The Covid pandemic walloped state and local governments hard in 2020, shrinking tax receipts by hundreds of billions of dollars. In the first year alone, it forced severe budget cuts that curtailed public services and forced layoffs of more than one million jobs. According to the National League of Citiespdf (NLC), revenues dropped by an average of 21 percent, while expenditures rose by 17 percent.
Congress and the Biden Administration came up with the American Rescue Plan Act (ARPA) of 2021, a $1.9-trillion stimulus bill to respond to the economic and public health impacts of the pandemic. It provided support to individuals and businesses and included a $350-billion State and Local Recovery Fund (SLFRF) that sent aid to state, local, territorial and tribal governments.
ARPA and other programs, including the $150-billion CARES Act Coronavirus Relief Fund, helped to fill the financial gap for at least a few years. However, an NLC survey showed distribution of CARES money was uneven, with an estimated 6,000 cities, towns and villages getting left out.
In any case, those programs have now ended or are in their final days. That means cities are having to either trim services, raise taxes or get creative about ways to pay for their bills, experts say.
The first thing that communities need to understand is that no one from the federal government is likely to be coming to save them [with new funding],” said Kyle Wedberg, a senior manager with the Government Finance Officers Association (GFOA), which has 26,000 members in the United States and Canada.
“That’s going to be the reality, at least in the short term,” said Wedberg, who lives in New Orleans and harshly criticized the federal government’s response to Hurricane Katrina, which clobbered the city 20 years ago. He said the city is still feeling the negative aftereffects of widespread, catastrophic flooding, which caused billions of dollars in damage and claimed 1,800 lives.
To help guide cities in navigating fiscal issues, the GFOA has created a project called Rethinking Revenue, which has a goal of raising the literacy level of municipal finance. The organization also has a core group focused on the economic consequences of land-use decisions.
According to the GFOA website, Rethinking Revenue provides local governments with tools to help them raise enough revenue for the services their communities need. It also seeks to raise that revenue fairly, in ways that are consistent with community values.
Likewise, the Bloomberg Harvard City Leadership Initiative’s “Guide on Building Fiscal Resilience Post Covid 19pdf” offers a roadmap structured around responding, stabilizing and transforming strategy. The guide emphasizes leveraging underused assets and long-term reform.
State funding is being trimmed in some cases, as well. And shifting retail patterns due to the decline of brick-and-mortar stores is causing further uncertainty.
That unreliability highlights the importance of compact, efficient land use for communities’ long-term fiscal health, said Joe Minicozzi, the founder and principal of Urban3, which has modeled more than $2 trillion in real estate and worked in more than 170 cities around the globe.
The company is a pioneer of an approach to planning and city design called Geoaccounting, which maps a community’s revenues and expenditures to understand how varied land uses and development patterns perform financially.
“Financial complexity drains resources. Land use, fee structures and tax policies are poking holes in your budget bucket,” according to Urban3’s website.
Minicozzi’s presentations demonstrate how cities can use local data and simple math to understand the impact of development on communities’ economic health. He said the case studies illuminate how cities and regions can better forecast fiscally sustainable development patterns.
“After Covid hit, the federal government just started throwing money out the door to keep cities afloat,” Minicozzi said. “Then they followed it up with ARPA, so many of our old cities got a big injection of cash. Now, though, the current administration is doing the opposite and everybody’s freaking out.”
He said cities like Syracuse, N.Y., not far from where he grew up in Rome, are cutting millions from what are now more austere budgets that are focusing on the basics — and even trimming those functions.
Syracuse lopped $16 million from its $330-million annual budget, closing one pool this past summer, putting a pause on plans for new bike lanes, reducing park landscaping, cutting trash pickups, trimming aid to seasonal festivals and ending a program that sent mental health counselors out on 911 calls.
The city also recently lost a $30-million grant to help rebuild a historically African-American community cut in half by the construction of the now-crumbling Interstate 81 viaduct. The road ripped through the working-class Black neighborhood in the 15th Ward and displaced long-time residents.
Come winter, budget reductions mean Syracuse will reduce the amount of salt it spreads on ice- and snow-covered streets.
And Syracuse is hardly alone. That economic uncertainty and slowing housing markets in some areas have caused cities elsewhere around the country, from smaller communities like Madison, Wis., Sioux Falls, S.D., and Yakima, Wash., to larger metropolises such as Los Angeles and Houston to cut programs or in some cases, raise taxes.
In Sioux Falls, Mayor Paul TenHaken said he was reluctantly forced to, among other things, trim summertime swimming pool schedules, phase out contracted snow removal in the winter, reduce library hours year-round and lay off several public health employees due to property tax cuts enacted by the state South Dakota Legislature this year.
“There’s no solutions, only tradeoffs,” TenHaken said of the cuts, which will save between $8 million and $10 million. “I don’t want to be doing these things. I don’t want to have to be making some of these cuts, and, trust me, we looked at a lot of other things. These are the best of the worst.”
Likewise, the Yakima City Council trimmed $3 million from its budget in July by closing its Franklin Park Pool for 2026, ending both youth and adult sports programs and eliminating day camps. The biggest reduction was in the city’s street maintenance fund, where $410,000 was cut, which will surely mean it will take longer for potholes to be filled.
And in Houston, the city’s Parks and Recreation Department alone is taking a $4-million hit. That means the city will only do 12 improvement projects, such as playground, light and fencing repairs in 2026, down from 58 this fiscal year. There will also be considerably longer gaps between mowing with a 24-day rotation for parks, libraries and multi-service centers, as well as fewer patrols, officials said.
In Syracuse, Mayor Ben Walsh said he vetoed some 45 cuts enacted by the city’s Common Council that he regarded as “most harmful,” while still allowing the city to avoid raising its tax rate.
“Respectfully, I do not support the Council’s amendments and significant reductions to the proposed budget,” Walsh said in his letter to the Council. “In the interest of compromise, however, I am only objecting to 45 amendments, which I believe to be most harmful to our constituents and employees. I urge the Council to reconsider and not make those reductions.”
Walsh’s objections included all of the Council’s reductions to Police and Fire Department budgets; cuts to Code Enforcement and Permit Review, the 50-percent cut in Law Department funding for outside legal counsel, which plays a key role in housing and neighborhood safety; and most of the amendments that reduced spending in the Department of Public Works and the Parks Department. He also rejected the Council’s elimination of a small increase in water rates.
Walsh’s objections let stand 37 other council amendments that reduce spending. His letter continued, “Through these reductions the need for an increase in the tax rate is eliminated. This measured approach results in a budget that achieves the Council’s goals of maintaining the tax rate and lowering spending. It also ensures that no employee loses their job, invaluable city services are maintained at their current levels, and we protect the quality of life for our constituents.”
In Madison, Wis., the city went another route when voters ratified a referendum in November 2024 to increase the city’s annual property tax levy by $22 million, in addition to the state-mandated levy limit. That move avoided significant service cuts. For the average homeowner, however, it means a boost of around $230 annually in property taxes. With the approval, the city should be able to pay for its spending needs through 2030 through a combination of efficiencies, new special charges on residents’ municipal services bills and the use of $25 million from its reserves.
David Schmiedicke, Madison’s finance director and a former State Budget Director, said Wisconsin cities are heavily reliant on property taxes and “really have no other general revenue sources.”
Milwaukee, he said, is an exception, due to a 2-percent sales tax hike that took effect in 2024, driven largely by pension liabilities that were leading them to a “pretty large fiscal cliff, so they were able to convince the Legislature to let the city impose the sales tax, with a number of strings attached.”
Schmiedicke said the history of local government finance in Wisconsin has been that cities have the property tax, while the state collects income and sales taxes and then “is supposed to share that with local governments, kind of in lieu of local governments having the authority for local sales taxes or local income taxes and so on. I think most, at least the larger governments in Wisconsin would like to see that changed.”
He said Madison has been restricted to around 2-percent annual increases. “So that’s a big limiter,” he added. “Even before the pandemic arrived, we had what we call a structural deficit in Madison’s budget because of the levy limits and the fact that state aid had been reduced and then not increased other than very recently in the state budget before this most recent [session].
“In any case, we’ve had a structural gap, meaning our allowable growth and revenues had not kept pace with the cost of basically maintaining current service levels for Madison residents, particularly with Madison being the fastest growing city in Wisconsin. We were fortunate to receive American Rescue Plan Act funding that helped us fill that revenue gap brought on by the pandemic. But that money was one time in nature and ended at the end of 2024.”
Schmiedicke said as Madison continues to grow, the city is focusing on a blend of multi- and single-family housing. It also needs more affordable housing to achieve what officials call the “elements of a great city.” That phrase comes from the city’s Imagine Madison comprehensive plan, which was created from thousands of community interactions.
“It’s got to be a mix in order to maintain our overall quality of life and fiscal health,” he said. “In fact, the city just did a series of zoning changes to allow the division of large lots, accessory dwelling units and things like that to try to get more owner-occupied housing. Those are in addition to the large number of multifamily housing units that are going up to meet demand.”
While that infill is largely positive and jives with smart growth planning, he said the tall apartment buildings that have been added in the city’s downtown have required larger sewer pipes to meet increased demand. “We’ve had to ‘upsize’ our infrastructure in some cases and step back to do planning for that type of development,” he said.
In Midland, Texas, Mayor Lori Blong wasn’t facing major budget cuts. Rather, looming infrastructure repairs for roads and other needs prompted the city to undertake a number of audits, increase fees and seek out grants to fund programs. Blong, who has been mayor for three years, said the “recurring efficiencies” in its strategic plan saved $15 million last year. Other cuts lopped off $116 million in one-time municipal costs.
The two-year-old plan highlights key priorities of the city and made long-term forecasts and fiscal plans with the intention of making the local government more high-performing and self-sufficient, she added.
The city tapped the Lean Six Sigma Institute, which aims to optimize government processes, increase transparency and improve citizen services by employing strategies tailored for the public sector. Its website says it also endeavors to “foster a workplace culture that values efficiency, innovation, and customer satisfaction, leading to sustained improvements in operational performance.”
Blong said the audits were mandated because much of the city was built decades ago and had seen little reinvestment. In July, a manhole collapsed on a busy street, prompting emergency lane closures.
“We needed to be proactive,” she said. “We’re working to where we can budget for potential infrastructure failures that we can foresee. But those are rising costs that we know are coming because those things are going to continue to fail.”
Blong said the biggest savings — worth $60 million — came when the city renegotiated the firefighters’ pension plan. It also scooped up $16.8 million from a series of private partnerships for Beal Park renovations, won an $8.6 million grant from the U.S. Federal Highway Administration (FHWA) for safe streets and $6.7 million from the state and the FHWA for its Wildcatter Trail.
The city also will save $10 million annually from a reorganization of the utilities department. And it cut $1 million by eliminating a subsidy to the Midland International Air and Space Port. Meanwhile, an audit revealed the city had overpaid fees to the Federal Aviation Administration, so it will be receiving $5.4 million in refunds.
Another $2.1 million should be clipped annually by using a water leak detection service called Asterra, which will monitor “basically every drop going through the city system,” Blong added. These cuts are on top of $10 million in savings from “process improvements” in the utilities department.
While remaining competitive with other golf courses, the city also cut a $700,000 subsidy to its Hogan Park Golf Course by raising fees to users so the links can be self-sustaining. And through searching for software “redundancies,” the city trimmed $870,000 in costs in its Information Technology service department.
“We’ve cut a lot, but I want to emphasize that we weren’t facing declining revenues like many other cities,” Blong reiterated. “It was our costs — streets, law enforcement, all of that — which were rising precipitously.
“So, this deep dive into how we do and pay for things and seeking all-around efficiencies, as well as grants, was required,” said Blong, who is optimistic about Midland’s future.
Minicozzi, for his part, said cities should be doing more than cutting programs, raising taxes or increasing fees at golf courses. Audits are good and can uncover waste, but communities of all shapes and sizes should be looking at what different kinds of real estate development are costing and/or benefitting them.
They also should be promoting infill that takes advantage of existing road systems, sewers, lift stations and other infrastructure, he said. “It’s all very true that they can cut services, chase grants and raise fees, but can you also stimulate people to redevelop properties?”
Unfortunately, that doesn’t come naturally for many cities and their leaders. “What I run into with a lot of governments is that it’s very much ‘we’re here and you’re out there’ when it comes to real estate development,” Minicozzi said.
“And that’s befuddling to me. So, I say ‘no, we’re in it together.’ My property would be worth almost nothing unless there were services and infrastructure that go there, so we are already in a partnership.
“Cities often just respond to developments. I think that’s kind of weird, but it is very common. It’s a total no brainer for me, though, because [in existing neighborhoods] you’re already paying for the pipe and the road and the sidewalk and the snowplow. You’ve already made an investment in the infrastructure, so you would think they’d want to do as much as possible to turn that vacant land into something.
“They should be looking at their books and asking where are we leaking money. That’s another kind of audit and our red and black models show what’s red and losing tax dollars and what’s black and gaining money.”
Minicozzi gave the example of a single empty lot in Eugene, Ore., that was “upside down and costing the city $6,000 a year. Likewise, another study showed that vacant lots in Kansas City were bringing in only about $40 a year in property taxes. That doesn’t even pay for a snowplow to go by and scrape the street in the winter.”
Minicozzi pointed to Memphis, Tenn., which he said “had metastasized and chased sprawl in the ‘70s, ‘80s and ‘90s by annexing, annexing and more annexing.” It grew by leaps and bounds, eventually leaving square miles of vacant land inside the city and all the related infrastructure that needed to be maintained and eventually be replaced after 50 or so years.
Similarly, he said Annapolis, Md., grew in size by tenfold in the decades after the 1950s to meet the demand for suburban homes, but its population only tripled.
Minicozzi acknowledged that it can be difficult to redevelop areas that have been neglected, “making it hard to go back in when you’ve blown your city out.” But he lauded South Bend, Ind., for creating pre-approved house plans to make it easy for people to redevelop properties in the city.
“Now you can waltz in, get your plan and just kind of go for it,” he said of South Bend, a Rust Belt city that is also home to the University of Notre Dame. South Bend was annexing land at the same time its population was declining. It now stands at 104,000, down from 125,000 in 1970, according to the U.S. Census Bureau.
He also praised Rancho Cucamonga, a Los Angeles suburb, for creating a downtown while telling the owners of a rebar mill who wanted a large tax break to keep the mill in the city that it could go elsewhere.
“Cities are like people and they are all different in their own ways, with biases and such about how they want to look and what they want to be,” he said. “Regardless, it’s helpful if they know not only what properties are paying for themselves, but what infrastructure is going to cost to replace in years to come as well.
“To put it in real estate terms, it’s like checking out a house that you might want to buy and considering future costs. Repairs and upkeep can be quite expensive.”
