Corridor Business Journal Article

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Most of the larger cities in the Corridor are experiencing a drop in hotel/motel tax revenue.

The decline in collections from calendar year 2008 to 2009 isn’t a surprise to hotels, which had a sharp increase in guests following the flood.

“2008 was a horrible year obviously for the community. The flood was huge. But the hoteliers had record numbers,” said Josh Schamberger, president of the Iowa City/Coralville Area Convention and Visitors Bureau. “For the period of early June through almost into September (2008), we were pretty darn close to 100 percent occupied. So, those numbers have skewed the overall picture. When we’re comparing this year, it’s a lot better to compare this year’s results to 2007 as opposed to last year.”

The decrease in tax revenue could be severe for organizations like convention and visitors bureaus.

“Fortunately, we haven’t taken anywhere near a hit as just about every other community in the country,” he said. “We’ve been insulated because of the (University of Iowa and UI Hospitals and Clinics) and Interstate 80, but that said, there certainly is an impact as a result of the economic downturn and the suspension of conferences and meetings and cutting back of those sorts of events for cost-saving methods by corporations.”

As the bureau begins budget planning in March for fiscal 2011, it may consider cuts to programming.

“A lot of those funds are things that we directly funnel back into efforts and area festivals and things like that,” Mr. Schamberger said. “So it’ll be cut from those sorts of activities and programs. We won’t have so much funding to reinvest for some of those things and some of the things that have been on the drawing board will have to continue to be suspended until revenues are there to make up for it.”

Staff reductions will be another consideration, he said.

“I think the next 18 months are certainly going to be the most difficult of my tenure here in Iowa City, Coralville and Cedar Rapids, and I’ve been around for 11 years in both,” he said.

Cities will be hurt by the decline, as well. Iowa City spends 47.5 percent of hotel/motel tax revenue on the police department, 27.5 percent on the parks and recreation department and 25 percent goes to the convention and visitors bureau.

“We’ve only gotten receipts through September and they’re down about 25 percent,” said Kevin O’Malley, Iowa City finance director. “We should have gotten around $48,000 but we received $39,000. Last year was a little low also.”

Fiscal years for cities begin July 1. Corridor towns expect to receive their receipts later this month from the second quarter, which is often the largest collection of the year because of the football season.

“That’s usually about $60,000, then the next quarter is about the same as this one, about $45,000 and then the last quarter is the lowest which is around $25,000 to $30,000.”

During fiscal 2009, the city collected $62,000 in revenue, while the previous year during the same quarter it received $52,000.

In Coralville, hotel/motel tax revenues are split between the convention and visitors bureau, trail projects and the parks and general budget funding.

“We apply some to trail improvements, about $80,000 a year is earmarked for trails and the portion to CVB, and then the balance of it all is deposited into our general fund, which is then used to support our general funds departments. A large part of it is the parks and rec department,” said Terry Kaeding, Coralville finance officer.

Ms. Kaeding said it is difficult to compare this fiscal year to last because of the flood. Fiscal 2009 revenue was up 8 percent from the previous year.

“It’s probably comparable with fiscal year ’08,” she said. “It’s so hard to tell because football traffic has so much to do with it, too. I would say it will have an increase over (fiscal year) ’08 but it probably won’t be as much as ’09’s was.”

The first quarter of the current year was down 3 percent.

“When we budget, as far as our city budget goes, we’re pretty conservative when we budget that coming in,” Ms. Kaeding said. “It probably won’t affect our budget because we hadn’t budgeted an increase. So we’ll keep a close eye on it but from what I’m hearing the indication is that it will be down for the second quarter.”

CR, Marion

Tim Boyle, executive director of the Cedar Rapids Area Convention and Visitors Bureau, noted some post-flood hotel occupants in 2008 were state and federal employees who are not required to pay local hotel/motel taxes.

Consequently, tax revenue allocations might not drop as much as expected, Mr. Boyle said.

Sue Vavroch, Cedar Rapids city treasurer, and Wes Nelson, Marion finance director, both said there are always more requests than money.

Ms. Vavroch said the hotel/motel tax revenue dropped 9 percent from fiscal 2009 to fiscal 2010.

Cedar Rapids allocations will be announced this month.
The city budgets about $2.5 million annually for allocations, she said.

That’s usually a low projection, so Mr. Boyle said he hopes that is the minimum amount, Mr. Boyle said.

Requests increased about $90,000 to $4.32 million in 2011, Ms. Vavroch said. Collections were about $3.37 million for fiscal 2010.

Debt commitments, the U.S. Cellular Center and the Museum of Art are primary allocation recipients, Ms. Vavroch said.

Marion revenue went up $26,373 in fiscal 2009 to $182,424, which ended June 30, Mr. Nelson said.

The city allocated $135,850 to organizations and projects include $5,000 to the Swamp Fox Festival and $10,000 to a new park, he said.

North Liberty

North Liberty only recently began collecting hotel/motel tax. North Liberty voters approved a 7 percent hotel/motel tax when the city’s first hotel, Sleep Inn was built in 2007.

“We just finished our first fiscal year, our first full fiscal year with it being in effect,” said Tracey Mulcahey, North Liberty’s assistant city administrator.

The state began paying the city the tax revenue too early and credited the difference during the second quarter of collections, she said.

“They started paying earlier than they were supposed to so we got a $29,000 payment the first time around,” she said. “Our second payment was only about $14,000 which should have been higher because they credited the overpayment they had made in the previous quarter.”

Because of the combined quarters and heavy traffic at the Sleep Inn due to the flood, it is difficult to track changes in revenue, she said.

“We just now have four quarters on the books so from here on out we should be able to see a trend. But it’s going to be kind of muddled with the first two payments being mingled,” she said. “For us it all looks good because we don’t have anything to compare it to.” CBJ

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