You can go here to read a NPR piece on the problem mentioned below the fold: that CARES money Congress appropriated for cities whose revenues have plummeted while their expenses have increased are seeing little of it. More than I initially appreciated, the problems lie as much with the federal law and its implementing regulations as with State and local governments.
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The sales tax is one of the most important sources of revenue for American municipalities. So what happens when the floor falls from under retail sales due to Covid-19? First, there's the Coronavirus Aid, Relief, and Economic Security (CARES Act). Congress appropriated $150 billion for State, local, and tribal governments to cover necessary expenditures due to the ongoing public health emergency. Sounds like more than a good start but, strange as it may seem, almost none of this appropriation has found its way to local municipalities.
There are several reasons for this state of affairs. First, only a municipality with more than 500,000 residents may receive any direct funding under the CARES Act. A number of US States have no municipalities with a half-million residents. Alabama and both Dakotas come to mind. Even so, each State can get funds for the same purposes and then remit funds to their municipalities. But some States that have received money, say, West Virginia, haven't spent a cent. One wouldn't go broke underestimating the level of dysfunction in State governments generally.
Well, if federal money isn't finding its way to them, what can cash-strapped municipalities do? Why, file a Chapter 9 municipal bankruptcy, that's what. And first to take the plunge is Fairfield, Alabama. Quoting from the Bloomberg Law article of May 20
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The sales tax is one of the most important sources of revenue for American municipalities. So what happens when the floor falls from under retail sales due to Covid-19? First, there's the Coronavirus Aid, Relief, and Economic Security (CARES Act). Congress appropriated $150 billion for State, local, and tribal governments to cover necessary expenditures due to the ongoing public health emergency. Sounds like more than a good start but, strange as it may seem, almost none of this appropriation has found its way to local municipalities.
There are several reasons for this state of affairs. First, only a municipality with more than 500,000 residents may receive any direct funding under the CARES Act. A number of US States have no municipalities with a half-million residents. Alabama and both Dakotas come to mind. Even so, each State can get funds for the same purposes and then remit funds to their municipalities. But some States that have received money, say, West Virginia, haven't spent a cent. One wouldn't go broke underestimating the level of dysfunction in State governments generally.
Well, if federal money isn't finding its way to them, what can cash-strapped municipalities do? Why, file a Chapter 9 municipal bankruptcy, that's what. And first to take the plunge is Fairfield, Alabama. Quoting from the Bloomberg Law article of May 20
The city of Fairfield's filing Tuesday ... listed assets and liabilities between $1 and $10 million. A resolution signed by Mayor Eddie J. Penny included with the filing said Fairfield has "exhausted its options" after years of financial stress. It was unclear whether the shutdowns intended to mitigate the spread of the coronavirus in the U.S. worsened the city's problems.Fairfield's problem predate Covid-19 but it seems clear that more municipal bankruptcies are on the horizon.
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