Cities Across Michiana Brace For Financial Strain From Coronavirus Crisis

May 11, 2020

FILE
Credit STEVE CARMODY / MICHIGAN RADIO

The coronavirus pandemic has sparked financial hardship for many in Michiana, including cities. South Bend, Niles, and Elkhart are preparing for a large hit to their budgets.

For all three Michiana cities, it’s still a bit soon to know exactly how this pandemic will affect its budgets. But officials say some kind of impact is inevitable, the question is to what degree.

City governments are looking at two factors before they respond, one being how much federal and state aid is made available. The second is how long the recession will last.

Daniel Parker, the Controller for South Bend, says the City has a pretty large reserve that could last about a year or two, if needed. But if the economy takes longer to bounce back, South Bend will need to adjust.

“In order to continue to build upon the progress that we’ve made and maintain the level of service that we currently provide, we’re either going to have to come out of the recession quicker than we are anticipating, or receive aid from federal and state governments.”

Parker says the City is expecting a 20 percent loss of income tax, a 45 percent decrease in gas tax and a decrease in property tax. That adds up to millions of dollars lost.

He says the City has spent a lot of money fighting the coronavirus and will most likely use the entire $500,000 COVID-19 emergency response fund.

Parker says the most direct impact is lost revenue from the Morris Performing Arts Center and the Century Center.

He says operational services like police and fire departments won’t be changed because of budget cuts. Some development activity and recreational spending would be the first to go.

Niles is a significantly smaller city than South Bend and is already starting to feel the financial impact of the pandemic.

The City of Niles has laid off 10 city employees. That’s according to Ric Huff, the City’s administrator.

“When we went into the great recession, we were actually in a very good position to weather that storm," Huff says. "The problem is ever since the great recession, revenues for municipalities haven’t bounced back.”

Niles receives a substantial amount of money through sales tax but spending is way down. Huff predicts about a 50 percent loss in sales tax which means hundred of thousands of dollars for the City.

“This is a significant impact to the municipal budget, all municipal budgets in the state of Michigan," he says. "The estimates right now is for this to be a quick and severe impact with a fairly quick rebound. It’ll be painful for a few months, then hopefully we’re back to standard operations.”

The City of Elkhart is also anticipating a recession, but Councilmember Dwight Fish says they’re well equipped to handle any economic hardship from the crisis.

“We’re sitting quite well when you compare any city across the state of Indiana," Fish says. "The City is not in bad financial shape and won’t be in bad financial shape.”

He pointed to Elkhart’s manufacturing and service industry that could help revive the City’s economy.

“There will be an economic resurgence of people returning to work," Fish says. "It will be a somewhat slow recovery. We don’t know exactly the effect because we haven’t gotten the full workforce back.”

Elkhart is expecting a roughly 8 percent loss in property tax. Fish says the City has only used a fraction of it's $500,000 emergency fund for fighting the Coronavirus. He says Elkhart's reserves and finances are in good enough shape they don’t need to start thinking about major budget cuts yet.

But for all cities, the longer the recession lasts, the harder it will be to get back to normal operations. City officials are hoping the economy bounces back quickly to avoid any changes.

Contact Annacaroline at acaruso@wvpe.org or follow her on Twitter at @AnnacarolineC16

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