GRAND RAPIDS, Mich. (WOOD) — With so many working from home in 2020 due to the coronavirus pandemic, the city of Grand Rapids was expecting to take a big hit in income tax revenues.
That’s why President Joe Biden’s signing of the latest federal COVID-19 relief bill Thursday prompted a sigh of relief at City Hall.
“We know we won’t have to take drastic measures. We know that we can at least sustain services,” Grand Rapids Chief Financial Officer Molly Clarin said.
The city won’t know the exact amount until sometime next week, but Clarin said she expects it to receive between $45 million and $70 million from the part of the relief package set aside for communities hurt by the pandemic. That’s more than the $10 to $20 million in income tax losses the city was forecasting.
But the impact of the pandemic is expected to last well beyond the next fiscal year.
“The economy’s not just going to switch back on and be OK. Everything stopped, so it’s going to be slow growth going forward,” Clarin said. “Companies may still choose to allow their employees to work from home. We’ve had unemployment. We’ve had business closures.”
That could impact the city’s general operating fund for the next four to five years.
Clarin’s budget cut pen was put to work even as Congress debated the relief package. The city already has a hiring freeze in effect. It has also renegotiated contracts and dipped into savings to the tune of $6 million. It would have been $13 million from savings if not for federal CARES Act funds provided to the city last year.
Cuts to services, especially big tickets items like public safety, were inevitable. Clarin said she had yet to come up with a number of job cuts that would be required.
“We never did. We were talking more in terms of dollars and what we could manage going forward,” Clarin said.
One bright side of the budget challenges, property taxes, which are the second largest income source for the general fund, have remained steady and in some cases slightly increased during the pandemic.