Cities krs the u. S. From the urban institute this runs an hour. Were about to hear some very good Economic News after recordbreaking declines in economical activity in the Second Quarter of 2020, well be see eyepopping consensus, 25 growth in the third quarter. We should not lose sight of what that means for people who are still struggling and the fact that we still have a deep hole to climb out of. Much has been written about the kshape recovery. Workers at the low end of the distribution who dont have options to work from home and for whom federal help has already been paid in a way. Weve seen who will owedout downtowns with fewer workers coming in, buying lattes. What does that mean for city revenues . One estimate suggests its in highrent zip codes, highrent districts, employment is still at 45 of precovid levels. So we are about to explore these things today. We also have a blog my colleague and i have a black about what this means for cities and each industrys mix and, of course, their exposure to covid as well as the uncertainty of federal and state response. If i could get to the next slide, please. Uhoh. There we go. The point of our blog is really that going into this, there were a we thought we knew about city economi economies. It was thought to be a Success Story if you were a service economy. Now many of those jobs are under threat. Similarly, we used to think that cities that this successfully evaded the property tax revolt by diversifying Revenue Sources into things like charges and fees for services having few of those taxes and not your reside residents, we thought to think of those cities at winners. So access to personal income tax or sales and use taxes. Now those revenues are vulnerable just like they are at the state level. This is from our blog today that basically shows for most sficit, sals and income taxes. If you add up fees and other little taxes that accounts for 40 of revenues, especially in big cities. Of course theres a lot of variations. Were very likely to have a panel today that can represent that diversity of experiences and different types of cities. Ill now introduce our panelists. Mayor andy berke from chattanooga, tennessee. A former twoterm state senator. He can speak to the perspective of states. He may have some insights on that experience and has won numerous awards, which i wont go into here. Legislator of the year, friend of education. Municipal leader of the year. He holds a jv from the university of Chicago Law School and bachelor degree from stanford. Carolyn coleman is a leader and advocate in private sectors, now the executive director of california cities, spent the decade here in washington, d. C. Where she can speak to the national perspective, director of federal add voeks a. Deputy mayor of the city of indianapolis where she sfoek used on Affordable Housing and Community Engagement initiatives and is on many boards of directors including school of law and the university of minneapolis. Mayor Michael Nutter is a former twoterm mayor of philadelphia with almost 15 years of experience as well on the city council, the inaugural david denkins professor at Columbia University school of international and public affairs, senior fellow for the what works citys program and a member of the external Advisory Board for jp morgan initiative. Past president of the u. S. Conference of mayors and serves on various boards including the urban institute. Welcome to you all. Thank you for being here. Thank you. I was going to start with you, carolyn, since the lead of california cities published a report referencing cities of california. I know youre well versed in that. Can you give us a birds eye view both from the state and National Level . Im happy to do that, tracy. First, i want to thank you for putting together this conversation and also to thank the urban institute for this important conversation. Its always good for me to spend time with two of my favorite mayors, albeit one is outside of california. Good to be here with both of you. I thought i would start with a little bit of whats happening fiscally in california cities as well as part of the National View thanks to the National League of cities. Lets go back to january of 2020. City revenues were finally returning to the prerate recession levels with reserves and revenues trending positive. We werent out of the woods. Things were looking up. In march of 2020 as the covid19 took hold, u. S. Economy went into a freefall. At the local level we began to close down our local economies to prevent the spread of covid19. The impact was swift. We had to close businesses, retail sales plummeted. Unemployment sky rocketed and uncertainty was the name of the day. The fiscal impact of these swift changes were felt immediately on city budgets. Sales and Income Tax Revenues were the first to be hit and cities that rely on those sources were forced to take immediate action as the shortfalls began. In some cities even property tax revenues started to show signs of weakening as the economic hardships began to dampen on demand for real estate. Not quite the case in california but certainly in other cities. I do just want to point out that given that most Cities Fiscal year 20 budget captures only a few months of the pandemic recession. It is the fiscal 21 year budgets that for most cities started july 1 that were more fully the fiscal impacts felt by cities across the country. At some point i truly believe when we look back, the toll of this pandemic on our economies could easily be more severe than that which we experienced during the Great Recession. I know well talk more about that in a few minutes. If you look at this first slide from the National League of cities 2020 fiscal condition survey, the next slide. You will see the breadth and depth of the challenges facing city budgets. According to city fiscal officers from across the country, nearly 90 of cities will be less able in fiscal year 21 than in 2020 to meet the needs of their communities. In fact, our current estimates for 2020 put year over year General Revenue Fund growth at near zero. Its been a long time since weve been at zero. On average youll see in the next slide cities anticipate a 13 decline in fiscal year 21 general Fund Revenues over what they had in 2020. Unlike the Great Recession, the impact on city budgets of covid were immediate and deep. This is not something that was gradual, that played out over 18 months or so, which is what we experienced with the Great Recession. Now i want to take a look at more specifically about what happened in california. By april 2020, just four months into the year, california cities were facing a 7 billion revenue short fall in their general Fund Revenues due to covid19. You look at the next slide, you could see that the impact of covid19 while its being felt across all of the Revenue Streams that tracy highlighted earlier, its being felt most acutely in our sales taxes and not surprisingly in our hotel bed taxes. Im in a state thats noe known for its Recreational Activities and tourism, sales and these transient occupancy taxes are key to local government Revenue Streams, and those have been severely hit. For cities, these Revenues Fund essential what i like to call bread and butter services in our communities. Services like police and fire, code enforcement, street maintenance, filling potholes. They also fund millions of Public Sector jobs. Its those jobs that are vital to a strong middle class in our country. If you look at the next slide youll see these revenue short falls in california, and im sure that my colleagues from across the country in every state has put together these kinds of numbers and certainly the National League of cities has done it as well. These short falls will have real consequences. With states facing their own budget challenges and the federal government so far providing only minimal relief to cities, we are having to go it alone. But with balanced budget requirements and revenue raising restrictions, cities are going to have no choice but to cut services, lay off workers, freeze hiring, and roll back capital projects, which is the very investment we need in our communities. As we begin to look beyond 2020, cities continue and will continue to face economic and fiscal uncertainty. Tracy, i hoped some of the good news you shared a few minutes ago does come to fruition, because our cities are going to be focused on trying to keep their communities safe from a surge in covid19 and whatever happens with the flu, but were also going to be trying to reopen our local economies and to be able to do so in a very safe fashion. I think it is precisely times like these where cities need the federal government to step up and provide assistance. Its the smart thing to do and its the right thing to do. Thank you so much, carolyn. That was just perfect in terms of the overview. I would like to turn to mayor berke and hear about whats going on the ground in your city. I know you enacted a budget that includes many of the solutions that carolyn mentioned. Had an more can you say about that . Yes. And thanks again to the urban institute and to you, tracy. It is a pleasure beyond with carolyn, who ive gotten to know over the years. Mayor nutter is someone who not only do i admire, but i know every mayor around the country is a mayor nutter fan. Great to be on with him and appreciate yall. Let me put a face to some of the things that carolyn is talking about. And to make it more explicit, lets try to back up and say a little bit about chattanooga. Chattanooga is a solidly midsized city, about 180,000person city in a county that is 375,000, and a metro that is 575,000, were squarely at the center of that donut. So we have all the things going on that midsized cities have. But we also have been doing a little bit better than most. Weve been a bit of an it city. Forbes said chattanooga would be the number one for jobs. I have to say that as a brag, mayor nutter understands that. You get paid per brag. We were fundamentally in a good position. City government built up our reserves. We had virtually twice the reserves going into march 2020 that we had going into 2009. And lots of things were going right. We had a bit of an it vibe going on. All of a sudden, covid hits, and things change immediately. We see it in Small Businesses that dont have 60 days of cash reserve. We see it in our hospitality industry, which had been going like gangbusters. Hotels going up everywhere. All of a sudden rooms start to decline. We see it, of course, in city coffers because tennessee has zero income tax. Its against our constitution. We have sales tax and we have Hotel Motel Tax are our two main sources of revenue, apart from the dollars we get from other governmental sources like state and federal. And all of a sudden, that just started to vanish. And so as we hit the budget, this budget that we had started to put together and we were on a july 1 fiscal year. So, we had been anticipating putting together this really robust initiative that expanded the services that we need, that we were giving to people and also huge capital projects. That went away. Instead we were dealing with with setting aside money for Small Businesses, to help them survive and ride out the pandemic of closures. We were setting aside money for enhanced service for people in our community to beef up Immediate Response to homelessness, which of course no matter what youre talking about with eviction and those have gone away, you see increased homelessness in a world of 10 unemployment. All those things took precedent. At the same time, and then ill turn it back to you, tracy, i want to give poom an idea of what it looks like in real world when you enact these freezes. Its one thing to say its a freeze. Everybody says okay, thats fine. And we were lucky we didnt layoff or furlough anybody. But the realworld consequence is we freeze our fire department. That means we dont have an academy, which puts us down 30 firefighters. At the same time a Global Pandemic is going on and another 25 firefighters are out at any given time because either theyve been exposed or theyve gotten covid. Now were down 55 firefighters. And thats just one of the myriad of things that the City Government does. And thats the realworld impact of not being able to take a really studied approach to how you reduce services, but to just be in an emergency where you just freeze everything and you are where you are. Uhhuh. Uhhuh. Thank you so much. Carolyn, you had mentioned the similarity and differences with the Great Recession. I cant help but plug an article that was done that says sales tax were worse than the Great Recession. I want to invite mayor nutter to comment on similarities and differences to the last recession that you might have to rename because apparently it was not so great or is not so great anymore compared to this. Thank you, tracy. And certainly to my great colleagues, carolyn and mayor berke. You know, a dozen years ago, when we hadnt even figured out that we were in recession yet, the summer of 2008, six months, seven months into my first year of my first term, and my chief of staff and finance director said they needed to talk to me. Clearly, i was a rookie and didnt realize that when your chief of staff and finance director need to talk to you immediately, i should have known to just run and not take that call. Thats a call you dont want. Theres no good news coming out of that call. But i didnt know. So we met. And they said well this is, again, the summer of 2008. Were not exactly sure whats going on but were seeing some unusual signs of lack of revenue, lack of collections. But well monitor it. Maybe its just a blip or an anomaly or something. So, you know, best of luck. I got that call again in august. Still hadnt learned the fundamental lesson of not taking that call or meeting. But nonetheless, you know, im a little slow on the uptake. They said theres definitely something going on. We have a problem. Were actually starting to run out of money. I said well, we just passed a budget in may that was balanced. We made investments. We spent some money. We werent frifvolous, but we spent some money. Finally in september the federal government announced that the economy had gone into recession actually back in december of 2007. So, it was a bit of a glide, if you will, into it. It just continued. As carolyn said, for some time. You make steps. You plug a hole, another hole would pop open. In this scenario, i came home from new york on the night of march 12th and on the morning of march 13th, the state announced immediate stayhome orders. And all of us basically, regardless of city, almost anywhere in the country, suddenly the economy started to shut down. People had to stay to shut down. People had to stay home. Businesses closed. Folks werent sure what their job situation was. So it was immediate. In its impact. We talked about, and caroline had some slides up. Not only is the City Government negatively impacted, of course the state, philly is a city and county, but also our School District, which heavily relies on property tax to fund the education of our children. So the city will have its own fiscal challenges and the School District at the same time. And the city and state are the primary funders of education in the commonwealth of pennsylvania. And so in 20089 we didnt make businesses close. They closed some on their own because of an economic worldwide crisis. This was a Health Crisis that led to an economic crisis and we had to close to keep people away from each other to save lives. And so in a bizarre kind of way this is a selfinflicted massive wound in order to try to save lives. And save people. So its that much more complicated. And lastly, theres no end date. Theres been a slow reoechg but there are many, many businesses, not just in philadelphia but across the United States of america, that have not reopened. Some unfortunately because weve now all been in the house six months, seven months, depending on your calendar . Will never reopen. Thats a hit economically but more in human terms to those individuals. Many cities have not fully recovered from 10, 11, 12 years ago and now find themselves under even more severe pressure. Mmhmm. I think theres sort of a good news bad news story in a way that to make you feel better about the selfinflicted damage. The research ive seen say even place thats were late to adopt this skill had a big drop in consumption. Because people were scared. Its selfinflicted but its also something you cant undo by taking off the stayathome order. People are going to show up and go back in the marketplace when theyre good and ready. Right. I think dr. Fauci has said that the virus will ultimately decide what happens here. Exactly. I just wonder what this means again about sort of what we think of as a healthy city. Mayor berke, you had talked about the idea of creating Magic Moments in chattanooga and those were all based on being a center for hospitality. Can you talk a little about sort of what you see as your vision of the city Going Forward . Has it changed or are you just sort of hoping to ride this out . Well, we are at the urban institute, so we have to use the word density at least a few times. You know, for the first seven years that i was mayor i ran around saying the word density everywhere, weve got to create density. A