The fiscal crisis is emerging for many cities in the United States | Opinion – Pennlive

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AUTOR: John Reni Short, University of Maryland, Baltimore County

Five years after the start of the Covid-19 pandemic, many cities in the United States are still adapting to a new normal, with more people working remote and less economic activity in city centers. Other factors, such as underfunded retirement plans for municipal employees, are pushing many urban budgets into red.

Urban fiscal struggles are not new, but in historical terms they have mainly affected the US cities that are small, poor or obsessed with incompetent managers. Today, however, even major cities, including Chicago, Houston and San Francisco, have been subjected to serious financial stress.

This is a national threat, led by factors that include climate change, a reduction in the city center, the loss of federal funds and major pension and retirement commitments.

Why are cities fighting

Many cities in the United States face fiscal crises over the last century for various reasons. Most often, stress occurs after an economic decline or a sharp decline in tax revenue.

Florida municipalities began to overtake by default in 1926 after the collapse of a boom on Earth. Municipal defaults were common throughout the country in the 1930s during the Great Depression: with an increase in unemployment, the severity of the relief swelling and collecting taxes.

In 1934, the Congress amended the US bankruptcy Code to allow municipalities to submit a formal filed bankruptcy. Subsequently, 27 countries have passed laws that authorize cities to become debtors and seek bankruptcy protection.

Declaring bankruptcy was not a cure. This allowed the cities to refinance debt or to extend the payment schedules, but it could also lead to higher taxes and fees for residents and a lower payment and benefits for the city’s employees. And this can be spent a city for many years later.

In the 1960s and 70s, many urban residents and businesses left cities for adjacent suburbs. Many cities, including New York, Cleveland and Philadelphia, make it difficult for debt repayment as their tax bases shrink.

After the collapse of the housing market 2008-2009, cities, including Detroit, San Bernardino, California, and a hundredth, California, filed a bankruptcy request. Other cities face such difficulties, but are located in countries that do not allow municipalities to declare bankruptcy.

Even large, wealthy jurisdictions can get out of the financial rails. For example, Orange County, California, went bankrupt in 2002 after his cashier Robert Citron pursued a risky investment strategy for complex use, losing about $ 1.65 billion in taxpayer funds.

Today, cities are faced with increasing increasing costs and reducing revenue in many places. As I can see, the urban fiscal crisis is already a comprehensive national challenge.

Climate disasters

Climate changes and its concomitant increase in major disasters are financial pressure on municipalities across the country.

Events such as fires and floods have a double impact on urban finances. First, money should be spent to restore damaged infrastructure, such as roads, water lines and public buildings. Second, after the disaster, cities may either act independently or require under the state or federal law to make expensive investments in preparing for the next storm or fire.

In Houston, for example, court decisions after a few years of heavy flooding are forcing the city to spend $ 100 million in street repair and drainage by mid -2025. This requirement will expand the Houston annual budget to $ 330 million.

In Massachusetts, Cape Code cities spend millions of dollars on transition from septic systems to public sewer lines and upgrading wastewater treatment plants. The increase in the population dramatically increased the pollution of the water of the nose and the climate change promotes the flowering of toxic algae that feed on nutrients in the wastewater.

Increasing the uncertainty about the overall cost of mitigation and adaptation to climate change will inevitably bring rating agencies to reduce municipal credit ratings. This increases the costs of cities to borrow climate -related projects, such as shore protection and improvement of wastewater treatment.

Insufficiently funded pensions

Cities also spend a lot of money on employees, and many major cities are struggling to finance pensions and health benefits for their workforce. As municipal pensioners live longer and require more health care, costs increase.

For example, Chicago is currently facing a budget deficit of nearly $ 1 billion, which stems in part from the underfunded pension benefits for nearly 30,000 public officials. The city has $ 35 billion in unfinanced pension liabilities and nearly $ 2 billion in non -financed health benefits for retirees. Chicago teachers are due to $ 14 billion unfinanced benefits.

Politics research has shown for years that politicians tend to undergo retirement and retirement benefits for public officials. This approach unloads the actual costs of providing police, fire protection and education of future taxpayers.

Fighting in the city center and less federal support

Cities are not just facing increasing costs – they also lose revenue. In many cities in the United States, retail and commercial offices are reduced. The developers have upgraded commercial properties, creating unnecessary supply. More relaxed properties will mean lower tax revenue.

At the same time, the federal aid related to the federal aid, which announces municipal finances from 2020 to 2024, is decreasing.

State and local authorities received $ 150 billion through the Coronavirus Aid Action, Election and Economic Security in 2020, an additional $ 130 billion through the Law on the Rescue Plan in 2021. But now this federal large part – which some cities used to fill in Mounting fiscal cracks – is after all.

In my opinion, President Donald Trump’s administration is very unlikely to save urban areas – especially liberal cities such as Detroit, Philadelphia and San Francisco. Trump presented major cities ruled by Democrats in the darkest conditions, for example, calling Baltimore “rodent-infected porridge” and Washington, Colombia County, “Dirty, Trap for Death from Crime.” I expect that Trump’s animus against big cities, which was the main one of his campaign in 2024, could become a hallmark of his second term.

Resistance to new taxes

Cities can generate tax revenue on sales, business, properties and utilities. Increasing municipal taxes – especially ownership taxes – can be very difficult.

In 1978, California adopted a proposal 13, a vote measure that limited the increase in ownership tax to the percentage of inflation or 2% annually, which is more of a less. This high -profile campaign has created a widespread story that ownership taxes are out of control and make it difficult for local employees to support the increase in ownership tax.

Thanks to restrictions such as Prop 13, constant public opinion that taxes are too high and political resistance, property taxes tend to lag behind inflation in many parts of the country.

Crunch

When I accept these factors together, I see a fiscal crunch that comes to us. Small cities with low budgets are particularly vulnerable. But they are also bigger, more common cities, such as San Francisco with its office market collapse in the center or Houston, New York and Miami, which are facing increasing costs of climate change.

An urban manager who runs a rich municipality in the quiet northwest told me that in these difficult circumstances, politicians should be more prominent and open to their voters and explain convincingly and convincingly how and why taxpayers’ money is spent.

Efforts to balance the city’s budgets are opportunities to build consensus with the public about what municipalities can do and at what cost. In the coming months, they will show whether the politicians and residents of the city are ready for these heavy conversations.

This article was reissued by the Creative Commons license. Read the original article here: https://theconversation.com/a-fiscal-crisis-is-loming-for-many-us-Cities-249436S