new national league of cities report predicts cancelled capital projects due to tightened pandemic economics

The latest annual report looking at the fiscal condition and challenges of metropolitan areas across the country underline the negative impact of the Covid-19 outbreak and subsequent economic shutdown.

According to the City Fiscal Conditions 2020 report published by the Washington-based National League of Cities, nearly 90 % of all cities will prove less able in fiscal year 2021 to meet the fiscal needs of their communities than they were in the previous fiscal year.

On average, the nation’s cities are anticipating a 13% decline in 2021 fiscal year revenues over fiscal year 2020, with sales tax revenue seeing an 11% drop, and income tax receipts off by 3.4%.

The picture, according to the report, looks even more challenging in the face of likely declines in both federal and state support: “In this environment, cities’ balanced-budget requirements and revenue-raising restrictions” are resulting in service cuts, hiring freezes, and rollbacks in capital projects.

The report notes that the revenue decline caused by the pandemic is more severe than most U.S. cities experienced during the Great Recession.

Based on the input of leaders and officials from cities ranging in size from 10,000 to more than 300,000 people, with cities in the West comprising the largest response, the report also notes than 87% of respondents said they will be less able to meet the fiscal needs of their cities in the 2021 fiscal year—up from 24% similarly responding in 2019.

Because of a lag time of up to 18 months and more between changed economic conditions and the impact on revenue, the report suggests that further city service cuts and capital project cancellations may be in the offing.
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In a press release accompanying the report, it was noted that the revenue decline that took 6 years to fully play out in the Great Recession is “already happening in just the few short months of this pandemic downtown,” adding: “And it won’t go away easily.”

By Garry Boulard

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