If Benton Harbor voters approve income tax, manager would pay down pension liabilities

Oct 18, 2013

Benton Harbor Emergency Manager Tony Saunders is breaking months of silence on a proposed city income tax. Saunders says he has some concerns about the proposal.

“I want to make sure we have a strong climate for business investment here. Also, you know this is one of the poorest cities in Michigan, so the last thing I want to see is our citizens being taxed once again when they’re already struggling to make ends meet,” Saunders said.

Still, Saunders says he’s willing to let voters decide the issue. Elected city officials got the proposal on the ballot. They say Benton Harbor needs the revenue to invest in infrastructure improvements and to replace other revenue streams that are expected to go away in the next couple of years.

People who live or work in the city would have to pay the tax, if voters approve it. Whirlpool, the world’s largest appliance maker, is based in Benton Harbor.

More than 20 cities in Michigan already impose an income tax. Most have a rate of 1% on residents and 0.5% on nonresidents. Grand Rapids, Detroit, Saginaw, and Highland Park have higher rates.

For a while, Saunders hadn’t said much about the potential revenue. Now he’s speaking up, letting residents know what he’d do with the revenue if the proposal passes next month.

“If this thing passes, there’s no pie in the sky vision about what to do with this money. We need to be really practical,” Saunders said.

Saunders says paying down Benton Harbor's legacy costs is practical. He says the pension funds remain underfunded. He says he’d put most of the money towards covering that liability. Roughly 23% of the city’s annual revenue goes towards legacy costs.

Saunders still hopes to have the city's finances in good enough shape to return local control to elected officials as early as the end of this year.