photo: A line of shuttered shops in downtown Cincinnati.
A line of shuttered shops in downtown Cincinnati. Ian Johnson/Icon Sportswire via Getty Images

For Cities, This Is a Fiscal Disaster

America’s smaller towns and cities face a fiscal calamity. The next federal stimulus must save the local governments that face a financial crisis due to the coronavirus.

Until two weeks ago, I was serving as the assistant city manager for the city of Cincinnati. In this role, I helped advance and coordinate large economic development projects, like the new high-rise apartment complex just built in the booming Over-the-Rhine neighborhood and the downtown stadium under construction for the city’s Major League Soccer team, FC Cincinnati. I assisted with parks and recreation management, shepherded legislation through the City Council, worked on energy projects like Cincinnati’s effort to go 100% renewable through the use of solar energy, and coordinated with federal and state government agencies. I had been serving in this role for nearly five years, with no end in sight and exciting projects on the horizon for the community.

Then the coronavirus hit, stores and workplaces were shut down, tax payments were delayed, and Cincinnati suddenly faced a budget hole of over $75 million, with a state deadline to achieve a balanced budget by the end of June. Like many of my colleagues, I was placed on emergency furlough. About 1,700 city employees — a fourth of the overall city workforce — have been put on temporary leave, including the majority of the city planning department, neighborhood development officers, and the staff running the city’s award-winning low-income and school-based dental clinics.

This financial pain is structural and not anyone’s fault. Cities and states depend on April tax receipts for revenues, and this year these have been delayed until July or longer. All major cities in Ohio are dependent on an earnings or income tax, putting us in a particularly precarious position. In only a month, Cincinnati saw nearly a $100 million fiscal deterioration in its position for this fiscal year and the next, partially due to its dependence on earnings taxes for 70% or more of its general fund. Other cities saw worse: Facing acute shortfalls, Akron, Ohio, immediately laid off more than 400 city staff and prepared to cut the city budget by 25%. There is no way that even the best prepared, most fiscally responsible communities could sustain such an immediate blow, let alone the recession that is now underway.

Yet this fiscal crisis threatens to undermine the local governments that are working on the ground and around the clock to safeguard their populations and keep people alive during this crisis. Most American citizens largely rely on their local government to protect them, support them, transport them if they get ill, and provide basic, life-sustaining services. We simply cannot afford for our first line of government to fail or go broke. These local governments continue to do this important work, but right now they don’t have the resources they need, and their options to remedy that are limited. Cities cannot print money — during crises they rely on the federal government to backstop and support them.

However, the federal response to date, including the CARES Act, has been woefully insufficient with respect to the provision of aid to states, and particularly local governments. As a series of new Brookings Institution analyses have found, “the federal government has not yet treated the health-cum-economic crisis faced by…countless cities and states as a disaster that demands immediate fiscal relief for these governments on the front lines.” If this is not fixed, and soon, this will deepen and lengthen the economic recession the country is now feeling. In the last recession, local and state public spending dropped off a cliff and didn’t truly recover for almost a decade.

The CARES Act contains a particularly gaping hole when it comes to Cincinnati and cities like it. The act only provides direct aid for government operations to cities of more than 500,000 people. But it is the very cities and towns under this threshold that will now be the hardest hit economically without federal support. Kansas City, Oakland, Tampa, Louisville, Cincinnati, Buffalo, New Orleans, Albany, Cleveland, Anaheim, and Pittsburgh all fall beneath this poorly conceived threshold. And that doesn’t account for smaller, and even more vulnerable, counties, cities and towns, many of whom have faced decades of infrastructure decline, factories closed, jobs lost, and declining investment from businesses and the federal government.

Some cities below the 500,000 threshold will get support from their states and counties. But those government units desperately need the money too, and the fiscal support they give to cities likely will not arrive quickly enough or be sufficient, as research from the National League of Cities has demonstrated. It will not come close to balancing the books and making sure these governments can continue to provide the front-line service that is needed. The U.S. Conference of Mayors is working to lower the population threshold to 50,000 people — the current threshold for Community Development Block Grant allocations — in the next round. This must be done. It won’t matter how many checks, grants, loan guarantees or low-interest rates the federal government offers to Americans if our local governments do not have the physical capacity to rapidly and effectively support the recovery of communities.

In addition to providing the immediate funding to maintain local government operations, the forthcoming “phase four” stimulus should invest in cities to make them more resilient when the next disaster hits, which it assuredly will. As Matthew Yglesias of Vox has written, one key to doing better preparedness post-Covid-19 is to prepare not just for a recurrence of this exact virus, but to look more widely at the range of external threats, including diseases and natural disasters. This includes not just novel and ongoing public health menaces like antibiotic-resistant bacteria or mosquitoes spreading northward due to changes in climate, but extreme weather events such as hurricanes, floods, and tornadoes like those that hit the Southeastern U.S. last week. Therefore, the next stimulus ought to include massive investments in local public health and public transit agencies; critical energy improvements, such as public renewable energy projects and energy storage for critical facilities; and upgrades to buildings and housing so that people are living in healthier, more affordable conditions.

As a bonus: These things also improve local air quality, reduce respiratory vulnerabilities, make people less susceptible to health crises, and invest in the jobs and industries of the future.

These are not abstract concerns. Jobs, families, businesses, governments, and lives are all dependent on us getting this right. Every time the American people have faced a challenge of this scale before, they have risen to meet it, but always with critical support from their government. The help offered to date is not enough for wide swaths of this nation. Key omissions have to be addressed in the next round — and there must be a next round if our economy and society are to be spared. So many lives and livelihoods depend on it.

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