As business activity and travel begins to resume in Springfield, the city and local agencies are still grappling with the financial impact of the coronavirus pandemic.
After hitting “rock bottom” hotel occupancy numbers during the spring, city officials predict hotel/motel tax collections will reduce by half year-over-year.
Collections of the hotel/motel tax, which is a 5% levy on gross rental receipts, goes toward marketing Springfield and city debt payments, said David Holtmann, the city’s finance director.
The Springfield Convention & Visitors Bureau Inc. is the hardest hit agency, annually banking on nearly half of the tax monies. It’s resulting in major budget cuts.
CVB President Tracy Kimberlin said about $2 million of its $3.1 million proposed budget for the upcoming fiscal year, which begins July 1, will come from the hotel/motel tax, down from this year’s initial budget of over $4 million. Kimberlin presented the fiscal 2021 budget to the Springfield City Council on June 15, and it will be up for vote June 29.
His projections are slightly higher than the city’s because he said the brunt of the financial impact was felt this fiscal year, and with already rising occupancy figures, the tax collections will improve moving forward.
“It’s rebounding, and we’ll be building up to close to what the hotel tax used to be by next spring,” he said. “We’re not going to be down 50% for a 12-month period. We’ve already suffered through the worst of it.
“We’ve seen the bottom. The bottom is about 20% occupancy, and hopefully, we don’t see that again.”
Room sales were down over $20 million from March through May 30, according to data provided by Kimberlin. That’s equal to a $1 million loss in hotel/motel tax revenue and a $427,000 hit to the CVB budget over the last three months.
Kimberlin said the CVB had a healthy reserve headed into the pandemic and have made budget adjustments, such as cutting all advertising expenditures, laying off part-time employees, delaying new hires and freezing salaries. He said the advertising cuts saved roughly $750,000, while payroll cost-saving measures added up to roughly $100,000.
“We’re working right now on trying to prepare marketing plans for the recovery and we want to hit the ground running as soon as the time is right,” he said.
The CVB doesn’t qualify for the federal coronavirus relief funds because it’s a 501(c)6 organization. However, he’s on the lookout for grants to help.
“We’re looking under every rock for everything we can either save or grab to, hopefully, have a good marketing budget next spring,” he said.
The remainder of the hotel/motel tax is broken down to allocate 47% toward debt service on Jordan Valley Park projects, city capital grants and debt; 3% toward the Springfield Sports Commission; and 2% to the Springfield Regional Arts Council. The remaining 1% is used for miscellaneous debt service, Holtmann said.
He’s anticipating the tax will generate roughly $3 million for the upcoming fiscal year – a 50% hit on top of the impact felt this year. This year’s tax collections were projected to reach $5.6 million.
“We’ve seen a significant decrease in that revenue, and we anticipate for the current year we’re getting ready to close out, we’ll be down 26% from what we anticipated,” he said.
City Council approved the city’s fiscal 2021 budget during the June 15 meeting, which outlined projected cuts to the tax collections.
Kimberlin said he doesn’t agree with the city’s projections for fiscal 2021.
“There’s a huge drop in tax, there’s no question about that, but we’ve already incurred it,” he said. “I don’t think it will be as bad as what they’re thinking for next year because we’ve already lost a chunk of it.”
Holtmann and Kimberlin agreed the projections could change, noting the pandemic impact is spanning both fiscal years.
If the hotel/motel tax collections are higher than anticipated, a budget revision would need to be approved by City Council so that the agencies can use the extra funds, said Holtmann.
“It’s everybody’s best guess,” said Kimberlin. “If we have another shutdown, all bets are off.”
The Springfield Regional Arts Council’s share of the hotel/motel tax is usually 18%, or roughly $81,000, of its $450,000 annual revenue, but in fiscal 2021, officials are anticipating only $29,000 from the tax, said Nicole Chilton, SRAC’s marketing and development director.
The SRAC uses the money to promote the arts and manage The Creamery Arts Center, she said. Council is also anticipated to vote on SRAC’s budget proposal June 29. The SRAC also experienced $60,000 in losses this fiscal year, including the drop of tax revenues and the cancellation of Artsfest in May.
The annual art festival, which generates 30% of SRAC’s revenue, is scheduled for September as a combined event with Cider Days, Chilton said.
“We’re in the process of figuring that out and planning it,” she said. “It may look different this year, and then hopefully, again in May be back on track with its normal programming.”
The SRAC also has cut expenses, such as planned travel and advertising spends, but Chilton said it hasn’t had to lay off staff.
Factoring the cuts and revenue from two potential events in fiscal 2021, Chilton said the SRAC has minimized next year’s revenue losses to $25,000.
“We’ve been very fortunate that the leadership for the arts council had endowments and savings in place. We’re looking at a budget cut this year for sure, but it won’t be anything that will break us because of our savings,” Chilton said.
At the Springfield Sports Commission, Executive Director Lance Kettering said his budget is set to drop by about $100,000 for the upcoming fiscal year, which is one-third of the commission’s typical budget.
He said 40% of that dip is from hotel/motel tax losses.
Sporting events also have been canceled in upcoming months and he’s beginning to see a reduction in out of town travel. If approved by City Council at the upcoming meeting, the Sports Commission is set to receive nearly $44,000 from the tax – down from a projected $88,000 for the current fiscal year, according to city documents.
Kettering’s unsure when the sports scene will return, adding many people are opting to stay closer to home right now amid the COVID-19 pandemic.
“The challenge of some of the sporting events is that they can’t be rebooked,” he said. “We don’t have a huge budget, so every dollar we get is important.”
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