Local Governments Are First Responders to and Victims of the Coronavirus
Local leaders are putting together relief programs intended to cushion the economic blow to households and small businesses reeling from widespread shutdowns. But complicating any rescue package is the fact that local governments are themselves victims of the economic collapse.
Presented with a public health crisis over the novel coronavirus pandemic that has now led to an economic crisis, local leaders are beginning to put together relief programs intended to cushion the blow for households and small businesses feeling the effects of an economy coming to a screeching halt.
San Diego Mayor Kevin Faulconer has introduced an emergency fund to provide microloans to small businesses, while the City Council is attempting to adopt a moratorium on residential and business evictions. The San Diego Foundation has likewise introduced its own community relief fund.
But complicating any attempt at a local rescue package is the fact that local governments are themselves victims of the economic collapse, with tax revenues shrinking even as they look for ways to help.
Bruce Katz, director of Drexel University’s Nowak Metro Finance Lab, which helps cities create public financing solutions, said the metropolitan regions that weather the crisis best will be those that’ve created a cohesive and collaborative network of governments, universities, philanthropies and business communities capable of tackling the problem together.
Those networks need to begin surveying the damage on the ground, he said, before the better-financed state and federal governments can hope to put together rescue packages capable of addressing the problem.
“It’s obvious that what’s needed in every metro area is an economic stabilization network that on a day-to-day basis can ascertain the damage to small businesses, particularly neighborhood serving businesses or businesses that are crucial to supply chains,” Katz said. “What runway do these businesses have? Do they have a month of cash? How long can they last without an infusion of capital that’s fit to purpose?”
That’s the first step. Then, he said, those same networks will need to figure out what money is available within their region that can be deployed to the people and businesses that need it.
“Step two is, are there local pools of capital that could be aggregated quickly to infuse into affected businesses? How would the pools be aggregated; how would they be structured? I don’t know, but I don’t think the federal government has the available tools.”
The federal government’s standard tool for a sudden economic shock – economic injury disaster loans – is better suited for responding to a hurricane, for instance, Katz argued. Those crises hit a specific geographic area for a finite period. They’re not well-suited to a crisis that’s hitting the entire country, indefinitely, all at once.
“The alternative is, we’re going to lose our small businesses,” he said. “This is an economy without consumers. It’s an enormous stress test.”
Local organizations have started announcing their own efforts, but for now the details are scant, as is any indication of whether they will be large enough to dent the problem.
Faulconer’s initial economic relief package, announced Wednesday, would create a small business relief fund to provide no-interest microloans to businesses affected by the crisis. The city provided $4 million in seed funding and is calling on corporations and financial institutions to contribute as well.
“I’d like to use this opportunity to call on San Diego’s corporate partners, to provide support in any way they can to help grow this fund,” Faulconer said at a press conference announcing the fund. “San Diego has always showed its generosity in a time of crisis. Today, it’s time to do it again.”
Jerry Sanders, the former mayor and now head of the San Diego Regional Chamber of Chamber, said it’s time for large businesses to help where they can so small businesses can survive, but acknowledged the financial needs are likely too big for San Diego to solve on its own.
“None of this should replace the importance of state and federal government engagement in providing the funding for businesses to recover over the long run,” he said at the press conference.
But at just $4 million, the fund has a long way to go before it can address a hit this large. Chicago Mayor Lori Lightfoot, for instance, announced a similar fund Thursday, beginning with $100 million in funding.
The City Council, meanwhile, instructed city staff to begin working on a set of policies that could provide some relief. They’re pushing for a moratorium on evictions for both households and businesses that can’t pay as a result of lost income from the coronavirus crisis. Residents or businesses would need to alert their landlords before skipping a payment, provide paperwork connecting their income loss to the virus and eventually make good on any missed payments. The Council will still need to adopt a final proposal, once it’s written.
And the San Diego Foundation’s relief fund, which now stands at $5.7 million after a $1 million donation from the Qualcomm Foundation, will send grants to local nonprofits to help deal with food insecurity, rental and utility assistance and income replacement. The United Way received its first grant of $250,000.
But Katz said it will be important for metro leaders to view their response as an iterative process, in conversation with the state and federal governments and the people and businesses feeling the effects on the street.
“I think we’ll see waves of intervention,” he said. “We’ll intervene here, then see what happens. Then do it again. These local networks can assess, inform, fill in gaps, then do it all over again. There needs to be constant engagement with ears to the ground. There’s going to need to be a collaborative back and forth between metros and state governments: Where does the government have a solution? Where do we work together? And it’s an opportunity for places that don’t have nimble networks to come together and act with purpose.”
County Supervisor Nathan Fletcher said he has primarily been focused on the public health side of the pandemic, but that what he’s seen there has made him optimistic that San Diego is capable of putting together an effective response network.
“I can tell you that within the last 12 hours, I have spoken to the chancellor of UCSD, the president of SDSU, the mayor of San Diego, business leaders and hospital CEOs,” he said during a Thursday morning interview. “That network is working – since midnight I’ve talked to all these people and we’re collaborating on, ‘What do you need? Can you give me this building?’ Once we get through the immediacy of the public health issue, we do have a network working together.”
The local capital available will almost certainly be insufficient to address the problem, Katz said. That’s part of the conundrum they’re facing: Cities are playing a role as both first responder to the crisis, and victim of the crisis simultaneously.
“Local governments are going to have to be made whole by the federal government,” he said. “Their loss of tax revenue – it’s certain. Whole sectors of the economy have been shut down. But particularly if the national response doesn’t happen fast enough, or isn’t fit to purpose, only these networks can be close enough to small businesses to make these assessments fast. We need a feedback loop here, and it’s going to be led by a small group of cities that get these networks cohered.”