Cedar Rapids nonprofits struggle with financial planning - InfoNews

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Cedar Rapids nonprofits struggle with financial planning

August 21, 2020 - 10:02 PM

CEDAR RAPIDS, Iowa - Staff and trustees at the Brucemore historic estate had just approved a budget for the 2021 fiscal year in March when COVID-19 disrupted business as usual, throwing a wrench in the organization’s financial planning.

While closing the 26-acre historic site to visitors, Dave Janssen, executive director of Brucemore, said the not-for-profit organization scrambled to revisit the just-approved budget, which is on a cycle that started April 1. But much about the pandemic remained a mystery at that point — especially its true financial impact and whether the coronavirus’ spread would persist.

The team “did a pretty brutal reassessment of what we thought our revenue would be going into the spring and summer,” one of its biggest revenue-generating seasons, Janssen said.

As the financial outlook grew shaky, Cedar Rapids non-profit leaders like Janssen wondered: Would they also lose their share of hotel-motel tax revenue, usually millions of dollars the city reaps from overnight guests to help attractions and tourism draws?

The pandemic has put the budgets of many Cedar Rapids nonprofits in flux, according to Gazette interviews with leaders of local organizations, leaving them to grapple with the question of how to flourish — or simply survive — amid a future filled with unknowns.

About six weeks after the pandemic forced extended closures of Iowa businesses under Gov. Kim Reynolds’ directive, non-profit leaders received a letter from city Finance Director Casey Drew addressing the emerging financial woes.

While the City Council would fulfil its fourth-quarter allocations for the 2020 budget year ending June 30, Drew wrote in the April 27 letter, financial uncertainty loomed as COVID-19 continued to spread across the United States.

Projections showed a sharp drop in hotel-motel tax revenue through the end of fiscal 2020 and a continuation into the 2021 budget year that began July 1, he said.

“The City has funded recipients such as yourself with hotel motel tax revenue using the revenue collected during the fiscal year once long term commitments have been made,” Drew wrote. “We encourage you to greatly reduce expectations for fiscal year 2021 hotel motel tax allocations. The City Council will discuss allocations in the future based on actual hotel motel tax revenue collections during fiscal year 2021.”

Non-profit leaders say the likelihood of diminished hotel-motel funds is a disruption they saw coming as travel came to nearly a halt for months across the country in an effort to curb an uptick in COVID-19 cases.

The city-owned DoubleTree by Hilton hotel, the largest contributor to Cedar Rapids’ hotel-motel revenue stream, opened again only on July 9 after closing in March. In recent years, the council distributed $1.2 million to 23 nonprofits in fiscal 2019, the budget year that ended June 30, 2019; and another $1.465 million to 22 Cedar Rapids organizations in a competitive three-year grant application process in fiscal 2020.

“We recognize that local nonprofits are trying to make financial decisions, and we’ve made efforts to be upfront with them on the funding picture,” Drew told The Gazette.

This revenue stream is only a portion of the funds that help Cedar Rapids’ nonprofits fulfil their missions, which the organizations’ leaders say helps fuel the local economy by attracting people to stay in the area and enjoy a sample of the entertainment and cultural offerings.

But “it’s not just looking at hotel-motel tax in isolation,” said Janssen, whose organization received $50,000 from it in fiscal 2020, less than 5 per cent of Brucemore’s annual budget that exceeds $1 million.

With live performances, organizations are seeing less revenue from ticket sales to events, as it’s unsafe for people to gather in large groups.

Job losses also have tightened usual donors’ pocketbooks. And endowment funds took a hit when the stock market tumbled at the onset of the pandemic.

Without that money, Janssen and other non-profit leaders said they would have to find other ways to offer their programming and look to other funding sources.

They said they’re filling those gaps largely through grants and Payroll Protection Program loans awarded through the federal Coronavirus, Aid, Relief and Economic Security Act.

The American Association of the Arts surveyed arts and cultural organizations across the United States, and 29 Cedar Rapids organizations that responded reported a $4.5 million financial toll, making this the “most substantial threat” leaders in the non-profit sector have faced in a generation, Janssen said.

“It’s looking at it as one of the many sources of revenue that we have to cultivate to stay healthy as a sector,” Janssen said, “and this crisis is hitting us all across the board.”

While most organizations whose leaders spoke with The Gazette essentially said their hotel-motel tax funds were just one drop in a much larger budget bucket, that’s not the case for Hawkeye Downs, Executive Director Jenn Draper said.

Taking in $150,000 from the revenue source in fiscal 2020,

Draper said hotel-motel allocations have typically made up about 60 per cent of the non-profit’s budget. Hawkeye Downs took in $150,000 from the revenue source in fiscal 2020, though it’s a bit less now after the organization sold its building. Seeing those funds diminish more would require changes to staffing and the overall ways the venue offers experiences to people, she said.

“It’s critical to our operating expenses, so for us that’s going to affect bottom line,” she said.

With much of the venue’s activities already outdoors, she said Hawkeye Downs has at least been able to earn revenue from racing, though events have come to a halt for now after the facility sustained damage in Monday’s storm.

Some other local organizations have tried to reinvent themselves during an unprecedented public health crisis without earning revenue from ticket sales, shifting focus to offer virtual programming to engage with the community.

As the spring closures dragged on, it became clear that Indian Creek Nature Center “really needed to start to take a look at some systemic changes” to rethink how to deliver its educational mission, Executive Director John Myers said.

“Several times throughout our history, we’ve had to go into a reinvention,” most recently after the 2008 flood, Myers said of the non-profit, which received $39,500 in fiscal 2020 hotel-motel tax allocations. “ … Even though we have historically been a recipient of hotel-motel funding, every time we’re forced to change, we end up better and stronger on the other side of it.”

Orchestra Iowa has been doing online weekly conversations with Maestro Timothy Hankewich to continue to stay in tune with the community, Chief Executive Officer Jeff Collier said. Viewers can grab a drink from their homes and get ready to chat during the virtual happy hour.

Organizations have now turned to social distancing, mask-wearing and hand-sanitizing protocols to bring people back for events safely, but the revamped procedures to operate do not signal a full return to normal anytime soon.

Collier said his organization, which received $40,000 in fiscal 2020 hotel-motel tax allocations, is working through plans for its fall season. The question of safety remains as his staff weighs whether to offer in-person events.

“The ability to make contingency after contingency is consistently compromised every day and there’s a new bit of information or new bit of news out there that changes exactly what you made plans on the day before,” Collier said.

The African American Museum of Iowa, a recipient of $42,000 in fiscal 2020 hotel-motel tax allocations, has also turned to virtual programming while scaling back some of the costs associated with exhibits, said Executive Director LaNisha Cassell.

The summer’s racial injustice protests, after the May 25 killing of George Floyd in Minneapolis police custody, brought some spotlight to the museum’s mission of fostering a greater understanding of Black history and culture.

“I think people are a little bit more awakened to of course what has been happening for years and years and years in terms of social justice, so now they’re realizing the truth, and that’s what the museum is here for,” Cassell said.

Some people have reached out seeking resources or hoping to collaborate on programming. Others have inquired about how to contribute financially, Cassell said.

But in terms of the outlook on funding support from the city, she said she treats hotel-motel funds like any grant money: “Every year is always a gamble.”

The budget line Cedar Rapids nonprofits typically fill with hotel-motel tax allocations remains inked with “zero” for many organizations as executive directors plan for the worst but hope for the best.

“Not knowing whether there would be any money coming our way, I did not want to budget for it and then have it come up at zero,” said Sean Ulmer, executive director of the Cedar Rapids Museum of Art, which received $41,500 in fiscal 2020 hotel-motel tax allocations. “I’d rather budget at zero and see if it can’t come up to what it normally is.”

Jason Wright, the executive director of The History Center, said that while losing any funding source will pose a challenge, the collaborative spirit of Cedar Rapids nonprofits will help navigate the financial hurdles brought on by the pandemic.

“This community has proved time and time again its generosity … to each and every one of these nonprofits that make this town such an amazing place to live,” Wright said.

There’s a demonstrated economic benefit to all Cedar Rapids residents, Janssen said, whether they visit museums or not. He said the livelihood of not only these organizations, but of the city itself, depends on the nonprofits’ ability to stay in business.

“I’m confident that an organization like Brucemore will survive it, but the question is for all of us, at what cost?” Janssen said. “What will we have to trim from the organization to survive rather than thrive?”

News from © The Associated Press, 2020
The Associated Press

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