Biz Money: Pandemic’s effect on economy being felt in different ways
Various reports in recent weeks are showing the longer-term impact of COVID-19 on Maine’s economy.
The impact on retailers and restaurants has been apparent for some time, but now we’re getting a fuller sense of the loss of hotel tax revenue as well as the potential impact of colleges operating at reduced levels.
An analysis by the American Hotel & Lodging Association and Oxford Economics showed that Maine stands to lose $65.9 million from state and local tax coffers this year due to the impact of the COVID-19 crisis on hotel operations.
The sharp drop in travel caused by the pandemic will drastically reduce tax revenue from lodging, sales, gaming, personal income and corporate income, as well as taxes paid for unemployment insurance and other government programs.
That means Maine could be short $40 million in lodging taxes that would typically have been incurred, and will also lose out on an estimated $16.8 million from legalized gambling proceeds.
The figures do not include the property taxes generated by hotels.
Nationally, the hotel industry directly generated nearly $40 billion in state and local tax revenue across the country in 2018. But the pandemic and resulting public health restrictions have led many lodging establishments to close at least temporarily, and forced many guests to cancel bookings.
“With the impact to the travel sector nine times worse than 9/11, hotels need support to keep our doors open and retain employees as we work toward recovery,” said Chip Rogers, president and CEO of the American Hotel & Lodging Association.
The downturn has spurred a group of Maine’s tourism and hospitality businesses to propose an emergency plan for the industry, to be paid for with $800 million from the state’s federal funding from the CARES Act.
‘Town-and-gown’ impact
Another area of concern for the economy will be a decline in spending related to college campuses.
The latest school to announce restrictions was Bowdoin College, which has 1,830 students and is a mainstay for Brunswick’s economy. On June 22, it said it would welcome first-year students and transfers, but most sophomores, juniors and seniors will study remotely. Most classes will be offered online.
Maine’s 38 colleges and universities have 72,600 students and 20,000 employees, including student workers. The schools have an estimated economic impact of $4.5 billion, including the multiplier effect of spending by students, employees and visitors to the state, according to the University of Maine System.
Bowdoin, a private liberal arts college, attracts students from around the world. Last year, its tuition was $55,822, with room and board and other fees bringing the total to $73,800 for the academic year. This semester, on-campus students will pay $33,935, while off-campus students will pay a fee of $27,911.
Bowdoin, which announced its plans in a letter from President Clayton Rose posted on its website, expects to have “a substantial budget deficit this next year, likely the largest we have ever had by a significant margin,” he wrote.
Bowdoin does not plan staff furloughs. As part of cost-cutting procedures, senior officers will see a 10% reduction in salary; Rose himself took a 20% cut, he said. Contributions to the retirement fund were cut by 50% for next year. Hourly workers will see a “modest increase” in wages, with the college honoring its commitment to increase the minimum wage to $14, he said.
Bowdoin had an endowment of $1.74 billion as of June 30, 2019, though Rose did not indicate whether that would be used.
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