Financial concerns are legitimate here, across state, nation
State and local governments, not only here but across the United States, are facing uncertain financial outlooks as the pandemic continues to reach its multi-pronged devastation.
The Wall Street Journal noted in a Jan. 13 article that “for governments that rely on property tax revenues, the impact of economic distress typically takes a while to be felt as business closures and other disruptions are factored into property values.”
Any Pennsylvania resident who pays taxes knows the degree to which counties and other units of municipal government are dependent on real estate levies to finance their operations and the services that they provide.
Therefore, observations contained in the article in question cannot be pooh-poohed as irrelevant here and the rest of the Commonwealth.
While many Keystone State businesses already are suffering as a result of state-ordered closures or state-ordered scaled-back operations, the yet-to-be realized “tax factor” resulting from such possible realities as lower assessed valuations will no doubt keep some government officials awake at night.
No doubt they will have to ponder tough decisions that they heretofore never have had to make.
Perhaps this part of the state will fare better than some other areas, due to responsible decision-making pre-pandemic. But what about those with officials who might have overextended their municipalities financially or made other decisions now proving to be questionable or shortsighted?
It is true that officials never could have predicted the situation like what dominated most of 2020 and continues to rear its ugly head now.
However, going forward, they face dealing with the consequences of past decisions, bad or good, and must put their best governmental skills to work to a degree they never anticipated even three or six months ago.
For many more municipalities than now, municipal bonds will be a future lifeline toward “returning to how things used to be.”
The Journal article reported that municipal bond issuance in 2020 was the highest in a decade, not only reflecting the collapse of interest rates but also the increased cost cities and state governments are facing from COVID-19 shutdowns.
According to the Journal, bonds for new projects reached $252 billion last year, a small increase from 2019 but the highest since 2010.
According to Federal Reserve data from the third quarter, the new borrowing drove the total amount of outstanding “municipal debt” above $3.9 trillion for the first time since 2013.
Well-run communities don’t enjoy the prospect of emergency-related indebtedness just to make ends meet. Such extra unwanted debt impedes possible progress on important fronts for years and can contribute to the need for future tax increases.
The Journal went on to say that the Federal Reserve’s commitment to low rates “suggests the cycle of investors buying bonds to get much-needed yield and municipalities issuing debt to get much-needed cash or refinancing to cut borrowing costs is set to continue for the long haul.”
Couple that with the fact that the most recent stimulus package is not being kind to local governments, although that could change in a subsequent package.
Regardless, the word “uncertainty” hovers over states and their municipalities, going forward. Pennsylvania is not immune to the kinds of challenges that lie ahead.