Friday, October 23, 2020

A Warning Concerning the Financial Condition of US Cities

 Gillian Tett at the Financial Times writes:

In early 2020 Francis Suarez, mayor of Miami, Florida, was basking in a boom. His city was thriving and seeing buoyant revenues from property sales and taxes.

No longer. When Covid-19 struck the US, Mr Suarez became the first American mayor to test positive for coronavirus. He soon recovered from the disease, but Miami’s fiscal health has not. “We had a $20m surplus going into Covid and $25m deficit after — and started the fiscal year [in October] with a $35m deficit,” he told me last week.

He is not alone. “I am in a situation where I have spent down our reserve funds . . . cut every dime and nickel we can,” said Bill Peduto, mayor of Pittsburgh in Pennsylvania. “But we are still facing a $75m deficit out of a $600m budget.” Jenny Durkan, mayor of Seattle, Washington, echoed: “Our revenues have been decimated. Without help we are facing depressionary conditions.” 

Investors and federal policymakers should be paying attention to these concerns — not least because Seattle, Pittsburgh and Miami are probably among the better resourced and better run American cities...

[W]hile the muni bond market might seem peaceful, the real-world situation in cities and municipalities is alarming. Not only could the current fiscal squeeze eventually raise default rates, deficits are undermining the civic services needed to support recovery. “At the time we need emergency personnel the most, we will be forced to lay off police officers and firefighters and medical staff [without help],” Mr Peduto warns. Mr Suarez adds: “We are looking at the possibility of having to let go policemen and firefighters — those on the front lines.”...

[M]unicipal tax revenues have collapsed as jobs vanished, wealthy residents sometimes fled and commercial activity slowed. 
Under these conditions, you have some cities spending as though money is no problem. In San Francisco where revenues are collapsing, Mayor London Breed has launched a program to pay artists to paint the boarded-up windows of stores that haven't re-started and are creating no revenue of any kind for the city, as if there was actually money to start any new programs.

These politicians are not financial geniuses. They are not even mediocre astute.

This is not going to end well. Many cities will default if not bailed out by the federal government which would provide funds by having the highly inflationary act of having the Federal Reserve print money out of thin air.



  1. Let them collapse. They never will if they don’t.
    That may sound dumb, but screw them. All of them. Just like you mentioned painting boarded up businesses. Businesses that the state destroyed. Lives that the state destroyed. What a bunch of damn fools. I want the empire to die, and the more cities that collapse will just help it along. Sure going to suck for people, but it’s going to happen someday, and how destructive is their existence? If they don’t have the money to enforce their lockdown edicts(among other things)that is killing thousands of people and ruining millions, then perhaps more people will live even with the state dying and collapsing.
    Every since I can remember, really, I have been told that none of this is sustaining and the longer they kick the can down the road the harder it will be when it collapses. Well collapse already. Death isn’t the worst of Evils.

    1. Except the goal here could be for the banksters to end up being the local governments. That is they swoop in either buying up government monopoly services or loan the governments money (which they get from the fed as free/cheap) then later foreclose to the same ends.

      Now the banksters have a controlling leverage on the people who live in cities and towns they take over. Then comes the real squeeze.

    2. It would be interesting to see who owns or will own the property sometime from now after all the rioting and destruction.

  2. Notice how the threat is to eliminate services people generally want: police and firefighters.

    You never see these government clowns suggest getting rid of all of the bureaucrats who waste time, money, and resources to a "T" and who are often the ones that end up ruining lives with their petty rule enforcement.

    I'm with Joshua on this one: let them collapse.