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  • Writer's pictureEdmund J. Russell, III

Solutions for Municipalities Dealing With The Economic Fallout of Covid-19

Even though a new year is upon us, municipalities are still dealing with the economic fallout of COVID-19 and will for some time. Although vaccines are being made available to certain groups of people, and there is a light at the end of the tunnel, herd immunity is not expected to be reached for a long time. Therefore, federal, state, and local governments may deem prolonged distancing mandates and business restrictions necessary to protect their constituents. Taking this into account, finances for municipalities are expected to experience some significant challenges over the next couple of years as the U.S. pulls itself out of the pandemic and recovers from the economic side effects.

A Brookings Institute report estimates that declines in sales and other taxes and fees will remain depressed for some time as consumption trends will not return to pre-COVID levels quickly. The report further states that overall revenue for state and local government is estimated to decline by approximately 5% for each of the next three years. Faced with a decreasing revenue, but increased capital costs, local municipalities will need to work closely with their advisors to navigate these difficult times.

For local governments, one means to address revenue shortfalls is the issuance of debt. Given the current interest rate environment, either short-term or long-term debt can address urgent needs without creating an insurmountable debt burden.

At Underberg & Kessler, our team of seasoned municipal and tax lawyers are well versed in all aspects of municipal finance including private activity bonds, general obligation bonds, revenue bonds, qualified 501(c)(3) bonds, swaps and other derivative financial products. We can help structure and implement necessary financial planning to weather the next couple of years.

For those of you familiar with our posts, you may have noticed our newest team member to the Municipal and Tax Practice Groups, Sarah Bothma, who joined us in 2020. Sarah graduated with a LLM in Tax from New York University, School of Law, which makes her particularly well-equipped to handle such work.

If you have any questions regarding the issues discussed above or if you have any other Municipal Law concerns, please contact the Underberg & Kessler attorney who regularly handles your legal matters or Ed Russell, the author of this piece, here or at (585) 258-2834.

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