The Marquette Township Fire Hall is shown. Municipal planners, including those in Marquette Township, are coming to grips with the possibility that revenue from the state of Michigan will be reduced — perhaps significantly — because of the pandemic. (Journal file photo)

MARQUETTE — The COVID-19 pandemic is described by a local municipal leader as an “octopus with many tentacles.”

The public health crisis is just one facet of a complex — and some say dire — social and economic situation impacting businesses of all sizes, resulting in more than one million unemployment claims in Michigan alone as of Monday.

Local government is not immune to the impact of the virus, Marquette Township Manager Randy Girard said.

Girard was one of hundreds of local leaders who tuned in to a conference with the Michigan Department of Treasury and other state economic experts on April 20.

“The most significant thing that they passed along was that the state sales tax is at about 50% and they anticipate it to be worse as the year goes on. So that is going to impact our revenue stream going forward,” Girard said.

The amount of 6% sales tax collected determines constitutional revenue sharing funds to each city, village and township in Michigan.

The Michigan Constitution requires that 15% of the sales tax revenue received from the sales tax levied at a 4% rate be paid to eligible municipalities on a per capita basis. Constitutional revenue sharing is the largest revenue sharing program in the state. For example, the estimated spending of $835.3 million in fiscal year 2018-19 based on the May 2018 consensus revenue estimates according to a state Senate revenue sharing overview. But ultimately, payments are based on actual sales tax collections.

“The state Treasury Department just before the beginning of the calendar year anticipates what you can expect your revenue sharing to be predicated on what they figure the sales tax and the other components of the revenue sharing formula are going to generate,” Girard said. “For us in 2020, the estimate that they gave us in the beginning of the year was that our revenue sharing was going to constitute $343,010 and that was going to be broken up into six payments.”

During the April 20 call, Jeff Guilfoyle, chief deputy treasurer of the Michigan Department of Treasury, said coming up with revenue sharing and other state revenue estimates going forward is not expected to be easy.

“We are in uncharted waters from an economic standpoint. We know things are bad right now, but they are also changing rapidly, which makes it very difficult to put a good forecast together,” Guilfoyle said. “The economic outlook is changing with the epidemiological outlook, which means it is changing week to week and at times it feels like it is changing almost day to day.”

He said most of the economic data state leaders get comes out with a lag, so many of the economic indicators that have been published do not have the impact of COVID-19.

“However, what we do know is that more than one million Michiganders have filed for unemployment since early March and this represents between a quarter and a third of the workforce,” Guilfoyle said. “We also know that much of our economic activity is on pause. Bars and restaurants are obviously shut down, auto manufacturing plants have been closed. Many retail establishments are either closed or are seeing extremely diminished business right now. We do not know the duration of the economic downturn, but one thing that has become clear in the last several days is the impact of COVID-19 are going to likely be with us for some time.”

He said the continued bad economic news is going to have an impact on state and local revenues. A University of Michigan economic forcast released in early April for the United States and Michigan. The forecast, which included an estimate of state revenues, estimated that fiscal year 2020 combined general fund/school aid fund revenues were down about $2.6 billion from the January consensus forecast and for fiscal year 2021 the combined general fund/school aid fund were down about $3.2 billion from the January forecast. The estimates indicate “really significant drops for both the general fund and the school aid fund,” he said.

He said sales tax revenues are expected to see a similar impact.

“We don’t know how bad it’s going to be, but we expect April and May collections to be extremely depressed. Clearly at a level we haven’t seen before,” Guilfoyle said. “I think a 50% decline in sales tax collections in both April and May is not out of the question. As the economy starts to open up again, things will improve. But sales tax collections in the summer months are still likely to fall short of the January estimates as many workers are still going to be out of work which will dampen spending and consumers are still going to be fearful of going to restaurants, etc.”

Girard said the impact goes farther than just constitutional revenue sharing.

The issue will be compounded by two cases that are currently pending before the Michigan Tax Tribunal.

“On the revenue sharing side of it … I am looking at my 2020 budget and deciding ‘Where can I cut $50,000 to $60,000?'” Girard said. “(And) I have to presume that the tax tribunal is going to act the same way on Meijer that they have in the past and the same way on O’Dovero that they have in the past. Those will be tax losses.”

He said he expects the O’Dovero case will result in a three-year reimbursement of taxes and the Meijer case will probably result in a one-year reimbursement of taxes.

“I have no idea what those figures are going to be. But it is going to be sizeable,” Girard said. “Three years of tax return is coming right out of my general fund balance of about $400,000 so it’s very possible that that fund balance will be gone by the end of this year.”

He said federal aid under the CARES and other COVID-19 support packages passed by Congress are unlikely to help as they will only benefit communities with a population of 50,000 or larger.

“If you live in Oakland, Wayne or Macomb County or Kent County, you are going to get some help,” Girard said. “If you don’t, sorry.”

He said other sources of revenue have dried up as well.

“I don’t mean to be bleak, but we have very limited sources of revenue. We have fixed costs, that unless we stop doing things like fire protection and public works or we quit doing water or we quit doing sewer, what else can we do? We’ve already eliminated most of our projects,” Girard said. “We are having a hard time, our parks are all closed, our venues are closed. We are not renting the township hall, we have canceled all of those reservations for the rest of the year. It’s a much bigger impact, it’s not just revenue sharing. But how many times can the federal government give away $2.1 trillion.”

Lisa Bowers can be reached at lbowers@miningjournal.net.