Tuesday, February 7, 2023

N.C. cities ask lawmakers for $210M in assistance, citing cash flow woes

Helping North Carolina’s cities and towns stabilize after suffering declining sales tax collections will require hefty state support, the N.C. League of Municipalities says.

The group made several requests of lawmakers in an April 3 letter:

  • $60 million each month for April, May and June to “offset anticipated lost sales tax revenue as a result of mandatory business closings and social distancing measures.”
  • $50 million in interest-free loans to aid with cash flow challenges.
  • $100 million in grants to help local water and wastewater utilities meet cash flow needs

The support is needed because a potential 20% decline in sales tax revenue could mean a lost of nearly $90 million in revenue for N.C. cities and towns for a single quarter, the trade association said. Those municipalities now take in as much as $1.3 billion in sales tax revenue annually, which makes up about 28% of the operating budget of the median N.C. city.

Cities spend about 30% of their budgets on public safety.

Gov. Roy Cooper issued an executive order blocking utilities from disconnecting customers that don’t pay their bills, citing the pandemic. Many such utilities in the state are owned by cities, which take a hit financially by such a decision. “Distressed customers, though, will mean distressed systems, as these systems have fixed cost and staff that must be paid,” according to the letter written by Rose Vaughn Williams, associate executive director of public and government affairs at the N.C. League.

Some of the state’s bigger cities are also facing deep declines in hospitality tax revenues because of plunging demand for hotels and restaurants. Occupancy taxes produce about $300 million in local government revenue annually, much of it in Charlotte, Raleigh, Durham and Asheville.

Recognition of looming financial pressures on state and local governments is prompting unprecedented action by the Federal Reserve, which today announced programs aimed at propping up municipalities. But the plan to buy $500 billion in debt is restricted to states, cities with population of at least 1 million people, and counties with at least 2 million people. No N.C. cities or counties would qualify.

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