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    Drop in Johnson County hotel stays crimps city budgets

    Hiring freeze, vacant positions result from enduring pandemic

    Think Iowa City President Josh Schamberger is photographed Thursday on the roof of the Xtream Arena in the Iowa River La
    Think Iowa City President Josh Schamberger is photographed Thursday on the roof of the Xtream Arena in the Iowa River Landing in Coralville. Local organizations — including his — face a steep loss of revenue from hotel-motel taxes due to a lack of hotel stays and nonexistent conference and events calendars since the pandemic began. (Rebecca F. Miller/The Gazette)
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    CORALVILLE — FRYfest — a celebration of all things Hawkeye — should have been last week in Coralville, drawing thousands of fans to the annual block party, trade show and pep rally.

    The COVID-19 pandemic led Think Iowa City — the area’s convention and visitors bureau — to cancel the event for this year. However, due to the ongoing loss of hotel-motel tax revenue — which partially goes to fund Think Iowa City and makes events like FRYfest, the UCI Cyclocross World Cup and Olympic wrestling trials — it’s not out of the question that Think Iowa City and those high-profile events could become things of the past.

    “We’ve been good financial stewards,” said Think Iowa City President Josh Schamberger. “We can take a pretty good gut punch for six months. A decent gut punch for a year. After that, it’s not unthinkable for there not to be an organization like ours.”

    Many communities across Iowa get part of their revenue by imposing a tax on hotel and motel stays. Passed by local ordinances, those taxes have been in place in Iowa City and Coralville since 1979 and in North Liberty since 2008.

    The 7 percent tax has a different financial impact on each city, but the funds are distributed in similar ways — with each of the cities contributing funds to Think Iowa City, parks and recreation programs and other expenses.

    Each community is being forced to respond to the loss of that revenue as travel has fallen off during the pandemic.

    “It has been huge ... huge,” said Schamberger.

    The Iowa City area had been on pace for a record year for hotel and motel occupancy rates and demand. “And then the bottom fell out,” said Schamberger.

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    In April, occupancy rates hovered around 20 percent, when typically they should have been around 65 to 68 percent. They’ve climbed somewhat since then. The month of July closed with 46 percent occupancy instead of the normal 72 or 73 percent for the month. After the Aug. 10 derecho, occupancy soared to 100 percent for about two weeks — but that’s not how anyone wants business to pick up, Schamberger said.

    Now, city leaders are trying to gaze into their crystal balls, making predictions in unpredictable times and chart a path forward.

    “You just don’t know what to plan for,” said Iowa City Finance Director Dennis Bockenstedt.

    Coralville City Administrator Kelly Hayworth said a combination of factors usually drive hotel occupancy in the area, including conferences, interstate travel and the University of Iowa with its football games, parents weekend and graduation, for instance.

    “Those are big weekends for us,” said Hayworth.

    Since the 1950s and 60s, Coralville has made its name as the “hub of hospitality” and the hotel business has been a large part of the city’s economy for decades.

    Despite being Iowa’s 24th largest community, it outpaces nearly every other city in the state in terms of hotel-motel tax revenue. According to an Iowa Department of Revenue summary, Coralville brought in $2.7 million in hotel-motel tax revenue, outpacing larger cities like Davenport, Iowa City, Dubuque and Sioux City.

    Hayworth said hotel-motel tax is one of the city’s top revenue sources. Most of it goes into the general fund and supports parks and recreation, the police department and other programs impacted by visitors to the community. Think Iowa City gets $$565,000 each year.

    With lower hotel occupancy, the city is anticipating a $1.8 million shortfall in hotel-motel tax revenue for fiscal 2021, the current budget year. At the end of August, Coralville received a quarterly hotel-motel tax payment for $464,000, down from $655,000 the year before.

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    “That was not in our prime months,” Hayworth said. “Our prime months are over the summertime and then obviously football season in the fall is huge. We think losses in those quarters will be even greater.”

    In response to that and other financial impacts, Coralville has instituted a hiring freeze, furloughed three quarters of the staff at the Coralville Center for the Performing Arts through the summer and eliminated three full-time positions in library, custodial and recreation services. Three full-time and one permanent part-time position in inspections, engineering, public safety and the building department have been lost to attrition.

    “They weren’t fun and they weren’t pleasant, but we didn’t have much of a choice,” Hayworth said of the cuts, which also include reduced hours at some parks and recreation facilities. “We wanted to make sure we were doing what was necessary to cover those revenue losses.”

    In Iowa City, hotel-motel tax revenue was about $1.3 million in fiscal 2019. The city sends 25 percent of those funds to Think Iowa City and the rest goes into the city budget, with 15 percent going to Mercer Pool, 12.5 percent going to Scanlon Gym and 47.5 percent going to the police department.

    Iowa City is projecting a $350,000 shortfall in revenue during the first half of fiscal 2021, Bockenstedt said.

    “Right now, we’re trying to estimate or guess a worse-case scenario as far as what could happen,” he said. “I don’t think anybody knows for sure what is going to happen. ... We don’t really have anything to go off of.”

    For now, several open police officer positions are going unfilled. Hiring for new positions in forestry, parking and transit and maintenance will be delayed and “many” seasonal parks and recreation positions are going unfilled as well, Bockenstedt said.

    In North Liberty, however, only $75,000 was budgeted in fiscal 2021 for hotel-motel tax revenue, said North Liberty Communications Director Nick Bergus.

    “Obviously, this isn’t a big, big thing for us,” he said.

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    In North Liberty, hotel-motel tax revenue left after the 25 percent cut to Think Iowa City goes to “one-time” projects and isn’t part of an operational budget, Bergus said. That means some park projects schedule this year could be delayed or only partially completed.

    While the future for hotel-motel tax revenue is murky at best, Hayworth at least is hopeful that Think Iowa City will continue to exist — in some capacity.

    “It’s a quality-of-life issue,” he said. “I think they are in a position where they will exist. It’s just in what format and how big?”

    Comments: (319) 339-3155; lee.hermiston@thegazette.com

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