While the financial cost of the coronavirus to individuals and businesses has been significant, local municipalities are anticipating a significant decline state constitutional revenue-sharing payments.
Revenue sharing distributes bi-monthly a portion of the sales tax collected by the state to local governments. The recent Stay-at-Home order cut consumer spending on goods ranging from auto sales to food to entertainment slashing the amount of sales tax collected. As a result, more than 1,800 Michigan local governments, including Atlas, Brandon and Groveland townships that are on the front lines of responding to the coronavirus pandemic are expected to absorb a significant monetary impact.
However, some assistance is possible.
The Michigan Municipal League (MML), the Michigan Association of Counties (MAC) and the Michigan Townships Associations (MTA) recently sent a joint letter to Gov. Whitmer and state leaders calling for the state to share a portion of the CARES Act to support local governments of all sizes affected by this pandemic.
When Congress passed the Coronavirus Aid, Relief and Economic Security Act (CARES Act), they set aside $150 billion to reimburse state and local governments for increased expenses related to the COVID-19 pandemic. About $4 billion is earmarked for Michigan.
Neil Sheridan, former Groveland Township resident and planning commission member currently serves as the Michigan Township Associations executive director representing more than 1,200 townships statewide.
“We are deeply appreciative of the CARES Act federal funding for our state as Michigan weathers unforeseeable impacts due to this crisis,” said Sheridan. “However, it is imperative that our local governments are not left behind. An equitable distribution of the state’s CARES Act funding is crucial to the ability of our local governments to serve their communities, both now and as we emerge into the new unknown ‘normal’ following the crisis.”
Area leaders are anticipating some long-term impacts.
Kathy Thurman, Brandon township supervisor supports a portion of the $4 billion CARES Act funding supporting local governments.
“The problem is, we don’t know exactly how much the COVID 19 pandemic will be affecting us financially until we get closer to the end of the year,” said Thurman. “We don’t know if we will have to hold a mail-in only election in August. We don’t know how much other extra costs will be incurred by the township and fire department. We also don’t know how bad the lack of sales revenue will affect us.”
Brandon township operates on a $2.4 million budget.
“Half of our revenue or $1.2 million is derived from Michigan sales tax,” she said. “Contrary to popular belief, property tax revenue only accounts for one-quarter of our total revenues. The state has informed us that we will be taking a hit but until the check arrives we won’t know by how much. I hope the Michigan legislature and governor don’t make any rash decisions with CARES Act funding allocations. We need to see how this epidemic plays out and how soon our economy can bounce back.”
Based on the amount the CARES Act made available to the state’s five largest municipalities, with populations of 500,000 or more, the MML, MTA and MAC asked that an equitable per capita amount, equal to approximately $1.1 billion, be made available to all other local units of government in Michigan to cover these expenses.
Tere Onica, Atlas Township supervisor emphasized the financial impact of the coronavirus to local government offices will be is anybody’s guess.
“Other than deferring employee tax payments without penalty, there is nothing else at this time that local government can apply for,” said Oncia. “There is no mechanism for local government to be reimbursed. FEMA has a reimbursing grant that requires a 25 percent local match for emergency management. Currently, local fire departments are reporting that emergency response calls are way down. Atlas Township Fire Department has spent $300-$400 on PPE and have what they need for the time being except for gowns. They have been able to acquire hand sanitizer that is dispensed from spray bottles from an alcohol distillery. All trucks and equipment are being sanitized following use.”
The State of Michigan has received money, but we do not know at this point what they are doing with it, said Onica.
“Since non-essential business has been shut down by Gov. Whitmer’s Executive Order 2020-21 which began March 24 at 12:01 a.m., we know that revenue sharing payments to local government will be down,” she said. “June revenue sharing is based on March and April sales. The Department of Treasury has not provided us with any percentages or guidelines that would assist in future budgeting. Legislation has been introduced to reimburse local government with the next stimulus package.”
Groveland Township Supervisor Bob DePalma and the township board of trustees have maintained a healthy fund balance.
“We’ve managed the township funds for rainy days like these,” said DePalma. “Back in 2008-9 when they Great Recession hit our funding dropped like a rock. But, we’re able to continue with a decent cash reserve. There’s no doubt this time we’re going to take a hit in our state shared revenues, as much as $100,000 out of the budget.”