the lodging businesses you can’t also be representing an organization that is eligible for funding,” council member Barry Peters said.

Three weeks ago, Peters, who also acts as chairman of LTAC, brought forward a recommended list of six people to serve on LTAC for the 2008-2009 year (members are voted on annually). The list was expected to be passed during last week’s council meeting, but in a quick reversal, two of the members who were to represent the lodging industry on LTAC, Bonnie McBryan and Christopher Ross, were dropped from the recommendation.

McBryan and Ross were both serving on the BILA board and had agreed to leave their posts to serve on LTAC in order to conform to the law.

It was a move opposed by vocal community members at a Sept. 10 City Council meeting. During public comment, allegations were leveled that the BILA board did not properly spend their allocated LTAC funds and that BILA inappropriately marginalized non-island members of its organization.

Peters did not directly address those accusations. He said the two were dropped in order to uphold “the spirit of the law.” His motion at Monday’s CRC was to implement a provision that would ban lodging members who have served on the board of a group eligible for lodging tax funds.

Jan Parker, president of BILA, spoke against the move. She believed the proposal would bar qualified individuals and hamper progress within the committee.

“With that kind of elimination you will probably have eliminated 90 percent or more of possibly qualified people,” Parker said. “The other (BILA) members are simply not interested in involving themselves with committees like this.”

Parker wanted the two BILA members to be re-recommended for LTAC and issues of conflict of interest to be addressed at a later date.

However, in a move to bridge the two conflicting sides, the CRC passed a motion allowing previous lodging board members to serve on LTAC provided they had at least a two-year respite since board service. McBryan and Ross would remain ineligible for LTAC until that time.

Patti Dusbabek, an eight-year BILA member and the owner of Holly Lane Gardens bed and breakfast, thought the measure adequately addressed conflict of interest issues.

“I was delighted with the recommendation that was made, I was delighted there was a two-year time period,” Dusbabek said. “That will help everyone out; it will prevent people from feeling they have a fiefdom.”

Given that conflict is inherently built into LTAC by state law, council members present at Monday’s CRC meeting felt the compromise was the best way to deal with interest issues.

“Every city’s LTAC has conflict of interest allegations,” council member Hilary Franz said. “We’re trying to create some insulation between any conflict of interest… we are trying to make sure LTAC has credibility.”

“I think today’s position will help us move forward,” Peters said, “And I am hopeful that other issues that have been raised will be resolved.”

The search is on for two new members from the lodging community to fill the vacant LTAC positions by the end of the month.