by Sam Hieb
Well it’s budget season for cities in North Carolina and everywhere else—and forgive me for stating the obvious–the coronavirus outbreak will seriously impact those budgets. The North Carolina League of Municipalities warned back in April:
North Carolina cities and towns face urgent needs in three areas.
Financial: Sales tax revenue accounts for approximately $1.3 billion annually, or 28 percent of the general operating budget for the median city in North Carolina. Occupancy taxes, which result primarily from the tourism industry, account for another $300 million for local governments. Local water systems serve 89 percent of the state’s population. All three will be severely impacted by this crisis—sales and occupancy tax revenue due to significantly diminished commercial activity, and utility revenue through non-payment and commercial/industrial customer loss.
Wynia also noted that 31 percent of municipal budgets go towards public safety, meaning that without support towards maintaining local cash flows, cities and towns will be forced to make budgetary cuts to critical areas.
Meanwhile, in Winston-Salem:
Stay-at-home orders and the shuttering of businesses will take a big bite out of budgets. Tax collections are way down, and that eats into the revenue that flows back to cities after being collected by the state.
“Right now, we are developing a budget assuming the country will be in a deep recession for at least the remainder of 2020,” wrote Ben Rowe, an assistant city manager, in an e-mail. “Sales taxes, occupancy taxes (i.e. hotel/motel taxes), and property taxes are the primary revenues that we are monitoring.”
Loss in income, in city budgets the same as in households, means belt-tightening. You and I might cut out such extras as eating take-out or Hulu subscriptions; municipalities often turn to recreation and parks first.
….and in Charlotte:
City Manager Marcus Jones said he does not plan to spend “a penny” from Charlotte’s “rainy day” funds in the coming fiscal year, despite the coronavirus pandemic drastically reducing tax revenue.
Jones presented his proposed $2.55 billion budget to the City Council on Monday evening — a 3% decrease from last year — that he said manages to maintain core city services and ongoing projects.
“I know it would be irresponsible for us to dip into the operational reserves when you have a structurally balanced budget,” Jones said.
The city’s general fund would be $718.8 million, a decline of about 1.2% from last year.
Needless to say–this is especially true in Charlotte— projects that were to be funded with taxes on hospitality, tourism, food and beverages–the industries hit hardest by the coronavirus–are now questionable. Once again we’re learning the hard way about the dangers of government straining systems in good times.