Cedar Rapids assesses changes to hotel and motel tax revenue allocations to nonprofits

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Cedar Rapids Town Hall is pictured on Wednesday, December 2, 2020 (Andy Abeyta / The Gazette)

CEDAR RAPIDS – Changes at the city’s request for nonprofits seeking a share of Cedar Rapids hotel and motel tax revenue are expected to come before the 2023 budget year.

Cedar Rapids City Council’s Finance and Administrative Services Committee has been in talks over the past few months with city staff about changing the app for nonprofits looking to tap into a part of the tax revenue the city derives from overnight guests.

After the revenue stream was hit in 2020 with the COVID-19 pandemic disrupting travel, the potential changes in the allocation process are a recognition of how quickly unforeseen events can wreak havoc on a budget. organization and would aim to accommodate unexpected changes.

“It makes you think,” said Scott Olson, a board member, who sits on the finance committee. “We want to look at all organizations and make sure they’re financially viable and can handle surprises like this. “

Faced with budget uncertainty with hotel closures and travel stoppages, the city in 2020 suspended these payments to nonprofits for fiscal year 2021 – the fiscal year that began on July 1, 2020. and ended on Wednesday June 30.

City finance director Casey Drew sent a letter to organizations telling them future allocations would eventually be discussed based on actual revenues for that fiscal year.

Cedar Rapids fulfilled its obligations for fiscal 2020, the fiscal year that ended on June 30, 2020 – a few months after the start of the pandemic. At the time, the city-owned DoubleTree by Hilton hotel, the largest contributor to Cedar Rapids hotel and motel revenue, was days away from reopening on July 9 after closing in March due to the COVID-19 pandemic.

Over the past few years, the council has been able to allocate over $ 1 million per year to local nonprofits. Cedar Rapids distributed $ 1.2 million to 23 nonprofits in fiscal 2019, the fiscal year that ended June 30, 2019; and an additional $ 1.465 million to 22 Cedar Rapids organizations in fiscal 2020.

Prior to the pandemic, Drew said the city budgeted $ 3.8 million in tax revenue for hotels and motels for fiscal 2021 and was $ 1 million short, at $ 2.8 million. Not all of this income is distributed to non-profit organizations.

For fiscal 2022, council approved in June the allocation of $ 3 million to the city’s commitments. This includes nearly $ 1.1 million to cover debt payments, $ 750,000 for the Cedar Rapids tourist office, $ 702,500 for the ImOn arena and an existing contribution of $ 100,000 per year to Prospect Meadows under a 10-year agreement.

The Tourist Board – the tourist office that VenuWorks has managed since the fallout from the city’s ‘newbo evolve’ music festival in 2018 – is “really the group that generates the most heads and beds for hotel-motels. “said Drew.

“We want to make sure there is funding so that they can continue to go out there and fulfill their mission of getting people to Cedar Rapids to spend money at Cedar Rapids,” Drew said. .

But it’s too early to tell if the number of overnight guests is returning to pre-pandemic levels or if it will take some time to increase.

“The hope is that we will reach pre-COVID levels faster, but it’s unclear at this point,” Drew said.

While some uncertainty remains as to the source of revenue, the finance committee discussed allocating tax revenue in two-year cycles instead of the current three-year cycle to allow more flexibility in light of the pandemic and derecho.

The board may also seek to cap allocations at no more than 10 percent of an organization’s budget, since tax revenues are not intended to fund the day-to-day operations of a group.

“We anticipate that this change will make a bit more transparent which organizations can claim tax distributions from hotels and motels, and at the same time encourage nonprofits not to depend on them,” said Scott Overland, board member. , chairman of the finance committee. .

But the changes to the app aren’t final yet. They would come to another finance committee review before heading to full council, which Drew said could take place in September.

Once ready, Drew said the request will be posted online and sent to leaders of nonprofits.

“It will be important to start to see convention activity and other events start to return to the city as we move away from the brunt of the pandemic,” Overland said. “So we hope that if we are sitting here in a year, that there will be a significant recovery in the hotel-motel (revenues), but time will tell.

Board member Ann Poe, a member of the finance committee, said board members have discovered how flexible many nonprofits are to recoup some of the funding lost during the pandemic. Nonprofits have applied for grants and forgivable loans from the federal paycheck protection program, in addition to reorganizing operations to keep the money flowing.

Poe said she anticipates that these groups in the future will continue to be nimble in the way they bring members to their organizations, fund their operations or their events.

“It’s our grassroots organizations that really bring people to the center of our community,” said Poe. “… We certainly appreciate and appreciate what they bring to our community and to the quality of life in our community, so I think we will constantly be looking for opportunities to help these non-profit organizations.” “

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