A fiscal crisis is increasing for many American cities

five years later Kovid -19 epidemic startsMany American cities are still adjusted to a new general, more people are working far and less economic activity in city centers. Other factors, such as Low pension scheme For municipal employees, many of the city budgets are pushed into red.

Urban fiscal conflicts are not new, but historically they have mainly influenced American cities that are small, poor or unhappy with disabled managers. Today, however, even large cities, including Chicago, Houston And San franciscoSevere financial stress.

It is a nationwide threat, inspired by factors that include climate change, decline in downtown activity, loss of federal money and large pension and retirement commitments.

Why do cities struggle

Many American cities have faced fiscal crises in the last century for various reasons. Usually, stress occurs after a sharp decline in economic recession or tax revenue.

Florida municipalities started default in 1926 Falling of a land boomMunicipal omission was Across the nation During the Great Depression in the 1930s: as unemployment, relief burden was bloated and tax collection decreased.

In 1934, Congress amended the US bankruptcy code Allow the municipalities to formally file for bankruptcyLater, 27 states enacted laws That authorized cities sought to become a debtor and insolvency conservation.

Declaring bankrupt was not a cure. This allowed cities to refinance loans or spread the payment program, but it can also create high taxes and fees for residents and low wages and benefits for city employees. And this can later tarnish a city for many years.

In the 1960s and 1970s, many urban residents and businesses left cities around the suburbs. many citiesInvolved New yorkCleveland and Philadelphia found difficult to repay the loan as their tax hideouts shrunk.

Cities including cities in view of the collapse of 2008-009 housing market Detroit, San Bernardino, CaliforniaAnd Stockton, Californiafiled for bankruptcy. Other cities faced similar difficulties, but were located in states that did not allow the municipalities to declare bankruptcy.

Even large, rich jurisdies can move away from financial rail. For example, Orange County, California, insolvency in 2002 Its treasurer, Robert CitronChasing a risky investment strategy of complex leveraging deals, lost some $ 1.65 billion in the taxpayer fund.

Today, there is an convergence of rising costs in cities and reduction in revenue at many places. As I see it, the urban fiscal crisis is now a broad national challenge.

Climate-driven disasters

Climate change and its hostess growth in major disasters is putting financial pressure on municipalities across the country.

Incidents such as wildfires and floods have a twice the impact on the city’s finance. First, money is to be spent on reconstruction of damaged infrastructure, such as roads, water lines and public buildings. Second, after the disaster, the city can either work on its own or be required under the state or federal law to make expensive investments in preparation for the next storm or wildfire.

In Houston, for example, after several years of severe floods, court decisions are forced to spend the city to spend $ 100 million Road repair and drainage By mid -025. This requirement will expand the deficit in Houston’s annual budget $ 330 million,

Among Massachusetts, Cape Cods are cities Spend millions of dollars To switch to public sewer lines from septic systems and upgrade waste water treatment plants. Population has increased Rapid water pollution Promoting on cape, and climate change Toxic algae blooms Feed on nutrients in waste water.

Increasing uncertainty about the total costs of reducing and optimizing climate change will essentially lead rating agencies to downgrade municipal credit ratings. This increases the cost of cities for borrowing funds for climate -related projects such as protecting coastline and improving waste water treatment.

Low pension

Cities also spend a lot of money on employees, and many big cities are struggling to fund pension and health benefits for their workforce. As the municipal retired people live for a long time and require more health care, the cost is increasing.

For example, Chicago currently faces one Around 1 billion dollar budget deficitWhich is partially stems from low retirement benefits for about 30,000 public employees. Unpublished pension liabilities in the city are $ 35 billion and about 2 billion dollars have retired retired health benefits. Chicago teachers have a profit of $ 14 billion.

Policy is studies Has shown for years These politicians reduce retirement and pension benefits for public employees. this approach Closes the actual cost To provide police, fire security and education on future taxpayers.

Struggling city and less federal support

Cities are not only facing rising costs – they are also losing revenue. In many American cities, retail and commercial offices economies are decreasing. Developers have overbuated commercial properties, Creating an additional supplyMore limited assets will mean reducing tax revenue.

At the same time, the federal assistance related to the epidemic has been decreasing to cushion the finance of the municipality since 2020 through 2024.

State and local governments received $ 150 billion through 2020 Coronvirus Assistance, Relief and Economic Security (CARES) Act And additional $ 130 billion through 2021 American rescue scheme actNow, however, this federal largacy – which is used to fill the growing fiscal cracks in some cities – At the end,

In my view, the administration of President Donald Trump is unlikely to grant bail to urban areas – especially more liberal cities such as Detroit, Philadelphia and San Francisco. Trump has Large cities ruled by Democrats were depicted in dark words-For example, Calling the bucket A “rodent-enhanced mess” and Washington, DC, a “dirty, crime-deformed death.” I hope Trump’s Animus against big cities, which was A head of his 2024 campaignCan become the identity of its second term.

Resistance to new taxes

Cities can generate revenue from taxes on sales, business, property and utilities. However, an increase in municipal taxes – especially property tax – can be very difficult.

In 1978, California adopted Proposal 13-A ballot measurement that increases the rate of limited property tax inflation or by 2% per year, whichever is low. This high-profile campaign created a comprehensive story that property was out of tax control and made it. Very difficult for local authorities Property increases to support tax.

Thanks to a cap like prop 13, a frequent public view Taxes are very high And Political resistanceProperty tax has lagged behind inflation in many parts of the country.

Crunch

Taking these factors together, I see a fiscal crunch for the cities of America. Low -budget small towns are particularly weak. But there are such large, more affluent cities, such as San francisco With its collapse city office market, or Houston, New york And MiamiWhich is facing rising costs from climate change.

The manager of a city running a rich municipality in Prashant Northwest told me that under these difficult circumstances, politicians need to be more clear and open with their components and are understanding wisely and competently about how and why and why Taxpayer’s money is being spent.

Efforts to balance the city’s budget are opportunities to build consensus with the public as to what municipalities can do, and at what cost. The coming months will show whether politicians and residents of the city are ready for these difficult conversations.

This article has been reinstated Conversation Under a Creative Commons License. read the Original article,