The city of Benton Harbor is preparing to seek a $1 million loan to help stabilize its finances moving into the next 24 months.
Speaking to the Personnel and Finance Committee this week, City Manager Alex Little said due to several high-cost expenses that have arisen in the past few years, the city will soon have deficient funds. He’s been talking with the Michigan Department of Treasury about seeking the lifeline.
“What we’re looking at doing is borrowing a million dollars, which would be packaged and handled by the municipal finance authority that would, in essence, talk with various lenders to get a buyer to take it,” Little said.
Little said a mechanism is being created for the city to pay back the funds.
“The loan is being secured by the fact that they will intercept part of the state shared revenue. You heard a mention a few minutes ago, state shared revenue you get every two months. They would intercept and hold a part of that, each distribution, and hold it in escrow to be used to pay off this loan.”
When asked what would happen if the city failed to pay back the loan, Little said that wouldn’t be possible because the payments would automatically be taken out of revenue sharing payments by the state. He warned without some help, the city will be unable to cover its obligations.
“If we get to a point where suddenly we’re not able to pay bills and not able to make payroll, we’re back to where we were when they sent somebody in here back in 2013, 2014.”
Little said the expenses that have strained the city’s finances include required work at the water plant, legal bills related to the city’s water crisis, and the recent clawback of some federal funds that had been spent as part of the lead water line removal program. In that case, he said a change in the presidential administration resulted in the feds calling back about $1.5 million that had been spent fixing streets and sidewalks related to that effort.
Little is predicting the $1 million loan could help carry the city through about two years of stabilization to get it back on solid ground. The committee took no vote on the matter.
