Committee of the Whole centers on COVID-19 impact

NILES — Local budgetary concerns took center stage immediately following Monday’s regularly scheduled city council meeting.

The city council convened for a Committee of the Whole on Zoom to hear about COVID-19’s impact on the municipal finances.

On May 1, the city laid off 10 employees in preparing the city for its predicted future of reduced finances. On Monday evening, City Administrator Ric Huff presented information he had received from the Michigan Economic Forecast on Federal, State of Michigan and city impacts that COVID-19 was currently having. The impacts have both immediate and long-term considerations that Huff presented.

“We are the point that services are going to be impacted and I think people are going to have to get used to things taking a little longer to get done,” Huff said at the close of the meeting. “We just simply won’t have the staff and the manpower to do it.”

Huff presented information and informational PowerPoint slides from the Gabriel Ehrlich, director of Research Seminar in Quantitative Economics at University of Michigan, Bethany Wicksall, director of Legislative and External Affairs at State Budget Office in Michigan, Eric Walcott, government and public policy specialist at Michigan State University Extension and from the city of Niles own budget.

“Here’s where we are at in the city of Niles,” Huff said. “Prior to COVID-19, our general fund revenues were estimated to be $7.9 million, and our expenses were estimated to be $7.9 million. We had a very small budgeting threshold there where we had about $20,000 for something to go wrong. Unfortunately, something went very wrong with COVID-19.”

Huff explained that the general fund budget comes from 2 percent of the state’s sales taxes. Of the 6 percent sales tax charged in Michigan, 2 percent of it is collected and redistributed to municipalities.

“The total state’s budget, by $58.7 billion, the piece that we really have to pay a lot of attention to right now is the general fund at $10.6 billion,” Huff said as he addressed the state level.

Of that $10.6 billion, the state is estimating a cut of a little bit more than half. The state predicts a reduction of between five and seven billion dollars over the next five months to the state’s general fund.

“The state did take some proactive steps following the Great Recession,” Huff said. “Right now, there is about $1.2 billion, but that is a small number when you really think about a $10 billion general fund budget, or a $58 billion dollar budget for the state of Michigan.”

The state of Michigan was a recipient of a $3.1 billion dollar grant from the general CARES act. The state is having some difficulty in figuring out how to allocate it under the restrictions it comes with. The revenue lost cannot be completely replaced by the assistance, and restrictions on the grant do not allow it to be flowed to cities with a population of less than 550,000.

The state’s budget committee will meet Friday to discuss the way forward for state finances, which will provide guidance for municipalities like Niles.

Huff said the city of Niles was seeing utility sales down as well, with large consumers offline due to COVID-19 mandated closures.

With budgeting for the fiscal year and for the next year to come, Huff said that the city had discontinued capital purchases, reduced to essential spending only at this time and sought department budget reductions of about 10 percent within the city. Huff said that the city had limited employee layoffs and tried to reassign employees to limit a financial impact to the general fund.

Huff also said that marijuana tax dollars would likely be used to supplement losses at the state level first, and the city might see some locally by 2022.

“It is day to day, week to week, continually changing data, continually changing information, continually morphing executive orders,” Huff said. “We are really trying to do what we can to keep things in operation.”

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