March 17, 2021

Michigan cities weigh how to spend $4.4 billion windfall from federal stimulus law

In Port Huron, local officials are kicking around the idea of refunding all 2020 property…

In Port Huron, local officials are kicking around the idea of refunding all 2020 property taxes for every commercial, industrial and residential property in the city’s eight square miles.

Such a move would normally bankrupt the international border city of 29,000 residents at the mouth of Lake Huron.

But not after President Joe Biden signed a massive $1.9 trillion economic stimulus bill Thursday, a landmark government spending spree that promises a $19 million sliver for Port Huron.

“We could literally refund the 12 mills of the general property tax from last year and still have $10 million left over,” said James Freed, city manager of Port Huron. “We’ll take the money, fill some potholes. But it’s almost a sickening amount of money.”

Municipal leaders across Michigan are slack-jawed at the enormous influx of federal tax dollars coming their way from the American Rescue Plan, an unprecedented response from a Democratic-controlled Congress and White House to the economic calamities of the coronavirus pandemic that upended American life a year ago this week.

“I’ve been a (municipal) manager for 29 years and I’ve never seen anything like this,” said Matthew Coppler, city manager of St. Clair Shores, a city of 59,000 residents that is getting $22 million in stimulus funds.

The vast sums of aid to Michigan’s largest municipalities are staggering and unprecedented: $879.6 million for Detroit, a city that is less than seven years removed from a bankruptcy that Washington didn’t send one extra dime to help settle.

Early estimates from a congressional committee show Wayne County could get a $339 million windfall, about 54 percent of the annual general fund budget for Michigan’s most populous county, which narrowly escaped the graveyard of bankruptcy court after Detroit emerged from Chapter 9 in late 2014.

Oakland County, Michigan’s second-most-populous and wealthiest, is to receive nearly $244 million.

Oakland County Executive Dave Coulter, a Democrat, acknowledges the county has no budget hole to fill — and he’s not sure yet how he’s going to dispose of a quarter-billion dollars.

“That’s a very good question — and it’s a complicated question, because it’s a lot of money and we want to spend it wisely,” Coulter told Crain’s. “I mean, just in its size and its breadth of what it can be used for, this is really a transformative opportunity — and I want to use it as such.”

The actual need for the aid varies from community to community, Coulter said.

In Ferndale, where Coulter was previously the mayor, the city has suffered a $1.5 million loss in revenue from parking over the past year due to the extended closure of dine-in service at its many bars and restaurants along the Woodward Avenue and Nine Mile Road commercial corridors.

The economic stimulus bill is providing $1.98 million to Ferndale, and the money could be used to supplant lost parking revenue used to pay down municipal debt, Ferndale Mayor Melanie Piana said Thursday.

Ferndale officials are considering using the federal stimulus funds to restore jobs in the recreation department that had to be cut last year when money got tight amid the economic upheaval of the pandemic, Piana said.

“We’re also talking about our small businesses and how do we best support them going forward,” Piana said.

Congress attached few strings to spending the money, other than prohibiting cities and states from depositing the money in underfunded pension funds to lower their long-term liabilities.

But the money could swapped for normal general fund revenue, freeing up that money to be used to pay down debts and liabilities, Freed said.

“I can assure you that’s what most communities probably will do,” he said.

The Michigan Legislature cannot use the money to make state-level tax cuts, but there’s nothing preventing counties, cities, villages and townships from issuing tax refunds or waiving future payments, said Michael LaFaive, senior director of fiscal policy at the Mackinac Center for Public Policy, a conservative Midland-based think tank.