downtown Peru

In this file photo, cars travel through the center of Peru on North Broadway on January 5, 2016.

PERU – The City of Peru will likely have a $300,000 revenue shortfall next year due to shrinking tax revenue caused to the economic fallout from the COVID-19 outbreak.

Eric Walsh, a financial advisor with Baker Tilly, which was hired by the city to help with budgets, told the Peru City Council on Monday that the city’s local income tax revenue is set drop by around $200,000 due to job layoffs and a reduced workforce caused by the pandemic.

That number will also drop due to the closure in March of the Schneider Electric Square D plant, which was one of the largest employers in the county with around 300 workers.

In total, Walsh estimates the city would have a $300,000 shortfall in the budget due to a loss in overall tax revenue this year.

“We don’t have a crystal ball,” he said. “But I would definitely say you’re going to see a reduction. … You’re going to feel that pain, if you will, next year.”

That comes even as the city slashed its 2021 general fund budget by around $300,000, dropping it from about $6.3 million for this year to $6 million next year.

Walsh said even with the smaller budget, the city will still likely have to dip into savings to fully fund the budget if the city ends up spending all the allocated amounts.

“You’re seeing some revenue shortfalls that I think are going to pinch you a little bit,” he told the council.

On top of that, the city is also projected to lose about $84,000 in gas tax distributions from the state. Walsh said the city this year received $460,000 in gas taxes. That number next year is projected to drop to $376,000 due to fewer people driving during the pandemic.

That loss in revenue comes as the city plans to increase the amount of projects the gas tax money would fund. Next year’s budget allocates $1.1 million to the motor vehicle fund, which pays for paving projects and street department funding. That’s up from $830,000 in this year’s budget.

Walsh said the motor vehicle fund is now running out of its cash reserves, and needs an infusion of money in the upcoming years to keep it solvent.

“We really need to start building up the motor vehicle fund after this year,” he said. “ … How are we going to do that? We’re going to have to rely on some other funds or on some cost reductions.”

Councilmember Betsy Edwards-Wolfe said given the projected financial shortfall next year, the city should start finding ways to save money. She suggested trying to make the Peru Airport and the Peru Municipal Golf Course self-sustaining. Right now, the city pays about $100,000 in taxpayer money to both entities.

“These are great things that we have, but only a small amount of people are using them and we’re paying all this money out,” she said. “I think we need to figure out a way where they could self-support or come closer to funding themselves.”

Walsh said one silver lining for the city’s 2021 budget is a plan by the state to distribute 14 months of income taxes to municipalities next year to help offset losses caused by the pandemic. He said the state would then distribute less income tax in following years, once the economy recovers.

The council is set to vote on the first reading of next year’s budget during its regular October meeting.

Carson Gerber can be reached at 765-854-6739, or on Twitter @carsongerber1.

Carson Gerber can be reached at 765-854-6739, or on Twitter @carsongerber1.

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Carson Gerber is a reporter for the Kokomo Tribune and can be reached at 765-854-6739, or on Twitter @carsongerber1.

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