November 14, 2020
By Mallory Herrmann
The city council will consider implementing a minimum reserve fund requirement for the city’s business and industry fund, more commonly known as the hotel/motel or bed tax.
The fund, which has historically netted a fairly substantial reserve balance, is seeing stress in the wake of the COVID-19 pandemic. With the county’s March 24 stay-at-home order and subsequent distancing mandates, the fund had a 74.30% decrease in May from the two-year average.
While it has improved since then – October revenues were down 32.76% compared to the two-year average – there is concern about what the winter will bring as coronavirus cases continue to rise.
Chris Clubine, management analyst, presented the data to the city council’s finance and budget committee this week. He explained that the initial forecast for the city’s fiscal year 2021 numbers assumed a 60% decrease for the first quarter (July to September) and a 25% decrease for the remaining three quarters (October 2020 to June 2021).
But the recovery from COVID-19 has been slower than anticipated and there are not enough funds available to provide an additional six months of expenditures for the city’s public service agreements paid out of the business and industry fund. These include contributions to Downtown Mainstreet Inc, the Lee’s Summit Economic Development Council, the Lee’s Summit Chamber of Commerce, the Lee’s Summit Chamber Marketing PSA, and Velocity Lee’s Summit. The PSA expenditures total $306,722 for a six-month period.
Steve Arbo, city manager, explained that the fund had often carried a surplus in the past, which prompted the city council to recommend spending down some of that reserve by paying for the PSAs out of the business and industry tax rather than the city’s general fund. Because the PSAs help promote the city as a destination, it was deemed an appropriate use of the revenues generated by the city’s hotels and motels.
But now that the industry has been hit hard by the pandemic, the council will need to ensure the fund doesn’t run dry.
“We’re somewhat caught with our pants down a little bit, as a city,” Mayor Pro Tem Beto Lopez said, advocating for a minimum reserve.
Councilmember Andrew Felker agreed, suggesting that with an unpredictable fiscal year ahead, having a reserve is the responsible move to make.
Arbo requested direction from the committee before city staff begins discussing a new spending plan with the PSA organizations. The committee discussed imposing a reserve balance minimum of $40,000 or $50,000 to ensure future expenditures can be covered, though no formal action was taken.
Councilmembers Felker, Diane Forte and Bob Johnson were present in council chambers for the Nov. 9 meeting. Lopez attended via teleconference.