COVID-19 Could Lead American Cities to Financial Ruin

Counties and cities across the country are struggling to balance the budget amid a sudden and unprecedented economic downturn caused by the COVID-19 pandemic.

The spread of COVID-19 has created a public health crisis while also triggering a financial calamity.

“This is something that really is hammering cities and it’s going to make decision making even harder.” – Adam Harris, The Atlantic

Record numbers of unemployment and stalled industry has left the federal and local governments scrambling. Cities big and small across the country will inevitably be impacted by this sudden economic halt. 


Listen: Are American Cities Prepared for a Looming Recession? 


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Adam Harris, staff writer at The Atlantic, recently wrote about the threat of insolvency many local governments face on the other side of the coronavirus pandemic.

Harris says previously considered safe bond markets have essentially froze as cities lose large amounts of tax revenue.

“Cities and counties across the country are looking for ways to cut their budgets as this economic activity and revenue is declining,” says Harris. For smaller cities this could mean a community’s only grocery store or hospital closes, forcing residents to drive long distances for essential services. 

The coronavirus relief bill passed by Congress was largest stimulus package in history but still may not be enough for struggling cities says Harris. A potential infrastructure bill and expansion to the Federal Reserves municipal bond relief powers could provide some much-needed reprieve.

Still, Harris says, cities and counties will be clamoring for more assistance and will have to make tough budgetary choices.

“This is something that really is hammering cities and it’s going to make decision making even harder,” says Harris. 

Crain's Detroit Business
Crain’s Detroit Business

Chad Livengood, senior editor at Crain’s Detroit Business, says the Michigan treasury department estimates that the coronavirus pandemic could have a $1 to $3 billion impact on the budget for this fiscal year.

“You take a quarter of a billion dollars out of two fiscal years and you’re going to see an impact on city services.” – Chad Livengood, Crain’s Detroit Business 

This loss will inevitably trickle down to the city-level in Detroit, where funding was already plateauing, says Livengood. The daily loss of revenue from shuttered casinos and reliance on income tax leaves Detroit in a very precarious position amid this health and economic crisis. On the city’s finances, Livengood says, “You take a quarter of a billion dollars out of two fiscal years and you’re going to see an impact on city services.”

Further Reading

Staggering: Record 10 Million File For Unemployment In 2 Weeks

The Other Way the Coronavirus Will Ravage Our Cities

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