City commission adopts FY2022 budget

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The Grand Rapids City Commission on Thursday approved a $546 million fiscal year 2022 spending plan that continues current municipal service levels and meets financial obligations for existing contractual agreements — something that many municipalities across the country have not been able to do due to the pandemic.

The recommended “continuation” budget also aids in pandemic response and local economic recovery. The general operating fund portion of the proposed budget is just shy of $156 million (29% of the total budget).

Funding through the American Rescue Plan Act (ARPA) will enable the city to sustain services in the current fiscal year and supports future budgets through FY2025. The city expects to receive approximately $92 million in relief through the ARPA over two fiscal years. The first payment of approximately $46 million is expected this summer, and the remaining payment should arrive one year later.

The city will leverage the majority of ARPA relief money to replace revenue shortfalls, improving the sustainability of the general fund. Specifically, just over $36 million of ARPA funding is allocated to backfill the income tax revenue shortfall for FY2021 and FY2022, which will sustain current services. And when the city’s full five-year fiscal plan is taken into consideration, City Manager Mark Washington recommends that $60 million be used for revenue replacement, which accounts for 65% of all ARPA funding.

Due to the city’s financial position prior to the pandemic and federal relief funding, drastic cost reduction measures — such as service reductions, significant increases to fees and staff layoffs — were avoided. In a forward-looking move, the city previously decreased spending by $22 million last year just as the pandemic began with the adoption of the FY2021 budget.

Washington said the city’s main financial challenge going forward will be to manage through lagging revenue resulting from the economic challenges that continue during FY2021 and likely will extend into the first half of FY2022. While all funds will be impacted, he said the general fund has been impacted the most severely due to the loss of income taxes resulting from increased unemployment and decreased nonresident withholding.

“This has been a challenging year for everyone,” Grand Rapids Mayor Rosalynn Bliss said. “We are still coming out of this pandemic and out of a recession. Hopefully, this next year will be more positive than we are currently projecting, but we are still in the midst of recovery. Having been around this table for the last 15 years and having been here during the last recession, I recall very clearly being part of conversations on how we were going to cut millions from our budget and hundreds of positions from this organization. Fortunately, we are not in that position today. I am grateful for the federal funds that are enabling us to move forward with stabilizing our budget and hopefully come through this pandemic still fiscally sound.”

In addition to revenue replacement, the following $2.15 million of ARPA investments are recommended for immediate investment in FY2022 and are included as part of the FY2022 preliminary fiscal plan:

  • Master plan funding – $250,000
  • Housing practice leader contract -$100,000
  • Funding for local special events – $300,000
  • Homeless outreach staffing – $1,500,000

As part of the fiscal plan adoption process, the commission pledged to engage in a separate process to finalize the programming of $10.2 million of the ARPA funding dedicated specifically for FY2022 to help encourage economic recovery, address the needs of vulnerable populations or allocate for other nonincome tax revenue replacement to maintain services.

This post-budget allocation process will allow more time and discussion regarding this $10.2 million to discuss the proposed major expenditure categories, which are aligned with the commission’s near-term focus areas.

A budget amendment soon will be prepared for commission consideration to appropriate the $10.2 million in ARPA funds for FY2022. Implementation processes, including requests for proposal, to achieve the outcomes envisioned by the allocations would follow, as necessary.

Washington recommended reserving the remaining $19.31 million of the $92 million in ARPA funds for investments in the outyears beyond FY2022. Nearly all those funds are proposed to be reserved in anticipation of additional revenue loss or needed recovery investments. The only other specific investment recommended at this time for the outyears is an additional $500,000 for the master plan.

The FY2022 fiscal plan also recommends capital investments of $96 million in FY2022 and $428.2 million across all five years (FY2022-2026). These investments are made possible through a variety of funding sources, including the general operating fund, bonds, federal and state allocations, leveraged funds, millages, Vital Streets income tax, water/sewer rates and grants.

Capital investments related to health and environment account for 61% of all capital investments ($58.39 million) and include all environmental services department (including the Water Resource Recovery Facility and stormwater/green infrastructure investments), water department, and parks and cemeteries projects — as well as all investments in LED lighting.

Mobility investments account for 22% of all capital investments ($21.71 million) and include Vital Streets, sidewalks and trail investments.

In addition to capital funding provided for lead service line replacements, beginning in FY2022, the city will invest in private lead service line replacements located in the neighborhoods of focus using operating dollars provided through a $5 million U.S. Environmental Protection Agency grant. Through FY2025, 86% of this investment, or $4.16 million, will take place in the Third Ward, and 14% will take place in the First Ward.

The FY2022 fiscal plan dedicates more than $25.62 million in direct city investment that will contribute to more equitable policies, practices and outcomes. Some of the significant investments include:

  • Regional consolidated housing and community development plan investments including increased supply of affordable housing and increased access to and stability of affordable housing – $6.8 million
  • Neighborhood of focus/Third Ward equity funding – $2 million (potential ARPA)
  • Staff diversity, equity and inclusion training – $40,800
  • Support for the Michigan Indigent Defense Fund – $700,000
  • GRow1000 2.0 – $1,200,000
  • To College Through College (T2C) Studio – $112,386
  • Grand River Equity initiatives – $284,166
  • Neighborhood match fund – $100,000
  • Neighborhood association support – $562,671
  • Lead service line replacements focused in Third Ward neighborhoods of focus – $1.74 million
  • Office of oversight and public accountability – $405,781
  • Thrive Outside – $193,290
  • Bill assistance for water, sewer and refuse – $221,200
  • Housing lead remediation – $2.2 million
  • New housing development/lead hazard position – $146,940
  • DASH bus operations – $2.4 million
  • Neighborhood of Focus based transportation solutions like car share – $200,000
  • Cure Violence evidenced based crime reduction program – $100,000
  • Violence reduction – $1 million (potential ARPA)
  • Additional violence co-response – $1 million (potential ARPA)

The city commission reviewed the preliminary fiscal plan during three work sessions in which the public had the opportunity to voice their opinions on the proposed budget. Residents also engaged with questions and comments about the preliminary fiscal plan during a May 6 town hall with the mayor and city manager and a Tuesday public hearing prior to Thursday’s budget adoption.

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