Benton Harbor leaders seek $420,000 income-tax transfer to avoid local shutdown

Mayor (unnamed) urged the Benton Harbor City Commission to transfer $420,000 from the cityincome-tax fund to the general fund to pay outstanding bills and "allow for us to make payroll" and keep essential services running. "To move $420,000 from the city income tax to our general fund in order to pay outstanding payables or bills," the mayor said when announcing the proposal.

City Manager Collins told commissioners the city is facing a recurring seasonal cash-flow shortfall after federal American Rescue Plan funds and other one-time grants were largely spent. Collins said the citypreviously had about $10 million in ARPA funds that helped cover gaps but that those reserves have been drawn down. "That money drew down and then when the last one was used and gone, we went back to reality," Collins said, describing the return to regular ups-and-downs in revenues.

Officials listed specific near-term liabilities and expected receipts. The mayor said the water contractor FNB bills the city for maintenance and operations at "a little over about a $120,000 a month" and warned that unpaid contractor bills could disrupt water treatment and distribution. He said the city has "over 1,000,000 and outstanding bills" overall. The mayor also said the city expects roughly $330,000 in state shared revenue in April and an estimated $230,000 in marijuana-related revenue in late February; he said the county contributes about $50,000 for trash collection.

Unidentified Speaker 4 reminded the public that determining whether an "emergency" exists so income-tax funds can be repurposed is a legislative decision for the city commission: the commission must vote to allow use of restricted income-tax revenue. The mayor said Commissioners Deacon Fields and Shaquille Turner called a special meeting to take up the transfer; Commissioners Santana Warren (2nd Ward) and Jim Henderson (1st Ward) were also recognized as present.

Reporters pressed officials about the risks if the commission does not approve the transfer. Asked whether the mayor was describing a worst-case scenario, he said: "Absolutely. I mean, anytime you have people calling 911 because of a crime or emergency, and we can't respond because we don't have the manpower... So we lose one man that impacts our ability to provide safety as well and provide fire protection." He warned the city could make payroll through February but that beyond that point staffing and services could be affected.

City Manager Collins said the $420,000 is not a permanent fix and that the city will likely need additional cash through September and October. He said staff are preparing a deficit-elimination plan and are working with the Michigan Department of Treasury on cash-flow matters.

No formal vote on the transfer appears in the transcript. The special commission meeting called by Commissioners Fields and Turner is expected to consider the transfer tonight; the commission, as Unidentified Speaker 4 noted, must determine whether an emergency exists that allows restricted income-tax funds to be used for general obligations.

The meeting closed after a final round of questions; the mayor said the city will proceed with the manager's deficit-elimination work and continue efforts to grow the tax base through development and housing.