Detroit area suburbs face budget squeeze in COVID-19 outbreak
In a time of coronavirus, Metro Detroit's cities and towns are planning for declines in state revenue sharing, while experiencing sharp declines in collecting permit and program fees and hoping, perhaps against hope, that residents can still afford their summer tax payments.
If one of the sharpest economic downturns in history persists, property values might put some slack in tax revenue for some time to come.
It is not pretty.
Livonia is hardly alone, and its circumstances might well be representative.
“We’ve done a lot of work in the area of cost containment in Livonia because we really do understand there’s going to be a significant impact to communities our size,” said Mayor Maureen Miller Brosnan, whose city has a general fund budget of $62.4 million.
“We knew we needed to form a proactive financial plan."
Brosnan said state-shared revenues for March and April were predicted to be 50% below normal, due to lower sales tax collections by the state. So that means a reduction roughly of $1.4 million to city revenue.
With the city recreation center and libraries closed, the loss of fees for permits and programs will cost another $1.5 million to $2 million, Brosnan said.
Water is not sold to hotels, manufacturers and other big businesses while they are closed, she said, with a loss of about 15% to 20% in sales.
Folks are driving less, burning less fuel.
Brosnan said the expectation by the Michigan Department of Transportation is that Livonia is going to lose around $1 million to $1.1 million. And there is the probability of another significant, perhaps longer-term reduction in revenue.
“To top it all off, as the result of unemployment, reduced real estate values, a slower housing market, you’re going to see property taxes suffer,” she said. “The consumer price index is down lower than 1%. So we totally expect that’s going to result in lower property taxes.”
In late April, after an assessment of critical services and workers, the city placed 37% of its employees on furlough. Most of the rest work remotely. The impact on municipal services has been especially felt in parks and recreation, libraries and programs for seniors.
However, the city has preserved Meals on Wheels and transportation programs for the elderly.
The pressure being felt around virtual city halls comes as there is much uncertainty within the state's financial plans. Michigan Budget Director Chris Kolb said Thursday that the administration's timeline for submitting a revised budget to address Michigan's pandemic-induced shortfall will be delayed. It's projected that Michigan has a $3.2 billion shortfall in the current budget that ends Sept. 30 and $3 billion for Fiscal Year 2021.
In Westland, which has a general fund budget of $70.6 million, Mayor William Wild worked with municipal unions on a furlough plan and laid off 77 employees effective May 1. None were first responders, Wild said.
But that is two-thirds of the city employees who are not first responders.
“That was through every department, starting with people who work in the mayor’s office all of the way down to our lowest-paid clerical,” said Wild, who was responding to some revenue shortfalls, and anticipated ones, similar to the list in Livonia.
“Shortly thereafter, we were able to furlough another 60 employees from the library and the court,” he said.
Wild said Westland has about 135 employees who are still on furlough.
“And we have 60 part-time employees that we hire for seasonal help in the summer. We didn’t hire them,” Wild said. “So I guess we’re down about 200 employees right now."
The mayor said the city saved about $250,000 on payroll in April and is expecting about $350,000 for May.
In Troy, City Manager Mark Miller said there has not been a huge impact from the pandemic yet on the Oakland County community, which has a general fund budget of $67.8 million.
“We recognize that we’re probably going to have to come back and adjust the forecasts of revenues in the budget because the budget was basically prepared in January, February and March,” Miller said.
“Since then, we have gotten some preliminary forecasts on revenues from the state of Michigan. I want to be cautious because the one things we’ve learned about COVID is that everything changes; it is not static.
“Plus, we haven’t had a lot of time to analyze how much we’ve been impacted by the loss of revenues.”
Revenue from property taxes pays a lot of the bills of municipal government in Troy, and Miller said that impact will be more long-term.
“Our primary source of revenues is property taxes, and the property tax is already set for next year. It’s not going to be adjusted,” he said. “What we’ve learned from the Great Recession is, we’ll have to wait and see how much property tax goes down.”
No layoffs have resulted, Miller said, despite the closing of facilities that, like other cities and towns, employ significant numbers of people. But Troy has stopped calling in about 250 part-time employees, including some lifeguards and librarians.
“We are obviously having decreased revenues,” he said. “Our community center is closed.”
The problems in the three communities are likely shared, to varying degrees, not only by most cities and towns in Metro Detroit but across Michigan and the country, municipal leaders and observers say.
“Every state in this country and every local government in this country is suffering from a huge hole in their budget,” said U.S. Rep. Debbie Dingell, D-Dearborn. “People aren’t paying their taxes. There’s no revenue coming in.”
Dingell and fellow U.S. Rep. Fred Upton, R-St. Joseph, are among a bipartisan group in the House and Senate who last week introduced legislation to authorize the State and Municipal Assistance for Recovery and Transition Fund, which would provide $500 billion in emergency funding to states, counties and municipalities.
It would supplement the $150 billion Congress provided to assist state and local governments in the Coronavirus Aid, Relief, and Economic Security Act.
“People don’t understand the basic necessities that local government provides,” Dingell said. “They take for granted what local governments provide them.
“I do a weekly call with all my local governments. Every community is struggling with money, right now. There is not a single one left out, because they all have a problem.”