The city of Grand Rapids plans a hiring freeze and budget cuts of $13 million because of the economic fallout from the coronavirus. And the city could be forced to cut even deeper if state and city revenues continue to fall.
City Manager Mark Washington announced the changes during a city commission meeting this morning. The preliminary plan calls for $540 million in city spending during the next fiscal year, compared to $553 million for the current budget.
Washington said, in addition to the $13 million in cuts, the city could face an additional shortfall of more than $9 million because of lower income tax revenue coming into the city, and a reduction in revenue sharing from the state. That could amount to a $23 million shortfall.
But even those projections could worsen.
“I think we are going to have to make some changes just based on the fluidity of the world that we live in right now,” said Grand Rapids Mayor Rosalynn Bliss. “I expect that we’ll continue to see some reductions even in what we are currently projecting, so we need to be prepared for that.”
Washington says before the outbreak of COVID-19, the city had been expecting its own income tax collection revenues to increase more than 4% this year. Now, the city expect those funds to drop by 7% as many of the city’s residents are out of work.
City staff had to scramble in recent weeks to rewrite the budget plans as the COVID-19 outbreak worsened.
Washington says the preliminary plan will protect essential services such as police and fire protection. But other departments could see bigger impacts. Those include transit, parking, and construction projects. Washington said it’s also more than likely that city pools will not open this summer.
The city expects to save about $5 million in healthcare costs for the year, after changing its healthcare policies for its employees. It says that change won’t reduce benefits.
The city expects to spend $3.75 million in the budget helping people affected by the coronavirus shut down. That includes $1.1 million for emergency housing and $600,000 for rent and utility assistance.
Under the CARES Act, the city could be reimbursed for that spending. But Washington says he doesn’t know when, or if that reimbursement money will arrive.
“We have not received a dollar from the federal government,” Washington said Tuesday, adding that the city has only received a letter stating that it is eligible for reimbursement for its COVID-19 response.
The new fiscal year for the city starts July 1st. The city will hold a number of meetings to discuss the preliminary budget plans in the coming weeks, and commissioners are expected to vote on the budget in late May.
City leaders plan a digital townhall Thursday at 5 p.m. for residents to voice their concerns over the budget. But at Tuesday’s meeting, the city manager said that town hall may need to be rescheduled because the governor has scheduled a statewide update for the same time.
This story was updated to reflect the rescheduled time for the city's digital town hall. The town hall will take place at 5 p.m. Thursday.