While the human toll can’t be underestimated, cities are now also facing the financial ramifications of the coronavirus pandemic.
The City of San Francisco estimates a budget shortfall of up to $1.7 billion over the next two fiscal years due to the coronavirus pandemic, the mayor said.
The shortfall refers to the gap between spending plans and available money to fund them.
The Joint Report Update, issued by Controller Ben Rosenfield, the Board of Supervisors Budget and Legislative Analyst Severin Campbell and the Mayor’s Budget Office, forecasts that the previously projected deficit of $420 million will increase to between $1.1 billion and $1.7 billion due to revenue shortfalls related to the public health crisis.
In the current fiscal year, the report projects a budget shortfall of between $167 million and $288 million, primarily driven by losses in hotel and transfer tax. The report estimates revenue losses of $330 million to $581 million in FY 2020-21, and losses of $214 million to $382 million in FY 2021-22.
“The coronavirus pandemic is an immediate threat to our public health and we’re doing everything we can to slow its spread and save lives, but we know that it is also having a major impact on our economy and our city’s revenue,” said Mayor London N. Breed. “The economic impact that is already hurting our residents and businesses is also going to require difficult decisions by the city moving forward.”
Mayor Breed sent a letter to the city’s department heads urging them to reduce costs and curb spending in the current fiscal year. She instructed departments to focus resources on essential programmes and the coronavirus response.
Hiring, except for essential workers, is frozen and all non-essential capital projects funded in the current year and other projects that haven’t yet started will be paused.
“The months and years ahead will be challenging, but we have risen out of crisis before."
The city’s budget timeline has also been delayed by two months to provide time to readjust spending plans. It will now be signed off by the mayor in October. The Board of Supervisors will shorten its summer recess to meet the new timeline.
“The months and years ahead will be challenging, but we have risen out of crisis before, and we will need to make critical decisions that will lead us back to fiscal health,” said Supervisor Norman Yee, President of the Board of Supervisors.
Other cities are also facing a similar financial crunch. For example, The Atlantic reports that New York City could lose $4.8 billion to $6 billion in tax revenue, quoting the city’s financial controller.
On March 27, US Congress passed a $2 trillion economic stimulus package, the largest initiative of its type in US history. The bill includes $200 billion for “temporary fiscal relief for states and cities” but this is only available to those with populations greater than 500,000. The US Conference of Mayors (USCM) called this threshold “high and arbitrary” and urged the government to lower it to 50,000.
“I’m the fifth-largest city in Florida and I don’t qualify,” St. Petersburg Mayor Richard Kriseman told POLITICO. “I’m on the front lines trying to make difficult decisions and these resources are not going to get through to me and cities like me.”
St. Petersburg has a population of around 265,000. Kriseman said smaller cities need assistance as much as larger ones.
“We’re struggling to stay open and survive,” he commented. “People are certainly afraid of whether they’re going to be able to come back from this.”
In collaboration with Bloomberg, USCM is delivering a programme to help US cities secure federal aid and monitor expenses.
The economic impact of the pandemic will, of course, be felt by cities worldwide. The Centre for Cities noted that cities and large towns account for around 60 per cent of the UK’s economic output and more than half of the population.
“Once the immediate crisis is over, the government will need to consider how it can help the towns and cities most economically affected by coronavirus rebuild their economies,” a statement said.
The urban policy and research organisation noted that lockdown measures introduced by the government to slow the spread of coronavirus have had a "huge economic impact" already and that some parts of the country will feel the negative effects more acutely than others.
“Places with stronger highly skilled, information-based economies – mostly in the Greater South East – have been able to more easily adapt to working from home, ensuring that some parts of the economy continue to function. However, other areas – mostly in the North and Midlands – with weaker, low-skill, service-based economies have been less able to do this,” the Centre for Cities said.
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