City prepping for 20% drop in hotel/motel tax revenues

The city is seeing a reduced amount of revenue coming in from the hotel/motel tax from city hotels, like the Boulders Inn & Suites above, and is taking steps to soften the blow. Photo by Chuck Vandenberg/PCC


FORT MADISON – Hotel and motel revenues in the city have taken a dip in the past year, but city officials are trying to react early to head off any budget crunches for organizations counting on those funds to bring people into Fort Madison.

According to Fort Madison City Manager David Varley, the city is down about 19% for the first three quarters of the fiscal year, which ends June 30.

“If things continue about the way they are, it would be about $30,000 to $40,000 maximum hit this year compared to last year,” Varley said.

The hotel/motel tax funds are a 9% fee paid by visitors who stay in the city’s hotels and motels. A portion of the funds is then allocated by the tourism board annually to the Fort Madison Area Artists Association and North Lee County Historical Society with final approval coming from the City Council. The FMAAA gets a 7.5% share of the funds currently capped at $14,000, while NLCHS is at 6% capped at $12,000.


Another portion of those revenues are used to fund Fort Madison Tourism Director Jean Peiton’s $35,000 budget. Peiton currently works in a part-time capacity marketing the city throughout the region.

The rest of the funds are controlled by the tourism board and given on an as-qualified basis to independent groups in the city putting on events that bring people into town, such as the rejuvenated RiverFest, past fishing tournaments, and other hyper-local tourism events.

Varley said it was hard to come up with a reason why the revenues are slipping because he doesn’t receive data from the city’s hotels, however he did point to the end of construction of the Iowa Fertilizer Plant, which buoyed hotel/motel revenues significantly during the construction years.

He said this year city staff had preliminarily budgeted $220,000 for those revenues. But when the final budget was adopted that figure was reduced to $213,000.

“It’s stupid to keep something on the books if you don’t think you’re gonna get it,” Varley said.

Fort Madison Mayor Brad Randolph indicated during the budget meetings that the city may be looking at losing 20 to 25% of hotel/motel revenues off trends of other area cities.

Varley said that Burlington is experiencing the same type of revenue decreases. However, he said Fort Madison’s revenues for the past quarter were closer to previous year’s receipts.

“We’re hoping we make that up. Last quarter wasn’t as bad as the first two,” he said. “You just never know. We won’t get the next quarter until June 15. We did drop the numbers down, but I think we’ll still come in below what we dropped it to. We trying to start now to prepare for that.”

He said the FMAAA and NLCHS should still be able to get the max funds the city council approved for next year, but going forward there may be some adjustments.

“I don’t think it will have a big impact on them right away, but going forward, does the tourism board want to make any changes and reduce that? Because if it’s being reduced, there is less money going around, and should everyone share in the pain,” he said.

“That’s up to them and the council because the council determines how much they get to to spend. My guess is they will have a discussion and talk about changing levels. But that won’t happen for a while.”

But he also said the city will be in a better position in the fund next year because this year a one time payment for the construction of the new Amtrak Depot platform…if and when that project is actually bidded out.

We’ve got money in there we’ve transferred out for construction of the platform. If Amtrak does go through, we spend that, and then that’s a one-time expense that won’t get transferred out next year. That’s going to free up that much more money, which is good news for the Hotel/Motel fund.

Varley said the dance between the city and the other parties in getting agreements inked continues. He said BNSF requested a change in one of the agreements, which he said will have to go back in front of the council for approval and then back to BNSF…and then to the other agencies involved.

“Amtrak has said once BNHS approves those changes, they will move very quickly to get approval. Then that will have to go to the Iowa DOT to get a firm date set for bid letting on the project,” he said.

“If I could give you a date on that, you’d be coming to me for advice on the stock market.”

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