Big U.S. Cities are Facing Heightened Financial Troubles in the Post-Pandemic World

Unlike the federal government, local governments can’t run large deficits for long stretches; and although cities have rainy-day funds to help offset budget gaps, those funds will only get them so far, in the near term and in the long run. Cited in example is Boston’s $1 billion tax deficit over the next five years due to falling property-tax revenues amid the rise of remote work causing a slow and steady decline in commercial real estate prices. The full impact on property taxes remains unclear as office occupancy remains low and commercial real estate values decline. Further creating financial challenges is the ongoing Inflation that is not only impacting people’s wallets, but state and city budgets as well; and some cities such as New York City and Denver have been further financially pressured by the added expense of providing housing and social services for immigrants crossing the southern border, for which there remains no solution to the problem with Congress yet to pass an immigration reform  proposal to improve border security and tighten asylum rules. Across the country, local governments are struggling to figure out what the new normal is, budget-wise in the post-pandemic world, and how to deliver services and investments citizens depend on without breaking the bank. During the pandemic, unemployment insurance and stimulus checks not only kept households afloat, but prompted many people to start spending, thereby boosting sales-tax revenue. In addition, stimulus from the federal government provided financial support to states and cities, however, those sources of cash are starting to dry up; and for those cities that used the one-time money to start new programs, apply towards ongoing expenditures, or “temporarily paper over long-standing budgetary issues,” they now face the need to figure out permanent funding sources.