With COVID-19 slowing local economies, cities and towns may need to tap rainy day funds
With COVID-19 slowing local economies, cities and towns may need to tap rainy day funds
The COVID-19 outbreak is likely to set off a long chain of economic dominoes. One possibility is that cities and towns might need to tap into their rainy day funds — the money they set aside for emergencies and economic downturns.
Here’s the bad news: There are many ways city finances will be affected by this crisis. Take airports, for example: They’re slowing down as airlines cut flights and people decide not to travel.
Bill Glasgall at the Volcker Alliance says cities collect fees and sales taxes from airports. Plus, “as people stay home, don’t want to be in a crowded store, sales tax revenues are going to be affected,” Glasgall said.
If people see their hours cut because they can’t get to work, that’ll mean less revenue for the cities that tax income.
All of this could make it harder for cities to pay for the services that their residents need, especially now.
Justin Marlowe at the University of Washington had some good news to share, though.
“Since the Great Recession, local governments have been deliberate about building their rainy day funds,” he said. “They’ve adopted formal rainy day fund policies.”
A recent report from Moody’s looked at the 25 biggest cities in the U.S. and found that most of them have built up enough reserves to get through a recession as severe as the last one.
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