Initial talk on 2021 Bloomington budget to come at Wednesday’s “budget advance” meeting, could include sidewalks

Bloomington’s city council will be meeting on Wednesday next week (April 29) for its annual “budget advance.”

It’s a part of the planning process for the mayor’s development of the budget for the city’s next fiscal year. The city’s fiscal year coincides with the calendar year.

Verson 2 Stacked Bar Chart for Rainy Day Reserves

Councilmembers historically have used the “budget advance” meeting to lay out for the administration some of their hopes for initiatives that might be funded next year.

Better sidewalks was a topic that councilmember Isabel Piedmont-Smith pushed at last year’s budget advance session.

More recently, at last Friday’s city council work session held about some capital street projects, the topic of sidewalks again got some air time.

Seeing the price tag for one component of a street project pegged at around $300,000, councilmember Kate Rosenbarger lamented the fact that it was a sum roughly the same as the council’s entire sidewalk budget for a year.

Also on Friday, councilmember Matt Flaherty inquired with staff about the status of discussions that might be taking place about bonding for a substantial investment in sidewalk repair and construction. Based on the response from staff, there’s not currently anything cooking along those lines.

Will topics like better sidewalks get stirred into the pot of the budget advance meeting next Wednesday?

This year the COVID-19 pandemic has injected a dose of uncertainty into funding streams like the local income tax, that have for the last several years shown reliable incremental increases from year to year. Local governments could be looking at precipitous drops in the coming few years, instead of incremental increases.

Asked at Friday’s weekly press briefing what kind of mindset councilmembers should adopt to make the budget advance meeting as useful as possible to the administration, Hamilton led off his response by saying, “Well, let’s use the word ‘cautious’ to start with.”

Hamilton described the city has having a good fiscal position, with strong reserves. Based on figures reviewed by the Square Beacon, in the general fund the city has about $16.7 million in reserves—counting the rainy day fund and account balances—for a general budget of about $46.7 million in 2020. That’s about a 35-percent reserve.

While both the city and county governments have substantial rainy day funds, the kind of revenue shortfalls that they could be facing aren’t the size that conventional fiscal planning has contemplated. At a recent meeting of Monroe County’s council, councilor Geoff McKim sketched out for his colleagues how the county’s rainy day fund could be wiped out, over the next two years.

McKim’s calculations were based on a 10-percent drop in local income tax revenues for 2021 and a 25-percent drop the following year, in 2022. Compared to current levels, those percentage drops would translate into a revenue shortfall of $6.7 million. So in two years that would wipe out the bulk of the county’s rainy day fund balance, which currently sits at $7.2 million.

Even though 2021 local income tax distributions are based on 2019 income, which should be unaffected by COVID-19 impacts, McKim was factoring in a possible drop in 2021 distributions, due to the extensions in filing deadlines that have been made by the state and by the IRS. The greater drop in 2022 distributions is based on the fact that the 2022 distributions will be based on incomes received this year, which are sure to be down.

How would McKim’s scenario apply to the city of Bloomington’s general fund?

Of the $46.7 million 2020 general fund budget, $12,457,998 of it (about 26 percent), comes from local income taxes.

A 10-percent drop in 2021, followed by a 25-percent drop in 2022, translates into a $4.36 million shortfall—just in the context of Bloomington’s general fund budget. That doesn’t include the shortfall in the public safety distribution of local income tax revenue ($3.27 million in 2020).

A similar shortfall in the public safety distribution would make for additional gap in local income tax revenues of another $1.14 million over two years.

That shortfall in local income tax revenue over two years would come to $5.5 million, which is at least a half million more than the $4.86 million in the city’s rainy day fund.

The scenario that McKim sketched out is more dire than the worse of two different scenarios in an April 9 study released by Ball State’s Center for Business and Economic Research.

That study considers two basic scenarios. Scenario 1 is a mild disruption from March through June, with a return to a 2019 baseline for the second half of 2019. Scenario 2 assumes the same declines from Scenario 1 with a continued impact for the rest of 2020.

The worse scenario translates to a total local income tax revenue loss to jurisdictions in Monroe County of $3,828,563, compared to the current amount of $32,825,468. That works out to about an 11.6 percent reduction in income tax revenues for 2020. That compares to a 25-percent decrease assumed in McKim’s calculations.

But the Ball State study includes a caveat that even the worse of the two scenarios could be too rosy:

Some cautions are in order. We have been observing and participating in economic estimates of the impact of COVID-19 since January. The only consistent observation over this period is that every projection has worsened following later analysis. Our Scenario 1 is especially rosy, suggesting a return to normalcy and baseline economic conditions in the second half of 2020. Scenario 2 is more likely, suggesting continued economic performance well below baseline through 2020. Indeed, this forecast is for a three-quarter recession that is greater than any in the post-war period. This too might be optimistic.

Impact of revenue forecasts on sidewalks?

After the Friday’s city council work session when councilmember Matt Flaherty floated the idea of bonding for substantial investment in improved sidewalks, The Square Beacon followed up with him.

The idea of bonding to address needs for additional sidewalks in the city as well as repair of existing sidewalks is not novel. It got passing mentions at meetings of the city council’s sidewalk committee last year. The existing sidewalk project requests total about $17 million worth of projects, compared to a roughly $300,000 annual budget.

Will Flaherty be pushing for a substantial new investment in sidewalks at a time when revenues are so uncertain?

It’s not off the table. While the city must be cautious, Flaherty said, “I think the uncertainty of our current situation is a strong argument to look at everything with a critical eye. Where are we spending money that could be redirected to more equitable uses that better serve vulnerable or marginalized residents?”

About the idea that investing in more and better sidewalks would put concrete ahead of people, Flaherty said, “Spending money on sidewalks is spending money on people. In particular, it is prioritizing money on the most vulnerable users of our streets. I simply wouldn’t characterize investments in the health and safety of our residents—through a better transportation system—as investments in concrete.”

The repair of existing sidewalks is currently the responsibility of adjoining property owners. The Herald-Times quoted councilmember Piedmont-Smith about sidewalks at last year’s budget advance meeting saying, “They’re in terrible shape, and we need to start reconsidering the policy of making private property owners pay for 100 percent of the costs.”

The city’s sidewalk assessment puts the portion of the city’s sidewalks in the “good” category at about 65 percent. A bit more than 3 percent, or almost 8 miles worth of sidewalks, are rated in poor condition.

Sidewalk Condition Miles Percent
GOOD 152.596 64.67%
FAIR 75.603 32.04%
POOR 7.775 3.29%

The condition of one section of sidewalk along North College Avenue is at the center of a lawsuit pending against the city of Bloomington, involving a scooter crash. The plaintiff contends that the city has liability for injuries to the plaintiff who was navigating the sidewalk with an electric scooter.

The trial is currently set for May in 2021.

cropped 2020-04-26 sidewalk IMG_0141
Section of sidewalk on North College Avenue near the place that is the subject of current litigation against the city of Bloomington. April 26, 2020 (Dave Askins/Square Beacon)

Information on how to join the Zoom videoconferencing call for the council’s Wednesday budget advance meeting is available in the meeting information packet.