The COVID-19 pandemic is disproportionately infecting the already
chronically ailing fiscal health of Democrat-run states and cities that
are least positioned to recover any time soon, if at all.
Former New York state lieutenant governor Richard Ravitch, now a director of the Volcker Alliance, observed that budget ravages of the global financial crisis and years of fiscal denial in 2009 doesn’t compare with the toll that COVID-19 is inflicting on municipal finance because this time, revenue shortfall is horrific. “There’s an enormous loss of revenue going on, and we don’t know how long it will last.”
Massive business shutdowns and huge numbers of people either unemployed or working from home are draining operating budgets and prohibiting existing debt repayments from many vital revenue sources.
Included are sales, income, real estate and gasoline taxes, bridge and tunnel tolls, airport fees, and public transit fares.
After receiving a $3.9 billion federal bailout in May, New York City’s transit authority, the largest in the nation, is now seeking $12 billion more.
And New York state is freezing hiring, pay raises, and new contracts -plus holding back one-fifth of payments that had been earmarked for local governments, health care, K-12 schools and higher education, transit systems, and payments to nonprofits contracted to provide foster care.
The multi-billion-dollar question now is how many municipal bond issuers — states, cities and others — won’t be able to repay investors. By law, states can’t go into bankruptcy, although Arkansas defaulted on its debts in 1933.
Last May, Fairfield, Alabama, a suburb of Birmingham, became the first city to declare bankruptcy since Detroit in 2013............To Reads More.....
Former New York state lieutenant governor Richard Ravitch, now a director of the Volcker Alliance, observed that budget ravages of the global financial crisis and years of fiscal denial in 2009 doesn’t compare with the toll that COVID-19 is inflicting on municipal finance because this time, revenue shortfall is horrific. “There’s an enormous loss of revenue going on, and we don’t know how long it will last.”
Massive business shutdowns and huge numbers of people either unemployed or working from home are draining operating budgets and prohibiting existing debt repayments from many vital revenue sources.
Included are sales, income, real estate and gasoline taxes, bridge and tunnel tolls, airport fees, and public transit fares.
After receiving a $3.9 billion federal bailout in May, New York City’s transit authority, the largest in the nation, is now seeking $12 billion more.
And New York state is freezing hiring, pay raises, and new contracts -plus holding back one-fifth of payments that had been earmarked for local governments, health care, K-12 schools and higher education, transit systems, and payments to nonprofits contracted to provide foster care.
The multi-billion-dollar question now is how many municipal bond issuers — states, cities and others — won’t be able to repay investors. By law, states can’t go into bankruptcy, although Arkansas defaulted on its debts in 1933.
Last May, Fairfield, Alabama, a suburb of Birmingham, became the first city to declare bankruptcy since Detroit in 2013............To Reads More.....
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