Last week we started to see hopeful signs on the COVID-19 pandemic. China is starting to return to normal. Up to 20 potential treatments and vaccines are in trials around the world. Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, told us the death toll in the U.S. may ultimately be much lower than earlier projections.
That is good news and we all hope the trends continue in the right direction. On the economic front, however, the toll has been catastrophic on a scale we have never seen before. The latest numbers project a 40% contraction in the U.S. economy during the second quarter. Unemployment is now 14% and will likely hit 20% or more before the end of the month. Those are numbers not seen since the Great Depression.
Congress and the Federal Reserve have reacted quickly by funneling trillions into the economy through a variety of channels. There is hope these decisive measures will prevent an economic collapse and allow us to emerge from the financial crisis late this year or early next.
Last week, I sat in on a Zoom call with officials from the city of Boulder. Cheryl Pattelli, chief financial officer joined Assistant City Manager Yvette Bowden and Mayor Pro Tem Bob Yates to update a group of business leaders on the local impacts of the crisis.
As you might guess, those impacts are grim. Colorado has never seen unemployment claims total more than 120,000 in a single year. Last week, the total number for the first 14 weeks of 2020 surpassed 225,000. That is staggering.
The bulk of those claims are coming from retail and hospitality workers. City of Boulder revenues show the pain. Sales tax collections in Boulder are down as much as 80% from last year. Accommodations taxes have almost dried up completely, as some hotels have shut down and others have occupancy rates close to zero. Parking revenues are nonexistent, as are fees from recreation and other city programs.
Late last month, staff presented numbers to City Council showing a worst-case scenario of a 17% reduction in 2020 tax revenues due to the crisis. That is now the best-case scenario and realistically we should expect much worse.
What can the city do? It has already implemented a hiring freeze and is planning to delay capital expenditures. City Council also will dip into emergency reserves but those are not enough to sustain normal operations.
It was not said on the call with city leaders, but I believe the city must be looking at substantial cuts in services this year and employee layoffs as well. Last week, Broomfield announced it will furlough 235 of its 1,000 employees until further notice. You just cannot continue to pay people to staff libraries and recreation centers when they are closed and there is no money coming in.
Boulder City Council should also ask voters to “undedicate” some of the dedicated sales tax revenues and give it the flexibility to use those precious funds for essential and emergency services during this crunch. This should include shelving the municipalization effort to free up those millions for basic city services facing a budget crisis. These can be temporary measures that sunset in two, three or five years depending on how the economic outlook unfolds over the next few months.
What can we do as residents? First, we have to accept that city government cannot and will not offer us the same level of services and amenities we’ve come to expect. Open Space, Parks & Recreation, Arts & Culture, Transportation and other departments will all see sharp cuts in their resources and their ability to respond to non-essential priorities. We need to expect less from the city for a few years. And we need to do it with no whining.
Next we need support local businesses. They are the lifeblood of our community and we need them to survive this catastrophe, put people back to work and start collecting taxes again.
We are all doing more online shopping right now. But when our small businesses open up again, we must get out and shop local. None of us want to live in a world where our retail choices are limited to Amazon, Costco and Walmart.
In the meantime, keep ordering takeout from your favorite restaurants, do your happy hours on Zoom and stay healthy. 2020 is going to be a tough year but we will get through this mess.
Sean Maher is the CEO of RRC Associates in Boulder. You can email him at email@example.com.