Over two months into a stunning economic recession wrought by an invisible enemy, the COVID-19 virus, local municipalities are grappling with new and unexpected costs of keeping their residents and employees safe while experiencing drastically reduced revenues.
At the beginning of March 2020, Michigan was enjoying an unemployment rate of 4.1 percent. By April 16, over 1.2 million Michigan residents had filed for unemployment – approximately 21 percent of the state's workforce, with reports of many still unable to log onto the state's site to file and qualify for unemployment benefits. While many of the unemployed are likely temporary due to the governor's stay-at-home order, each of those are not circulating in society, not purchasing items, utilizing restaurants, buying coffee at Starbucks, paying sales or income taxes, parking, building permits – all revenue which benefits local communities.
At the same time, municipalities have been called upon to provide greater services to their residents, from increased public safety, where first responders must have increased personal protection equipment, increased cleaning, and they must figure out how to provide access to residents through virtual meetings and online services, which they may not have previously offered.
“Less tax revenue, especially decreased property tax revenue, is nothing new for municipalities in recessions. What is new in this downturn is how they're experiencing the recession is like nothing ever before,” said Eric Lupher, president, Citizens Research Council.
“The depth of the crisis, as well as the speed – we've never seen the speed before,” said Patrick Gourley, PhD, assistant professor, economics and business analyst, College of Business, University of New Haven. “On February 19, the stock market was at an all-time high. The biggest hit to local governments is probably going to be sales tax. Retail sales have just fallen through the floor. There are just unprecedented drops in retail sales, month-to-month, and in the speed they fell. As far as property taxes, unlike in the Great Recession, they may not fall as much.”
Gourley said many municipalities which rely on receiving a lot of sales tax are probably going to take on more debt.
“The question is, how deep is the trough? The longer it goes on, it will take longer and longer to recover,” he said. “Right now businesses that are temporarily closed will hire most of their employees back if they reopen soon. If closures go on for a long while, those closures could become permanent. The longer the lockdown, the longer the recovery will take.”
Lupher noted other revenue shortages are in fees municipalities are accustomed to, such as parking fees, parking meter revenue, and parks and recreation fees, such as from leagues and camps. “They still have to pay to maintain buildings and parks,” he noted.
In southeast Michigan, members of Great Lakes Water Authority (GLWA) usually approve a pass-through budget item – dollars in, dollars out, meaning what they as a community are charged for water is what they charge their residents.
“Local governments have a minimum fee from GLWA,” Lupher said. “But because so many businesses are closed, and businesses often are a primary user of water, some communities will not make that minimum, or will have to pay that money out of their general fund if they don't have extra reserves.”
Lupher pointed out that the increased expenses municipalities are experiencing are different than 10 or 12 years ago, because right now there are costs local governments must cover immediately, rather than postpone for better times.
“They have to retrofit their operations to protect their employees and people coming into their buildings,” he explained. “Most governments have gone to online meetings, so they have had to purchase special software.”
He said many communities have extra legal fees, as well as special safety gear for not only frontline workers, but employees in the clerk's office and treasurer's office as communities get ready to reopen.
Some older city halls are discovering their older air conditioning systems can pass coronavirus germs on, so HVAC systems need to be reworked or updated. “There are a lot of costs like this,” he said.
“Some employees are getting hazard pay, and that's a new cost that isn't included in the budget,” he said.
On May 5, some local communities, although none in Birmingham, Bloomfield Hills or Bloomfield Township, had local elections. Only one percent voted in person, with the other 99 percent voting absentee. Local municipalities, with Oakland County and the Michigan Secretary of State, will soon have to determine whether to hold the August and November elections completely via absentee ballot or still maintain in-person elections.
Locally, Birmingham, Bloomfield Township and Bloomfield Hills leaders were asked to evaluate their situation during and post-pandemic. Here are their answers.
Birmingham City Manager
The fiscal impacts expected from the onset of the COVID-19 pandemic are both immediate and longer-term.
As we look back to the initial Declaration of State of Emergency on March 10, 2020 and subsequent Stay Home, Stay Safe orders by the governor’s office, the city of Birmingham has seen reductions in permit fee revenue of roughly 50 percent in March and 90 percent in April. Parking enforcement in downtown Birmingham was suspended on March 17th to incentivize patronage of our local businesses prior to the Stay Home, Stay Safe order being issued. The reduction in monthly parking fees is approximately $500,000 from the parking fund.
In addition, the shutdown of the state has reduced public movement so traffic violations are reduced but cost impacts are not available as the processing of violations by the court are limited at this time.
In the longer term it is difficult to predict what impact the COVID-19 environment will have on revenue sources such as state shared revenues. In prior years, the city would receive roughly $4 million in state revenue sharing, but we won’t know the effects on these revenues until May or June when we start to see actual receipts for March and April coming in. The state has not yet announced what cities can expect for the rest of the fiscal year and for planning purposes, we are anticipating roughly $600,000 less. Even longer term, cities will potentially be faced with lower revenues from property taxes if recessionary trends continue.
Fortunately, Birmingham is positioned well with solid reserves of roughly $14 million in its unassigned general fund fund balance. While discussions in Washington are ongoing in regard to a fourth stimulus package that would include federal funds directed towards local units of government, it is uncertain whether such funds would come directly to municipalities or be routed through state or county programs which typically limit what is received.
POTENTIAL SERVICE CUTBACKS
The current actions taken to respond to the COVID-19 pandemic under a national and state Declaration of Emergency over the past month have not caused significant service impacts due to increased costs or loss of revenue. However, the duration and scale of further state orders will determine the impacts to our services and operations in the months to come.
As we look ahead to determine the level of economic fallout from shutting down our state for almost two months and the recessionary effects this may bring, the reality of lesser tax, permit and fee revenues along with needed unplanned expenditures will be monitored as we assess the longer term impacts to the organization attributed to this public health crisis. One area we are focusing on is the implementation of additional technologies to allow for more online service delivery that will limit the need for the public to physically come to municipal facilities to conduct business.
At the present time, we have not had to layoff any employees as most employees are deemed essential given the city of Birmingham’s rare position as a Public Act 390 community, which means it runs its own emergency operation program under the state’s emergency management act. As a result, employees not normally classified as essential have been reassigned to serve in other capacities supporting critical functions such as staffing our COVID-19 call center.
Looking forward, however, the length and extent of the restrictions we are directed to operate under, while assessing the economic impacts this will have on our tax and related revenue sources, will drive decisions affecting our future staffing levels.
Overall calls for police assistance have remained consistent with normal call volumes. However, the types of calls have changed with reports of contractors working on projects in opposition to the governor’s orders and social distancing violation complaints accounting for a majority. Paramedic runs have seen an uptick from normal run volumes and fire runs remain low. Calls to our dispatch center have been primarily reports of contractors working on projects in opposition to the Governor’s orders and social distancing.
To assist our citizenry with COVID-19 related questions, the city started a COVID-19 Hotline on March 23rd to have a dedicated call center to address COVID-19 related questions and requests. This number is 248.530.1805 and is available for Birmingham residents Monday through Friday from 8 a.m. to 5 p.m. The call center has been taking about 10 calls per day. The calls have primarily focused on questions related to the governor’s executive orders. There have also been requests for assistance in locating provisions such as baby formula and some residents have called just to say “thank you.”
The concept of hazard pay was initiated by the Oakland County Sheriff’s Department based on existing labor provisions they had for their deputies. Subsequently, this concept had expanded throughout the state by other jurisdictions with the presumption these costs would be covered under reimbursable expenses attributed to a state of emergency. The Federal Emergency Management Agency (FEMA) has recently clarified their position on this and stated that federal funding for such programs as hazard pay would only be made if such policies existed pre-disaster, which is not the case for most communities in our state.
There is no question, the occupations our first responders and public service employees fulfill are demanding and dangerous. The compensation they receive is governed by collective bargaining agreements for these positions. Before the city can commit to paying one-and-half times more for existing services knowing there is no federal reimbursement, we really need to understand the duration of this pandemic. Without knowing this, we are essentially writing a blank check for an undetermined amount of time when we expect to receive less revenues in the coming year.
The city of Birmingham has supported our first responders in direct ways such as adhering to federal, state, and county protocols to ensure a safe workplace, and by providing an extra city funded COVID-related employee leave bank, which is in addition to any pre-existing employee leave. Also, the city has applied the provisions of the federal Families First Coronavirus Response Act (FFCRA), which specifically exempts emergency responders from coverage. This benefit guarantees that our first responders have access to emergency paid sick leave and expanded family leave benefits, when and if needed.
The city has hired one full-time paramedic and two temporary emergency medical technicians in order to put a third ambulance in service for the community. We have also procured and assembled COVID-19 care packages consisting of face masks, Tylenol, hand sanitizer and informational resources that can be left with our patients that may exhibit COVID-19 symptoms but are not permitted to be transported to area hospitals based on current protocols.
CHANGES AT MUNICIPAL BUILDINGS
The reopening of the state is something that will be stipulated by the Governor’s Office based on the data involving COVID-19 progression or recession of cases by May 29. At the present time it is unclear the extent to which access to public and private facilities will be allowed and what required health protocols will be. What is clear is that no current vaccine exists and a second wave of the outbreak is still very possible in the months to come. With that fact, city offices will remain closed until it is safe to interact in shared spaces in compliance with state orders. In anticipation of reopening, city offices are being outfitted with acrylic safety shields at open counters to protect both the public and our employees until the pandemic is under control. Additionally, the city has purchased new equipment that will allow for “fogging” of municipal buildings daily to supplement our increased cleaning regiments of sanitizing touch points within our buildings.
The ability to participate in virtual meetings was provided by Executive Order 2020-15 on March 18th and extended by Executive Order 2020-48 on April 14th. Currently the ability to conduct virtual meetings is provided up to May 12th under these orders. Unless the State provides further authority to conduct virtual meetings past May 12th, the Michigan Open Meetings Act will again govern public meetings within this State and this Act does not currently allow for virtual meetings.
Voting regulations in Michigan are governed by the Secretary of State’s office through the Bureau of Elections. The Oakland County Clerk’s Association have questioned the ability for a vote by mail requirement and are awaiting direction from the state.
Bloomfield Township Supervisor
At this time, we are projecting a 16-20 percent decline in the revenue sharing for our current fiscal year, which translates to $600,000-$750,000. The state has indicated they will possibly make this up but we have not seen anything definitive on this.
We don’t yet have a projection from the 48th District Court, but that will be another area of concern.
The building department permit revenues are down about 60 percent when comparing to the same time period a year ago. As our planning and building department has continued to work throughout the shutdown, the fee loss would be zero to 10 percent. A 10 percent loss would equate to approximately $130,000.
The fire department has seen a significant drop in EMS runs as well as Medicare requesting us to wave co-pays and deductibles for COVID-19 related patients which could lead to a reduction in EMS revenue collected. The expectation is going to be $100,000 to $150,000 in loss of EMS revenue. The police department will see reduced revenue from tickets and all other revenue sources. Currently, the officers are stopping and writing tickets to only the most very hazardous drivers and ticket production has been reduced to very low levels. We have temporarily stopped all other revenue sources for the time being. This would impact the court operations.
Forty percent of the Senior Center’s revenue comes from programs. We expect to lose approximately half of that, which would equate to approximately $400,000 off of the budget.
We have reserves in all of our funds. As we have been making cuts over the last 18 months, we do not think we will have to dip into reserves other than what has already been budgeted for. We’ll be monitoring throughout the year. There will be modifications to the budget in terms of purchasing and allocations and we will likely have budget amendments before the year is over. Additionally, we can delay large capital purchases that will take us into the next budget year if needed.
We would not be eligible for federal bailouts at this time based on the population size requirement. We have been in discussions with the state, which requires certain funding requirements that may change. That would help our budgetary needs.
POTENTIAL SERVICE CUTBACKS
None anticipated at this time. Layoffs – none at this time for full-time people. All part-time people have been let go. We have been cutting staff over the last 18 months. Currently, we have 19 employees less than what we had a year and a half ago. We still have a hiring freeze in place at this time.
Call volume has decreased for things such as personal injury accidents trauma from work-related injuries, police assists and citizen assists, but have increased for CPR and COVID-19 complaints. We have also added additional time to our runs due to the increased amount of decontamination need for the personnel, equipment and rescue.
Bloomfield Township was the first community to institute special help lines. Over the past seven weeks we have had approximately 200 calls and have helped numerous residents who did not want to leave their homes to get prescriptions, go food shopping or even to pick up people’s mail. Additionally, the Meals on Wheels program has just about doubled.
Calls for service are down for the normal criminal complaints and accidents. The officers are spending a majority of their time on subdivision and plaza patrols. We are trying to be as visible as possible for the residents.
We have not instituted hazard pay.
CHANGES AT MUNICIPAL BUILDING
We will continue to follow CDC guidelines and utilize the program of phases as we start to reopen and return to some type of normal operation. We are currently doing an assessment of the different township operations and what will be needed to maintain the safest way for the residents and employees to receive and provided the needed services. We just finished installing plexiglass barriers at all of the public counters throughout the township for the protection of both the residents and the employees.
The police department will phase in operations once the governor starts lifting the lockdown. We too are assessing how to keep both employees and customers safe.
We have been assessing what is going well with remote working. If we are comfortable the job is getting done, then it will be up to the department heads to make the determination of remote workers. We believe COVID 19 will be with us for quite some time. It does not make sense to rush everyone back to tight quarters if we do not need to do so.
We have, and will continue, a thorough cleaning of the buildings and will look at required mask use by visitors/contractors entering as well as requiring scheduled appointments to limit the number of people entering. We have installed clear partitions at the counters where the public interacts with employees. We will require all public to wear face masks when coming into our buildings and we will require all of our employees to wear face masks when we open up to the public.
The police department has stayed open throughout this emergency. It is the only access to Township Hall due to the clear glass we have in our lobby area. We have increased the hours of our custodian to ensure the building is thoroughly sanitized and we require our supervisors to sanitize the lobby throughout the day. These things will continue and we are in the process of determining any changes to our protocol when we go back to full operations.
That is something we are going to need to assess with the entire board of trustees. We will also look to the state and the medical community for guidance. It is very hard to keep the appropriate social distancing in place with public meetings. Some of them get very crowded.
While Michigan’s Proposal 3 allows all voters to request an absentee ballot without a reason, the local election commission has no authority to require all absentee voting. It is a politically complex and sensitive issue to alter the way people vote. For instance, the Wisconsin governor’s executive order to cancel in-person voting and extend the deadline for absentee ballot returns came after the state legislature refused to postpone the vote. The Wisconsin Supreme Court blocked the governor’s executive order suspending in-person voting in their primary election, but allowed the deadline extension. The U.S. Supreme Court blocked a lower court’s six-day extension of the receipt deadline for mailed ballots. In the end, polls were open with precinct and absentee ballots counted on election day.
In Michigan, this type of order would have to come from the governor in an emergency situation or through legislation. Governor Whitmer issued an executive order for the May 5, 2020 special election held in some Michigan municipalities. She encouraged all Michiganders to vote absentee by allowing the department of state to assist local jurisdictions in mailing absentee ballot applications to every registered voter, and to provide absentee ballots directly to new registrants. Local jurisdictions were required to keep at least one polling place open for those wanted to cast their vote in person or were unable to vote by mail. Currently, there are ongoing efforts to encourage absentee voting in August and November, but establish procedures to provide social distancing, masks, gloves, sanitizers and wipes for all election inspectors at the polling locations.
Bloomfield Township is processing absentee ballot applications for August and November as designated by the Michigan Bureau of Elections, May 4, 2020: “There is no reason to assume there will be a state mailing, and clerks should ensure that voters expecting applications receive them.”
Bloomfield Hills City Manager
Our budget year ends June 30, 2020. We do not anticipate any problems completing this year within the approved budget. For the 2020-2021 budget, the city commission has been proactive in revising the next budget to reduce costs in anticipation of potential financial impacts to the city as a result of COVID-19. Some of these changes include: reducing capital expenditures, reviewing financing options to reduce cash outlay, and the postponement of some road improvement projects until a later date.
City operations run lean financially. At the same time, we are nimble enough to make changes as necessary to meet financial shortfalls. We continue to evaluate all operations and will adjust as needed.
At this time our permits are still strong and even up from prior years. Currently, we are successfully working with applicants remotely to continue this process. There may need to be adjustments to these operations based on any long-term affects the pandemic may have on these operations.
There will be a reduction in police enforcement activity as the officers have concentrated their efforts to neighborhood patrols with the goal of keeping our residents and business community safe. Reduced case revenue will also reduce the cost of criminal prosecution through the courts. At this time, we are concentrating on keeping our officers and public safe, not the amount of tickets we are writing.
The city of Bloomfield Hills is in strong financial health. We have a AAA bond rating and our reserves are within city policy for this budget and next. We are aware and concerned what the financial impact the COVID-19 pandemic will have on our community and are planning appropriately.
POTENTIAL SERVICE CUTBACKS
There may be adjustments to our building department if there is a loss in revenue for this department. We are nimble enough to make these adjustments. Thus far our staff has been busy servicing building applicants through the design and review process remotely. There has not been any layoffs at this time, but we continue to review the need for this.
There has not been a measurable increase or demand for public safety service other than what we normally provide. We continue to service our residents and citizens without delay.
The city has considerable measures in place to keep our public safety personnel safe both inside and outside of the public safety building. This includes how we engage with the public to protect them and our officers. At this time we are not providing hazard pay.
CHANGES AT MUNICIPAL BUILDING
Our city staff was able to work successfully providing our services remotely because we already provide many of our services electronically. This has also allowed us to continue nearly all city services in a responsive way and without any noticeable effect.
We plan to return to working and providing access to City Hall as soon as we can based upon what is safe and in compliance with any governmental order. We will continue to count on federal, state, and local medical experts to provide the safest environment we can for our employees and the public. Once safe our staff will be working from City Hall.
We will make these decisions based on the information we have from the CDC, and other federal, state, and county medical professional advisors. Our public safety department has systems in place that we may adopt depending on the current status of the COVID pandemic. In any event, we will continue to practice social distancing and cleanliness precautions as long as needed.
This will depend on the current guidelines advised from medical professionals. We prefer in person meetings, but our primary objective is the safety and health of our community.
Our city clerk is watching this issue very closely and will comply with requirements of the Michigan Secretary of State.