Local Government

Cedar Rapids sets hotel/motel tax allocation for next three years

Pot of money from tax is growing, officials say

The  U.S. Cellular Arena and the new U.S. Cellular Convention Center attached to the DoubleTree by Hilton Hotel Friday, June 7, 2013 in downtown Cedar Rapids. (Gazette file photo)
The U.S. Cellular Arena and the new U.S. Cellular Convention Center attached to the DoubleTree by Hilton Hotel Friday, June 7, 2013 in downtown Cedar Rapids. (Gazette file photo)

CEDAR RAPIDS — In early 2010, just-elected Mayor Ron Corbett convened members of the local arts and cultural community to warn them that their accustomed piece of the revenue from the city’s hotel/motel tax might start to dry up.

The city, he said then, would need much of the money to help pay for the city’s share of the cost of the new convention center and renovation of its hotel and arena.

Terry Pitts, then-executive director of the Museum of Art, wasn’t happy. He said the city’s cultural organizations are always the first place people look to cut at times of funding challenges, and “now city government is doing the same thing,” Pitts said.

The sky, though, didn’t fall.

The City Council now has approved a resolution that makes a new three-year commitment of revenue from the hotel/motel tax that will continue to support the same list of community organizations at the same level as it has the previous three years.

At the same time, a portion of the revenue will continue to be used to pay debt on city projects — the hotel, the convention center, the convention center parking ramp and the Ice Arena.

Casey Drew, the city’s finance director, said the revenue from the hotel/motel tax that the city’s hotel and its convention center generates each year is nearly equivalent to the revenue from the tax that is paying off debt for the hotel and convention center projects.

“It’s about a wash,” Drew said.

At the same time, he said the pot of hotel/motel tax revenue is growing.

In the fiscal year that ended June 30, the tax — 7 percent on hotel/motel bills — was expected to generate $3.144 million for the year. In the new fiscal year, the tax is expected to increase to $3.358 million, Drew said.

Corbett said one significant change in the distribution of revenue in each of the next three years is an increase in the amount that is going to the recipient that long has gotten the biggest share — the Cedar Rapids Area Convention and Visitors Bureau.

The bureau had received $775,000 in the last three years, and it now will get $1 million a year for the next three years.

Corbett said the extra funding for the CVB is intended to help the organization better sell the city to the region as it continues to work to lure conventions to the city.

“We’re also going to market Cedar Rapids for that day visit or weekend visit from around Eastern Iowa, and we’re going to promote events in the city,” the mayor said. “That’s kind of something that’s fallen through the cracks a little bit.”

The $3.358 million pot is split evenly between “primary” spending, much of which is debt payments for city projects, and commitments to community groups, with the CVB getting a majority of the funds in the second category.

The only new recipient is the NewBo City Market, which Corbett said has become a principal attraction in the city. It will get $35,000 a year.

Corbett said the city continues to be able to offer some basic support from the hotel/motel tax for the arts and cultural community even as it uses some of the revenue to support the city’s investment in its entertainment facilities and hotel.

“We knew back in 2010 that we were going to have to carve off part of the hotel/motel tax for the convention center and hotel and arena,” he said. “We knew we were taking a big bite. But we didn’t want the arts and cultural organizations to take the brunt of that decision.”

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The city has used revenue from the hotel/motel tax over the years to pay off debt on certain building projects, the Museum of Art and the city’s Ice Arena as two cases in point.

In the new allocation, $289,330 will be used to continue to pay debt for the construction of the city’s Ice Arena back in 1999 and 2000. The debt will be paid off in 2019. Another $100,000 will go to repay the city for a loan it made to the arena project. The loan will be repaid in 2017.

In the allocations newly approved by the City Council:

An annual debt payment from hotel/motel revenue to the city’s event center (convention center) is $250,000 and will run through 2021; a debt payment of $450,000 a year is going for the hotel renovation and will continue through 2034; an annual payment of $110,355 through 2032 for the convention center parking ramp; and a $92,240 annual payment through 2032 for the construction of an enclosed exit stairway at The Roosevelt. The stairway was needed when a parking ramp next door was demolished to make way for the convention center.

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