Cities Have Never Seen A Downturn Like This, And Things Will Only Get Worse | KGOU
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Cities Have Never Seen A Downturn Like This, And Things Will Only Get Worse

May 20, 2020
Originally published on May 20, 2020 7:35 pm

The coronavirus has taken a hatchet to municipal budgets everywhere, forcing cities and towns to lay off librarians, parks workers and even first responders like police and firefighters.

From big cities like Detroit to small towns like Ogdensburg, N.Y., workers are being furloughed, programs are being cut and major capital projects are being shelved.

Houston, which has been hard hit by the drop in oil prices, is grappling with a sharp drop-off in sales tax and fee revenue that has left the city with a deficit of almost $170 million.

"This virus has had a much deeper adverse impact on the city of Houston than Harvey did, when more rain fell on this city than any other city in the history of the country," says Mayor Sylvester Turner.

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Turner recently proposed a budget that would temporarily furlough all city employees except for police, firefighters and solid waste department employees and delay incoming police cadet classes.

Nationwide, almost a million government workers were laid off in April alone, according to the Labor Department, and the numbers are almost certain to climb, as sales and income tax revenue dwindles.

"We will see an intense drop-off in sales tax and especially in your income tax collection between now and November, December and certainly we're looking two years out," says Emily Swenson Brock, director of the Federal Liaison Center at the Government Finance Officers Association.

While many cities have tried to spare first responders from job cuts, the International Association of Fire Chiefs says nearly 1,000 firefighters have been laid off and projects that 30,000 positions could eventually be affected.

The downturn for cities has been as sudden as it is severe:

  • In Detroit, casinos have been forced to close, depriving the city of a major source of revenue and leaving it with a $350 million deficit. Most city workers are having to take pay cuts and the city has had to tap into a $100 million program to tear down abandoned buildings.
  • Las Vegas has asked city workers to accept pay cuts and has told its unions it may lay off as many as 200 employees. "We are in the midst of the most serious fiscal crisis I think the city of Las Vegas has ever faced," City Manager Scott Adam said recently.
  • Los Angeles faces a deficit of nearly $600 million next year. Mayor Eric Garcetti has moved to cut many employee salaries by 10% and says many departments "will have to operate at sharply reduced strength."

Big cities like these have been able to tap into an unprecedented amount of federal aid, including a $500 billion short-term lending facility created by the Federal Reserve, and $150 billion in money from Congress, under the CARES Act.

Smaller cities aren't eligible for the programs, unless their states choose to pass on some of the money to them, Brock says.

With restaurants and stores closed, Newport News, Va., has seen a sharp drop-off in sales tax revenue and has had to cancel big capital projects like the construction of a downtown parking garage.

"You know we can't jeopardize our safety services like a fire and police, so we have to make sure those things are in the forefront before we look at projects on the wish list," says Mayor McKinley Price.

Projects like these are meant to help lure businesses into the city, and canceling them could hurt the city's economy long-term, he says.

"So it's kind of a domino effect when you start seeing things like that decrease," Price says.

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ARI SHAPIRO, HOST:

American cities and towns are bleeding money right now. The pandemic has sent tax revenues falling off a cliff, and local governments are cutting services and laying off workers. As NPR's Jim Zarroli reports, help is on the way from the federal government, but it won't reach everyone.

JIM ZARROLI, BYLINE: Houston Mayor Sylvester Turner doesn't mince words about his city's plight right now. It is, he says, worse than a natural disaster.

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SYLVESTER TURNER: This virus has had a much deeper adverse impact on the city of Houston than Harvey did, when more rain fell on this city than any other city in the history of the country.

ZARROLI: Turner says, with stores and restaurants shut down and big conventions canceled, revenue from sales tax and fees has plummeted. The city faces a deficit of nearly $170 million. He's proposed temporary furloughs for 3,000 city employees in every department except police, fire and solid waste.

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TURNER: We will face the worst budgetary gap in the history of the city of Houston - 184 years old. And this will be the worst budget that we will be having to face.

ZARROLI: And it's not just Houston. More than a million government workers were laid off in April alone - parks workers in Dayton, Ohio, librarians in Tacoma, Wash. And even some very critical jobs are being lost, like a thousand firefighters all over the country.

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UNIDENTIFIED JOURNALIST: Just six years out of bankruptcy, and the city of Detroit is facing another major money challenge. Like the entire...

ZARROLI: Detroit has had to cut the pay and hours of most of its employees. With its casinos closed, the city has lost an important source of funding. And the economy tends to decline well before tax revenues fall off, which means things are only going to get worse for cities everywhere, says Emily Brock of the Government Finance Officers Association.

EMILY BROCK: We will see an intense drop in sales tax and especially in your income tax collection between now and November, December. And certainly, we're looking two years out.

ZARROLI: There is some help coming. The Federal Reserve has set up a new $500 billion loan program to help cities and states weather the downturn.

BROCK: For the first time in our nation's history, the federal government has become a lender to state and local governments. This is unprecedented. This is a whole new ball of wax.

ZARROLI: Congress also included $150 billion for state and local governments in the CARES Act. But, like the Fed's lending program, the money only goes to large cities. It won't help places like Newport News, Va. The city is still trying to figure out how much revenue will fall. In the meantime, Mayor McKinley Price says the city has decided to scrap plans for new projects such as a downtown parking garage.

MCKINLEY PRICE: You know, we can't jeopardize our safety services like our fire, you know, and police. So we have to make sure the - those things are in the forefront before we look at projects on the wish list.

ZARROLI: Projects like these are meant to help lure businesses into the city, so Pryce says cancelling them could affect the city's economy far into the future.

PRICE: So, you know, it's kind of a domino effect when you start seeing things like that decrease.

ZARROLI: Even big cities that are getting money from the CARES Act are limited in how they can spend it. It can only be used for costs related to COVID-19. It's not supposed to be used for regular operating expenses. That means cities could eventually see trash piling up, potholes going unfilled and fewer cops on the beat.

Jim Zarroli, NPR News. Transcript provided by NPR, Copyright NPR.