CORONAVIRUS

Marion anticipates budget impact of the coronavirus

Decreases expected in sales, road-use and hotel-motel taxes

Although it was a little soggy on May 18, 2019, the usual large crowd showed up for the Marion Arts Festival. The festiv
Although it was a little soggy on May 18, 2019, the usual large crowd showed up for the Marion Arts Festival. The festival was canceled this year because of coronavirus concerns. The Marion city manager this week talked about the uncertainties the virus has brought to city spending plans for fiscal 2021. (The Gazette)

MARION — The city of Marion is preparing for coronavirus to have an impact on its budget for fiscal 2021.

Decreased revenue, for example, is expected in at least three funds — local-option sales tax, the hotel-motel tax and state road-use tax.

The city may have to adapt by delaying projects or “lopping off a program,” City Manager Lon Pluckhahn said.

Pluckhahn estimates a 10 percent to 20 percent drop in local-option sales tax collections — $300,000 to $600,000 in six months.

The tax was projected to bring in $5.15 million in fiscal 2021, up from $4.75 million for fiscal year 2020.

“We really don’t know if consumer spending has completely gone away or if it has just shifted from bricks and mortar to online,” Pluckhahn said.

Most online purchases in Iowa now must collect sales tax, but the coronavirus impact on consumer purchases is not yet known..

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Pluckhahn foresees up to a 50 percent drop in road-use tax revenues, which are collected on gasoline purchases and motor vehicle registrations and title fees.

That means a cut of $600,000 to $1.2 million in the next six months — money the city has to spend on streets.

The city has budgeted $4.75 million in road-use tax income for the coming fiscal year.

“We expect this one could be a little bit more severe,” Pluckhahn said. “How long will the economy run at half strength? How long will it take to recover until we can start to come back to historic levels?”

Pluckhahn also expects to see a significant decline in hotel-motel tax revenue.

While a new hotel is opening at Squaw Creek Crossing, the city was conservative in estimating it would receive $205,000 in hotel-motel taxes in the new fiscal year, he said.

He expects the reality will be 25 percent to 50 percent less than that.

The hotel-motel tax helps fund local events, but many of them — like the Marion Arts Festival — have been canceled or delayed, Pluckhahn said.

The city, he said, has a “robust reserve policy,” which gives it “breathing room” to respond to the drops in revenue.

One of the best ways to “jump start” the economy after the pandemic, Pluckhahn said, will be through construction projects.

“The more shovel-ready the project, the easier the case will be to make,” he said. “My favorite target would be the library. I don’t think there’s anything we have that would be more shovel ready than that.”

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All Iowa cities share Marion’s concerns about revenues in the coming fiscal year, which starts July 1. But every city has had to approve fiscal 2021 budgets, knowing they may well be revised as the economic impact of coronavirus closings — and federal and state aid — becomes known.

The city of Cedar Rapids approved a $637 million budget this week for fiscal 2021 and discussed the possibility of having to revise the spending plan, depending on tax revenues and how much recovery money might be in the offing.

Comments: (319) 368-8664; grace.king@thegazette.com

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