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Shuttered stores mean shattered finances for local governments

The Walden Galleria parking lot has a lot in common with the cash coffers of Buffalo and communities nationwide.

They're empty, and for the same reason.

The virus that shut down America shrunk local government tax collections, too. And as a result, local officials say an unprecedented series of actions – ranging from drastic service cuts to municipal bankruptcies – could result if the federal government doesn't come to the rescue.

For now, at least, Congress can't agree on whether to help. Democrats are fighting for $1 trillion in state and local government aid, but Republican leaders want to add conditions that could kill any deal.

Stuck in the stalemate are leaders of communities big and small, who say they are facing a crisis not of their own making. Buffalo Mayor Byron W. Brown noted that Buffalo was enjoying a development boom and expecting its second consecutive budget surplus. Now it's facing multimillion-dollar deficits both this year and next.

"If Congress doesn't help, we could be looking at furloughing hundreds of employees, we could be looking at service cuts, we could be looking at closing a firehouse," Brown said.

And for some cities like Jamestown, budget cuts could be just the start.

"We are going to need funding from the federal government for municipalities, because that's the only way we're going to be able to make up a budget shortfall and not have to go bankrupt," said Jamestown Mayor Eddie Sundquist.

The scope of the problem

Counties, cities and towns all face the same problem. With stores shuttered and restaurants restricted to takeout-only service, sales suddenly withered away – and so did sales tax receipts.

Erie County finds itself without $220 million in sales tax revenue that it had been expecting – far more than the $160 million in federal aid it received under earlier federal legislation that it can only use to fund coronavirus response measures. Much of the county's hotel tax revenue has disappeared. The local share of gasoline tax revenues is shrinking, too. And on top of it all, the county expects a 20% cut in aid from a state government projecting a shortfall of $13.3 billion.

"This is a dire situation," said Erie County Executive Mark C. Poloncarz. "It's the worst situation that this community has seen with regards to our governmental funding."

Erie County is by no means alone. Empire State counties outside of New York City project they will lose $2 billion because of the coronavirus crisis. Nationwide, counties see themselves falling $144 billion short.

“The situation we're seeing is moving from grim to catastrophic,” said Stephen J. Acquario, executive director of the New York State Association of Counties.

Cities find themselves starved of cash, too. Buffalo now expects to finish its fiscal year at the end of June $15 million in the red. And according to a survey by the National League of Cities and the U.S. Conference of Mayors, 96% of municipalities nationwide face unexpected deficits.

It's a crisis that's affected cities big and small, especially those that rely on sales tax collections from tourists and college students. The Cattaraugus County city of Olean, for example, really misses the 2,100 or so St. Bonaventure University students who went home in March.

"There's a lot of revenue that's generated, you know, from students coming into town, doing their shopping here, going to the restaurants," said Olean Mayor William J. Aiello, who is expecting at least a 20% drop in sales tax revenues.

Suburbs haven't been immune, either, from the crash. Town of Tonawanda Supervisor Joe Emminger – who is recovering from Covid-19 – returned to work facing a $5 million deficit. Revenues in Amherst are down at least $6 million. And in Cheektowaga, sales tax revenues are likely to fall between $6 million and $7.5 million short.

Cheektowaga Supervisor Diane Benczkowski sees only one solution.

"It's so important for the federal government to recognize that towns and municipalities need the help directly to balance their budgets so we don't have to pass on these increases to our residents and taxpayers," she said.

The view from D.C.

Congress came together relatively quickly to pass three major coronavirus relief bills, plus a "Covid 3.5" measure that replenished a depleted small business loan fund.

But Republicans blocked any state and local aid in that last legislation, and the next major relief bill looks to be a heavier lift – because top Republicans don't want to lift a finger to help states and municipalities without something in return.

Nevertheless, Democrats plan to push hard for a $1 trillion package.

"I think one of the highest priorities in Covid 4 – at the very top of the list – is going to be significantly more money for state and local governments than we asked for in Covid 3.5," said Senate Minority Leader Charles E. Schumer, a New York Democrat.

That earlier proposal would have brought $142.2 million to Buffalo, $81.5 million to Erie County and tens of millions in total to Western New York's smaller municipalities.

And while a measure with far more money for localities may move swiftly through the Democratic House, two powerful Republicans – President Trump and Senate Majority Leader Mitch McConnell – could stand in the way of the bill's final passage.

Trump last week indicated he was reluctant to give any aid to "sanctuary" cities that don't help the federal government enforce immigration laws.

"If we’re going to do something for the states, I think we probably want something having to do with sanctuary cities," Trump told reporters.

Capitol Hill Democrats said that could be a deal-killer, as could a proposal McConnell floated: to limit the legal liability medical professionals and businesses face in the wake of the coronavirus crisis.

“The next pandemic coming will be the lawsuit pandemic in the wake of this one," McConnell told Politico. "So we need to prevent that now when we have the opportunity to do it.”

House Speaker Nancy Pelosi told reporters, though, that Democrats "would not be inclined" to make it harder to sue medical providers and businesses during a pandemic. And when asked about McConnell's idea, another Democrat, Rep. Brian Higgins of Buffalo, erupted.

"I think Mitch McConnell is an idiot," he said. "I think he's vile. And I think he's acting in an unacceptable, irresponsible way – because disaster aid delayed is disaster aid denied."

No matter what McConnell says now, Schumer said the push to aid states and localities will be bipartisan because both red and blue communities are suffering.

Rep. Tom Reed of Corning is already lobbying his Republican colleagues for direct federal help to localities of all sizes – and not just money to the states that cash-strapped governors might hoard for their own use.

"State governors: You know what? You need to respect the fact that your local governments are dying on the vine and, and we should be collaborating to help each other out," Reed said.

Cuomo projects $13.3 billion budget shortfall, continues to deride McConnell

The worst-case scenario

Without more aid from Congress, local leaders say they will have to implement budget cuts unlike any the public has ever seen.

Poloncarz said Friday that he's asking department heads to cut spending 13.1% in the next fiscal year, which could mean layoffs and reductions on money for roads and parks. And the cuts could be far deeper if there's no more federal aid.

"If we get to that point, we are in a very bad position with slashing services and laying off thousands of employees," the county executive said.

In Buffalo, Brown on Friday proposed a hold-the-line budget for the fiscal year starting in July, but that spending plan assumes that Congress will pass a bill that gives the city $65 million in coronavirus relief. Without it, Brown foresees the possible closure of some city parks and curtailed overtime for police and firefighters as well as large municipal layoffs.

Without federal aid, Niagara Falls could end up $17 million in the hole – and contemplating drastic moves such as combining police services with the county Sheriff's Office.

"We would have to figure out, are there ways either economies of scale that we can engage in with regard to other government entities, where we can do certain things that can help us bridge that gap," said the city's mayor, Robert M. Restaino.

Sundquist, in his first months as Jamestown mayor, has been forced to contemplate an even more drastic solution: bankruptcy. He said that without aid from Washington, the city – which has a small rainy day fund – might have no choice.

"That puts us in the negative, with really no way to recover," he said.

Brown said that unless Congress acts, municipalities nationwide at the very least will be throwing huge numbers of employees out of work – at a time when millions are already unemployed.

In essence, he said, congressional inaction could turn a recession into a depression.

"If Congress doesn't act, I think they could literally trigger a national emergency across the country, right on top of the one we have now," Brown said.

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