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With No Federal Help Coming, Cities Cling to the Financial Cliff
New York, New York, USA
Media, Investment, Business, Technology
Patrick Sisson
Date Published: 
COVID-19, Economy, Government, Public Policy, Stimulus, Louisville, Kentucky, Cities
Tapestry Statistics:
2020-12-26 14:48:38
2020-12-26 14:55:52
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Stacie Scott/Bloomberg
State and local governments have been left out of a Covid stimulus deal, even as nearly 3 in 10 cities say they will be “significantly impacted” without federal relief.

No level of government has escaped harm or fiscal damage related to the coronavirus crisis. But the fluctuations in municipal revenue caused by the pandemic — left conspicuously unaddressed by the latest version of a federal stimulus bill — reflect both long-term trouble for U.S. cities and the deeply uneven state of local economies.As of Friday, the $900 billion Covid-19 stimulus bill, negotiated in tandem with a $1.4 trillion stopgap funding package to keep the government open, includes money for vaccine distribution and schools, $300-a-week jobless benefits, roughly $300 billion in new small business loans, and a new round of $600-per-person stimulus checks. But direct relief for states and cities that have been hammered by revenue losses does not appear to be forthcoming.

The lack of direct aid in the deal means that Congress has “abandoned American cities,” said Mayor Greg Fischer of Louisville, Kentucky, president of the U.S. Conference of Mayors, in a statement. “There is no doubt that the pandemic has wrecked the budgets of local governments from coast to coast, and Washington’s unwillingness to help will cost people jobs and make communities less safe. Nearly 1.3 million state and local government employees lost their jobs over the last year — exceeding the total number of public sector jobs lost during the Great Recession. History has shown us that we cannot have a strong economy without strong cities. Congress is now making it much harder for our economy to rebound.”

Those concerns have been echoed elsewhere. “Cities, like states and other local governments, face a one-two punch in every recession,” says Tracy Gordon, a senior fellow at the Urban-Brookings Tax Policy Center. “I’m incredulous that they’re not providing state and local aid, especially since a recent CBO report shows that state and local aid provides the most bang for its buck, in terms of helping the GDP,” says Gordon.

In a statement, National League of Cities Executive Director and CEO Clarence E. Anthony also expressed dismay over the terms of the plan: “Although this week began with lawmakers predicting a ‘Christmas miracle,’ it is now clear that all they were able to deliver was a lump of coal in the stocking of every mayor across the country.”

The landscape of fiscal distress across U.S. municipalities varies widely, as do sources of city revenue. In-person economic activity such as restaurants, shops, the service industry and office work has slowed or shuttered entirely, damaging a constellation of small businesses and tanking revenue from sales taxes and parking fees. The virus-driven drop in travel and consumption affected just about every municipality that depends on hotel taxes, air transportation charges, and sales taxes (recent bumps in sales tax revenue, for instance, may just be the echoes of earlier infusions of stimulus dollars). New York and San Francisco have seen steep drops in hotel revenue; tourism spending in cities like Orlando, Las Vegas and Honolulu could take years to recover. In April, Louisville predicted a $115 million budget shortfall over the coming 14 months. Overall, a May analysis from the National League of Cities estimated that municipalities stood to lose $360 billion between 2020 and 2022.

“It’s not anybody’s vision of a city,” says Gordon. “It’s fear, and people don’t want to transact in the marketplace.”

The pain has not been shared evenly, however. Wealthy professionals, who can work and earn money at home, have enjoyed a far more stable financial situation in 2020. The skyrocketing stock market and run on high-end residential real estate has even led to asset appreciation for many, and helped some areas escape worst-case financial scenarios.

New York City’s budget tells the same story; while tax revenues between March and August fell by $1.2 billion, the drop was smaller than expected, in large part because of the rise in property taxes (a 3.9% rise to $16.3 billion), which offset a decline in sales tax revenue (23.2% drop, a loss of $918 million). Thanks in large part to great performance in the stock market and securities industry, the city collected $985 million more revenue than expected from July through October.

While such windfalls have led some to say the urban fiscal crisis isn’t as bad, or doesn’t require substantial federal aid, cities still find themselves

Organizations Mentioned: (2)
Center for American Progress
Washington, DC, USA
Non-profit, Public Policy
NLC | National League of Cities
Washington, DC, USA