Petaluma, other cities, need federal aid
The economy is like a house of cards — everything functions as long as there are no disruptions, but even minor inputs can have disastrous results.
The dot-com bubble of 2000 followed by 9/11 and the Afghanistan and Iraq wars was like a breeze knocking a few cards over. The 2008 housing bubble and resulting recession was like taking a few key load-bearing cards out of the foundation.
So, what is the effect of almost completely shutting down the world economy for at least two months? That is like a toddler tearing through the room and stomping on the card house.
No one knows what the longterm result of the coronavirus shutdown will be. But the immediate economic effects have already been devastating beyond anything we have seen since the Great Depression.
Twenty-six million Americans are unemployed. The stock market is in flux. The U.S. budget deficit is at $3.7 trillion after four rounds of stimulus packages.
The initial bailout packages did not include money for states and smaller cities, whose budgets are also crippled just like those of businesses. A future round of spending would include funds for states and cities, if the Democrats have their way.
Cities like Petaluma need aid to get through this crisis just as much as businesses and individuals do.
Petaluma’s budget was already threadbare before the coronavirus shutdown. The city was still dealing with fallout from the 2008 recession and faced a multi-million dollar bill for rising pension costs over the next decade.
The latest projections show the city’s budget taking a $2.1 million hit through June, mainly due to a dip in sales and hotel tax. Since the retail and lodging sectors are completely closed for the foreseeable future, the city has no way of making up that tax revenue. The longterm picture doesn’t look any less grim even after things start to slowly open up.
And the loss of local tax revenue comes as there is an increase in demand for city services, especially emergency services. Since the city is required by law to pass a balanced budget, cuts to services unfortunately could be on the horizon. This at a time when Petaluma was still working on returning the police and fire departments to pre-recession levels.
To stave off service cuts, the city could opt to ask voters to increase sales taxes to boost the city’s budget. But Petaluma has been lukewarm to sales tax increases even in good financial times — the idea has never polled high enough to place a measure on the ballot since voters turned down Measure Q in 2014.
Just before the coronavirus pandemic took hold, there was evidence in Sonoma County that voters were growing tired of tax measures. A sales tax extension for SMART and another for fire services both failed on the March 3 ballot.
This November asking voters, many of whom having lost jobs and income streams, to pay more in taxes is probably not a winning strategy. Increased sales taxes will also raise the cost of goods purchased in Petaluma and will likely be opposed by the business community that has been hit hard by the financial shutdown and earlier minimum wage increase.
So, as Petaluma faces a bleak financial outlook and tepid interest for raising taxes, we look to Washington for relief. The next stimulus package Congress passes must include money for cities like Petaluma.
It may be the only way to keep our house of cards from tipping over.