Which Cities Are Best Prepared Financially for Pandemic?
A strong economy – and tendency to set aside money – distinguishes these six
The coronavirus lockdown is knocking the stuffing out of the national economy and — orders to open aside — more trouble lies ahead. As the country emerges, however, as with past recessions, recovery will be wildly uneven.
Some locales will lag for years and perhaps never fully recover, while others will bounce back relatively quickly. In laggard cities, citizens can expect service cuts, new fees and tax increases. Those, in turn, can drive some people away, further denting municipal finances.
In the best-prepared cities, it’s possible they’ll emerge with services and tax base largely in place. School quality, in particular, can be dependent on a city’s financial health.
If you’re someone who has newly found out you can work remotely, and thus can move now or later on, you’ll want to know about financially strong cities. If you live in one, you’ll be breathing relatively easier. And if a move lies ahead for other reasons, it’s good to know which cities might best emerge from this deep downturn.
Among the 25 largest cities, Detroit and Chicago are rated the least prepared to get through a downturn in research by Moody’s Investors Service, the credit-rating agency.
Here are the six best-positioned among the top 25:
Boston: Budget reserves entering the virus pandemic were equal to about 31% of the city’s annual revenue.
Tax rates, pushed up 25% in the wake of the last recession, are back at pre-recession levels. But tax revenues have been strong because home values rose to more than twice the national average.
Charlotte, North Carolina: Budget reserves recently are equal to 60% of its annual revenue.
Heavy exposure to the banking industry hurt the city during the last recession. The Federal Reserve’s prompt and massive rescue packages to support banks and overall liquidity in the economy have so far cushioned banks. Charlotte's economy is much stronger today and housing has remained affordable. One negative, however: debt payments make up nearly 30% of its annual spending and give it less flexibility during a lean year.
Denver: Budget reserves recently equal to about half of annual revenue.
Reserves were thin during the last recession, so Denver cut services and hiked fees on things like garbage collection and recreation centers. Debt payments are only about 14% of its spending.
San Antonio, Texas: Budget reserves are equal to 35% of its annual revenue.
Fixed costs like debt payments total about 16% of its budget, so San Antonio has flexibility.
San Francisco: Budget reserves are equal to about half of its annual revenue.
Already a high-cost city, San Francisco is more likely to turn to increased fees rather than tax hikes to cover shortfalls. During the last recession, officials laid off several hundred city workers, cut spending on social services, and raised fees for public transportation, among other things, which means residents can hope for a smoother ride in the next downturn.
Seattle: Reserves are nearly half of the city’s annual revenue.
Like most of its high-scoring cohorts, Seattle also has lower debt obligations — about 10% of its annual budget goes to debt payments.
Across the country, some cities face a lot of restraints on whether they can raise taxes like sales and income, and most face a limit on how much they can raise property taxes. This is true across Colorado, Massachusetts and Texas, for example. If your hometown faces these constraints, it’s more likely your town will raise fees or slash services to fix a budget shortfall.