Cities across the country, including in Missouri, are suffering deep financial problems due to COVID-19, according to a new survey of more than 1,000 municipalities.
The survey, by the National League of Cities, focused on local spending cuts and services and found that 65% have delayed or canceled capital expenditure and infrastructure project, while 24% predict significant cuts to community and economic development programs,
"Cities are being forced to delay or completely cancel capital expenditures and infrastructure projects, which will stifle job growth and slow local economic activity and further imperil economic recovery efforts in communities across the nation," according to the league.
City leaders in Missouri say the state's municipalities are particularly vulnerable at this time because of the lack of an e-commerce sales tax.
Mayors and the Missouri Municipal League are also lobbying for a special session to consider an e-commerce sales tax on online purchases.
While there is widespread support among many interest groups, some legislators argue that it should be offset by a cut in other taxes, including income, according to the league.
"We would certainly like to see this get done...but there are various interests and no consensus," Dan Ross, the league's executive director, told the St. Louis Record, who added that it his understanding that legislators opposed, or who want an offset, have not been moved by the financial impact of the coronavirus.
"I have no sense of any movement on that," Ross said.
Following a 2018 U.S. Supreme Court decision, in the case of South Dakota vs. Wayfair, 43 of 45 states with statewide sales taxes introduced legislation to collect on online purchases. Missouri and Florida are the only hold outs.
While the national survey did not break down information on individual states, Opportunity Insights, a project tracking the economy during the COVID-19, found steep drops in consumer spending along with similar decreases in small business revenue and openings, but all have recovered.
According to the project, which is run by Harvard and Brown universities, consumer spending on June 8 was only 0.7% lower than the start of the year, though it was 35% less at the start of April.
Small business revenue is down 5.4% compared to more than 30% at its peak. There are 15% less small businesses open now compared to the start of the year.
According to Fitch's, the credit rating agency, St. Louis is reporting a $37.6 million revenue shortfall in fiscal year 2020, which is equal to 7.2% of general fund revenues.
This is due partly to the nationwide filing and payment extension for payroll taxes to July 15. This accounts for about half the shortfall, but the city believes it will bring in most of the taxes later in the year.
It is further estimated that lower earning taxes revenue due to reduced economic activity will lead to a drop of $12.5 million, while lower sales and franchise taxes along with fines and fees will make up the remainder of the shortfall.