Local Government Officials Tell IWCE the Worst Could Be Yet to Come on Pandemic

The pandemic “has really hit local government hard,” said Teryn Zmuda, chief economist at the National Association of Counties. “Health services are strained, costs are rising,” she said. Governments “acted first and thought about the price tag later,” she said. Months later, counties are asking “what do we now?” she said: “We’re in this hole. We need to think about the economic future of our communities as well as these health impacts.”

Cities had “to react very quickly and suddenly to something that was largely unexpected,” said Scott Huizenga, director of the Office of Management & Budget in San Antonio. The areas that reacted quickly “are probably better prepared than those who did not,” he said. San Antonio instituted a long-range recovery and resiliency plan early on, he said. Kansas City, Missouri, where Huizenga used to work, adopted its annual budget the week a stay-at-home took effect, he said: “It’s just now probably starting to face the ramifications of what’s next,” he said. “Early reaction helped,” he said.

Scott Peterson, vice president-U.S. tax policy at Avalara, said local governments have had trouble getting federal emergency money from the states. School districts have an easier time getting money specifically allocated for education, he said. “The cities have to go in there and make argument that they have an expense, and they should have the state reimburse that,” he said.

Recent signs out of Congress have been discouraging on the outlook for another COVID-19 bill, Peterson said. “This is a great opportunity to start a conversation about how local governments are funded,” he said. Counties “are very limited in where they can tax,” he said. While property taxes are viewed as “relatively stable … it won’t be stable next year as this recession roles through the valuation of properties,” he said: “There are going to be a lot of challenges to assessments next year.” Local governments will have more challenges and less money in 2021, he predicted.

Local governments need a more diverse tax base and funding reserves, Huizenga said. “You don’t always know exactly what the next emergency or large crisis will be,” he said. San Antonio has seen the convention and tourism business “absolutely plummet,” he said. The city was forced to furlough 300 employees, he said. Sales taxes didn’t fall, at least initially, as much as expected, he said, but are shrinking as the pandemic continues, he said.

Local governments understand local needs better than anyone, Zmuda said. The pandemic made clear some “glaring” needs, especially for better broadband, she said. Funding is often based on population, she said. “Population doesn’t tell the whole story,” she said: “You don’t have all the metrics on how those communities are doing.”

Avalara was able to have all 2,500 employees working from home in 10 days, Peterson “We’re unbelievably lucky that we don’t do things that you do,” he told the local officials. The No. 1 issue has been internet access, he said, noting the company has employees globally: “There are places in the world where the broadband is actually worse than it is here.” His company was very concerned because it works with 3,100 local government that file a tax return on paper, with a paper check. “We were petrified that the post office would shut down,” he said.

The effectiveness of local government is increased if all employees can work remotely, Peterson said. “If they need to work from home because they’re sick and they can work, you want them working,” he said. “We need to get past this ‘you’ve got to go to the office even if you’re sick’ mentality.”

Counties don’t expect things to go back to the way they were before the pandemic, Zmuda said. “It’s a lot of folks thinking about how are we going to rebuild this entirely,” she said: “How are we going to rethink everything -- the way that we serve residents, the way that we spend our dollars, … the workforce that we build.”