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City finances are in trouble. Next year could be worse.

Justin Ho Aug 13, 2020
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The nearly empty streets of New York City in May. City budgets, which fund local infrastructure and services, have been slammed during the pandemic. Cindy Ord/Getty Images
COVID-19

City finances are in trouble. Next year could be worse.

Justin Ho Aug 13, 2020
Heard on:
The nearly empty streets of New York City in May. City budgets, which fund local infrastructure and services, have been slammed during the pandemic. Cindy Ord/Getty Images
HTML EMBED:
COPY

We got a new report Thursday from the National League of Cities, looking at the financial situation of American cities. Suffice to say, things aren’t great — on average, all major sources of tax revenue are down. And 90% of cities surveyed say next year’s financial situation is looking even worse.

The kind of services that cities fund are services people deal with every day.

“Police, fire, garbage, road paving, water and sewer,” said John Cranley, the mayor of Cincinnati.

His city relies heavily on income tax revenue, which has fallen with unemployment spiking. Cranley said the city’s had to borrow more to avoid layoffs in those services. It’s taking other measures, too.

“We’re not replacing retirees to avoid layoffs,” Cranley said. “And just over time, that diminishes the quality and the quantity of the service.”

Cities also rely on sales tax revenue, and consumers have been spending less.

Christiana McFarland, with the National League of Cities, is the report’s co-author. She said property tax revenue is likely to drop, too. But that drop-off likely won’t be felt until next year. As a result, cities are anticipating more cuts.

“Particularly when it comes to their municipal workforce, additional services, pulling back on capital and infrastructure projects,” McFarland said. “And these are all things that have broader effects on the national economy and the economic recovery.”

And when big projects are cut back or delayed, it means people won’t have services or infrastructure they need over a longer stretch of time, said Tracy Gordon, senior fellow at the Urban-Brookings Tax Policy Center.

“It makes perfect sense to not build a new bridge in the middle of a recession, like to hold back on that,” Gordon said. “But if you hold back on that year after year, then you don’t have that bridge.”

That affects a lot of people. A report last year from the University of Michigan found that 84% of the U.S. population lives in urban areas.

COVID-19 Economy FAQs

What are the details of President Joe Biden’s coronavirus relief plan?

The $1.9 trillion plan would aim to speed up the vaccine rollout and provide financial help to individuals, states and local governments and businesses. Called the “American Rescue Plan,” the legislative proposal would meet Biden’s goal of administering 100 million vaccines by the 100th day of his administration, while advancing his objective of reopening most schools by the spring. It would also include $1,400 checks for most Americans. Get the rest of the specifics here.

What kind of help can small businesses get right now?

A new round of Paycheck Protection Program loans recently became available for pandemic-ravaged businesses. These loans don’t have to be paid back if rules are met. Right now, loans are open for first-time applicants. And the application has to go through community banking organizations — no big banks, for now, at least. This rollout is designed to help business owners who couldn’t get a PPP loan before.

What does the hiring situation in the U.S. look like as we enter the new year?

New data on job openings and postings provide a glimpse of what to expect in the job market in the coming weeks and months. This time of year typically sees a spike in hiring and job-search activity, says Jill Chapman with Insperity, a recruiting services firm. But that kind of optimistic planning for the future isn’t really the vibe these days. Job postings have been lagging on the job search site Indeed. Listings were down about 11% in December compared to a year earlier.

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