Shutdown Will Lead To Difficult Battle Creek City Budget Decisions

Michigan's shutdown due to the COVID-19 Pandemic has caused dire and easily recognizable economic consequences in Battle Creek, but the trickle-down from that will certainly be felt down the road as city leaders struggle to deal with large revenue shortfalls.

Battle Creek City Manager Rebecca Fleury was a guest on the 95.3 WBCK Morning Show, and Tim Collins asked if they’ve been looking at projected shortfalls in city hall.  She says the city has had some conversations with the treasury department and the Michigan Municipal League with some early revenue estimates for units of local government that have a local income tax, as Battle Creek does.

“Yes we have and those are really tough numbers to look at right now”, said Fleury.  “The reason why that number is tough is because unemployment is not subject to local income tax.”  She said the same goes for telecommuters who may not be telecommuting within the city of Battle Creek.   She said, according to the treasury department, the city could lose from between 15%-30% of local income tax revenue.  “When we will feel that is very difficult (to say).  The income tax that was to be due in April is now not due until July, which includes everything from personal returns to businesses making their quarterly estimate.”

Fleury says a 30% reduction in local income tax would be $5 million based on the current fiscal year.  “But that’s not the only revenue that the treasury department is telling us that will result in reductions.  The other happens to be constitutional and statutory revenue sharing, particularly constitutional revenue sharing because that is supported by sales tax.”    With a downturn in local sales due to the quarantine, the treasury department is saying that the city could see a 40-50 percent additional reduction over the next couple of months.

Another shortfall is in the area of the gas and weight tax since far fewer people are driving.  That could affect street projects in the city.

“We’re having a lot of tough conversations in regards to the city’s budget and we’re at an awkward time because we’re in the last two months of our fiscal year.”

The city already had to tighten its belt considerably a year ago when the state recalculated property tax reimbursements to the city, resulting in a $2.4 million reduction.

Fleury points out that the majority of the city’s general fund expense is people and benefits.  She said the city and city commission is looking at how those expenses will be addressed by the end of June when the new fiscal year begins.