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With Colleges Closed, College Towns Can't Pay Their Bills

When students went home in March, some college towns lost half their populations. Tax and utility revenues have dropped and those cities are still wondering what sort of economies they'll have in the fall.

 Iowa State University
The city of Ames, home of Iowa State University, has seen its unemployment quadruple and has lost millions in revenue when students departed in March.
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Last summer, the city council in Champaign, Ill., increased the local food and beverage tax for the first time in two decades. It was a substantial hike – jumping from 0.5 percent to 2.5 percent – and was expected to bring in $6 million to pay for more firefighters and school programs for at-risk kids.

The tax increase took effect on March 1. The University of Illinois – far and away Champaign’s largest employer – shut down in-person instruction on March 17. Business at bars and restaurants dried up immediately.

“All of that is gone,” says Champaign Mayor Deborah Frank Feinen. “None of our new programs or anticipated revenue are there.”

All cities are having budget problems, but college towns are confronting a unique set of challenges. In many cases, half or two-thirds of their population abruptly packed up and left, months ahead of their usual summer migration. “When the students went away for spring break, we waved goodbye but expected them to come back,” says Mayor Leeman Kessler of Gambier, Ohio, home of Kenyon College.

With more universities canceling in-person classes for the fall semester every day, there’s great uncertainty about how many students will actually return in the coming weeks, or how long they’ll be able to stay. “As of now, Indiana University is one of the universities that will hold, in part, face-to-face classes,” says Yaël Ksander, communications director for Bloomington Mayor John Hamilton. “But, yes, everyone is apprehensive about what the fall brings – and by fall, I mean three weeks from now with the return of students.”

Even where students are coming back, homecoming, football and other large events are mostly being canceled. On Wednesday, Clemson University announced it was starting the fall semester online, at least for the first month. The school’s athletic conference, the ACC, is still deciding whether to play a limited season. 

Clemson football games draw 80,000 fans, generating $2 million for the local economy per game. “We will be hit especially hard from the loss of accommodations tax,” says Susan Cohen, president of the Clemson Area Chamber of Commerce. “For the most part, businesses in and around town are geared to serve and attract the student population and fan base.”

For the cities themselves, sales tax revenues are down, utility fees have dropped and transit ridership has plummeted. “The city has already experienced a 30 percent reduction in revenue from our largest utility customer, which is the university,” says Greg McDanel, city manager of Maryville, Mo., home of Northwest Missouri State University.

Everyone is hoping that the fall semester will turn out better than the spring – that campuses will at least be able to stay open, even if they’re emptier and less lively. But if you’re running a college town, you’ve got a lot to worry about. “We’re not going to come out of this to any level of recovery in college towns for two to three years,” says Mayor Steve Patterson of Athens, which is home to Ohio University.

The Year Started So Well

Ames was on a roll back in February, before the coronavirus pandemic struck the nation. The home of Iowa State University boasted the lowest unemployment rate in the nation that month, at 1.7 percent. 

By the end of May, Ames' unemployment rate had quadrupled. Local hotels have already lost $9 million; two of them have closed. “The city’s electric utility lost $4.5 million, and water and sewer also had losses,” says Gloria Betcher, a member of the Ames city council. “Currently, a record number of Ames utility customers have unpaid bills.”

The bookstore that normally does a good business selling Ohio U. paraphernalia has already lost $800,000, Patterson says. The local hotel and retail sectors in Athens are seeing payroll reductions of 35 to 50 percent. “A lot of industry has built themselves around catering to a large student population,” Patterson says. “Two of our major hotels have already reported they have lost well over half a million dollars and are projecting another million, depending on the atmosphere heading into the fall semester.”

Like other company towns, college towns face the dreary prospect of watching their dominant employer at risk. Ohio University itself has announced three rounds of faculty and staff layoffs, a total of 250 jobs. Other universities are in much more trouble

There are other long-term concerns. Capital projects are being put on hold as universities, cities and utilities all shift funds to make up shortfalls. “We were just emerging from the recession of 2008 to 2009,” says Ronald Filipelli, mayor of State College, home of Penn State University. “A lot of the projects we had scheduled for the next two years have been delayed.”

Census forms were hitting student mailboxes right when they were leaving town in March. They will have until Oct. 31 to fill them out, but they may have been counted at home on April 1. Or they may have graduated and won’t ever claim their college town as their residence. A lot of federal and state dollars are at stake.

“I’m really worried about those who have graduated, who have left the area and won’t return,” Patterson says. “If I lost all those, that would lead to about $4.2 million lost revenue a year.”

What If They Do Come Back?

Universities that are planning to open have come up with any number of ideas for fostering a safer environment. They’re limiting the number of students who can return and scheduling classes in larger spaces. Some are canceling fall break and planning to send students home at Thanksgiving, to reduce back-and-forth travel. A few are installing high-tech sensors that will have the gnarly task of testing sewage for evidence of coronavirus, sometimes down to individual dorms.

As with K-12 schools, faculty and staff are wary about working with large groups of young people. On Thursday, the University of Arizona announced that it will hold at least some classes in person. A survey of university employees earlier this month found that two-thirds of them are not comfortable about returning to campus for in-person classes.

Many universities are planning hybrid schedules. Students will come on campus for labs but listen to lectures online. They’re desperate for students to come to town and pay residential fees.

Townspeople are nervous. They know they need students to return to revive local economies, but also worry about spreading the virus. College towns are often dense, with students living in close quarters. The older folks are concerned that young people, having been trapped at home with their parents for several months, will drink and party and let the virus be damned.

“While I think that Colgate is doing all that is possible to ensure a safe return, residents are mixed,” says RuthAnn Speer Loveless, mayor of Hamilton, N.Y. “Many think that Colgate should not open its doors and are very concerned about the safety of the community, while others are glad for the economic and vitality boost it will provide.”

An International Problem

In the face of legal challenges, the Trump administration backed off from its plan to block visas of international students at universities that aren’t offering face-to-face instruction. Those students still face hurdles.

“Embassies and consulates are closed globally,” says Martin McFarlane, director of international student services at the University of Illinois. “Even if they can get visas, students are prohibited from entering the U.S. if they’ve been present in China, Brazil or Iran in the 14 days prior to seeking entry. China accounts for just over 50 percent of our international student enrollment, so if students can’t enter from China, that’ll cause our numbers to drop dramatically.”

The University of Illinois normally enrolls about 13,500 international students, the fifth-highest total in the country. Champaign has been transformed in recent years, with sleek apartment towers rising above the smoke shops and burrito joints to accommodate affluent foreign students. Those students not only spend money but enrich the city’s culture, says Mayor Feinen. “We are a midsized town in the Midwest,” she says, “and we have this opportunity for all of these cultural events.”

The university is taking every precaution, Feinen says, including developing its own saliva test that should be able to produce results within three hours. "The apartment owners are telling me they're as full as they usually are," she says.

Having watched her town empty out in March, Feinen is hoping she won’t see a second exodus. Champaign has already had to reduced spending by more than $10 million, with further rounds of cuts expected in the fall.

“From an economic standpoint, obviously it’s devastating,” she says. “We will lose additional small businesses if we don’t have the students on campus.”

Alan Greenblatt is a senior staff writer for Governing. He can be found on Twitter at @AlanGreenblatt.
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