The city of Grand Rapids’ preliminary budget for fiscal year 2021 reflects the financial impact of COVID-19.
The proposed $540-million spending plan is $13 million less than last year’s plan because of the financial impact of COVID-19 but still maintains essential city services, advances equity goals, furthers the ability to implement strategic priorities and ensures financial stability.
“Our immediate focus is to save lives and keep people safe by helping to stop the spread of COVID-19,” City Manager Mark Washington said. “Reliance on our strategic plan has allowed us to develop a preliminary fiscal plan that is financially sustainable, remains focused on our values, continues progress toward outcomes, and emphasizes investments in community and economic recovery in this unprecedented time.”
The general operating fund portion of the proposed budget is $146,078,885. General operating fund revenues are projected to decline more than 3% when compared to the FY2020 plan. As recently as last month, these revenues were projected to be 4% higher than last year before COVID-19.
The city’s fiscal year runs from July 1 to June 30. Unlike in past years, the fiscal years 2021-2025 plan is built on reduced revenue projections that have required rapid changes in planned expenditures due to COVID-19.
“We already had the budget pretty much prepared prior to COVID and we had to rework the entire budget, and we’re still working through it,” Washington said.
According to the budget narrative, the strong foundation of the city’s strategic plan has allowed leaders to pivot rapidly amid the changing dynamics of the pandemic response.
The assumptions used to develop the FY2021 preliminary fiscal plan include:
- A real reduction of income tax revenues in FY2020 rather than the previously mid-year projected 4.5% growth
- Only 0.5% income tax growth in FY2021 and 2% in FY2022 and 2.5% throughout the remaining three years of the fiscal plan
- Ensuring continuity of operations and maintenance of services at FY2020 levels
- Only service enhancements that in some way support economic resiliency and recovery or public safety
- Maintain staffing at FY2020 levels, as amended mid-year, and accommodate wage and fringe benefits included in contracts approved in 2019
- 4.25% annual income tax capital set aside
- $850,000 operating fund for Vital Streets support
- $6,309,705 parks maintenance operating support
- Meeting the 32% minimum requirement for operating fund support of the Police Department
- Reservation of $1.2 million for contingent operating fund appropriations
- Assuming annual lapse of $4.9 million in the operating fund for FY2021 and setting lapse at 3% of pre-lapse operating fund expenditures for FY2022-2025
“We are a resilient community, and we will recover,” Washington said. “We have proven it in the past and will prove it again. Times such as these shape us. How we respond matters deeply. Our strategic plan provides a guide in good times but is even more important in bad times.”
The city commission also approved the Downtown Development Authority’s FY2021 budget of $19,999,960. The budget was recommended by the DDA board, which also proposed a five-year financing plan that reflects priorities for downtown investment.
According to an earlier Business Journal report, the budgets for the DDA’s three funds – local tax increment fund, non-tax increment fund and school tax increment fund – include new projects from GR Forward and carried-forward priorities that span multiple fiscal years.
Among the budgeted recommendations is funding to implement several completed and soon-to-be completed planning initiatives including ongoing Grand River governance organizing initiative, River for All design guidelines, Disability Advocates of Kent County and common notice report, and downtown streetscape guidelines.
Two FY2021 budget review workshops will take place on May 5 and 12, and the city commission is expected to adopt the final budget on May 21.