City Business as Usual?

Recently, our city council had its first somewhat regular meeting since the beginning of the great coronavirus panic. Something that night struck me as odd.

The schools have been closed. Restaurants, bars and entertainment venues have been shuttered. All “non-essential” businesses such as hair salons and music shops have been closed. Landlords are being told they can’t evict for non-payment of rent. These draconian actions are and will continue to have drastic negative economic consequences.

But during this meeting it became clear that the city administration somehow thinks it is immune from all this. That night, the council approved two leases totaling $16 million for new vehicles for the city. Many of these were for the utilities, parks and administrative departments. Only about $6 million was for squad cars and fire trucks. Yet we were told that all the leases were essential for the business of the city.

In an exchange with the deputy controller, it became evident that the city is still expecting to collect taxes as if nothing has changed. When asked about expected delinquencies, the administrations response was that people paid their taxes in the mortgages and those have been in escrow for months. In reality, 60 percent of the property taxes in our county bare from non-residential sources, and nearly half of the residential properties do not escrow. Many residential properties are rentals or don’t have mortgages.

The coming period of 30 percent unemployment caused by the various government edicts will have a dramatic impact on tax collections. When the owners of the retail and commercial institutions don’t get their monthly rent checks from their shuttered tenants, it’s likely they’ll hold off on paying their property taxes. When landlords for the masses of unemployed service workers don’t receive rent, they may delay payment until the second half of the year.

These are not sky-is-falling predictions. This is a likely scenario that could cause severe shortfalls exacerbated by bonding of TIF districts. For instance, general funds may have to make the scheduled interest payments for projects like the baseball park that depend on retail shopping centers, namely Jefferson Point.

At that meeting, I asked the administration for a pro forma analysis showing the impact to each department of a drop in revenues. To date, council has not seen it. While in the real world things are anything but business as usual, the government sector seems to think it can go on spending without breaking stride.