Aug 13, 2020

Axios Cities

Welcome back! As always, thanks for reading.

  • Today's edition is 1,754 words, a less than 7-minute read.

For your weekend reading: I've been working on a deep dive into what "back-to-school" entails this year. If you're an Axios AM reader, you'll find it in your inbox on Saturday.

1 big thing: Pandemic hits city budgets harder than Great Recession
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Data: National League of Cities; Chart: Axios Visuals

With tax revenue in free-fall and expenditures dramatically rising, the coronavirus pandemic is on pace to hit cities' finances even harder than the Great Recession.

Why it matters: Almost all cities are required to balance their budgets, and at this rate they'll have no choice but to cut more services, lay off or furlough more workers, and freeze capital projects.

The big picture: The 2019 fiscal year was the first year that most cities regained the levels of general fund revenue they'd lost due to the Great Recession.

  • Those gains going into the 2020 fiscal year were wiped out in a matter of months once the pandemic forced local economies to shut down, and it could take another decade or more to recover from the sudden, deep free-fall.

Between the lines: During the Great Recession, cities' year-over-year decline occurred over six years. The rapid fiscal plunge cities have felt over the past six months has been a much greater shock to their budgets.

By the numbers: Almost 90% of the 485 cities surveyed by the National League of Cities expect to be less able to meet their communities' financial needs this year than last year — the lowest level of confidence among local budget officials since the low point of the Great Recession.

  • Cities, on average, expect a 13% decline in general fund revenues in the 2020 and 2021 fiscal years.
  • All local revenue sources shrank in the 2020 fiscal year, which ended in June for many cities. Sales taxes saw the steepest drop, at 11%, and income tax fell 3.4%.
  • Revenues from property tax showed the slowest decline, but property taxes are a lagging economic indicator that typically take at least 18 months to show up on balance sheets.

What they're saying: "Cities that rely on both sales and property tax — a pretty common mix — expect the biggest hit because they're getting squeezed both in the short term and the long term, having an even more damaging impact on their bottom lines," said Christy McFarland, National League of Cities research director.

For example, Pittsburgh Mayor Bill Peduto onWednesday said the city has spent its entire reserve fund to pay the bills and currently faces a $100 million budget deficit. Massive cuts and layoffs are coming across every department, he warned.

The bottom line: With the pandemic showing little sign of abating and negotiations over federal stimulus relief for local governments stalled, cities will be forced to make even harder decisions in the coming year.

2. The suburban renaissance

Illustration: Annelise Capossela/Axios

It's not just emotional buying, real estate agents say: There are smart and strategic reasons that Americans of all ages, races and incomes are moving away from urban centers, Axios' Jennifer Kingson writes.

Why it matters: Bidding wars, frantic plays for a big suburban house with a pool, buying a property sight unseen — they're all part of Americans' calculus that our lives and lifestyles have been permanently changed by coronavirus and that we'll need more space (indoors and out) for the long term.

What buyers are looking for: Fresh air, backyards, home offices (for two adults), a homeschooling area, space for pets, home gyms — plus proximity to beaches, lakes, parks and bike paths.

  • "Preferences have moved from 'What's a prestigious location?' to 'What's practical?' and 'What's the quality of life we want for our households?'" Anna DeSimone, a housing finance expert who writes guidebooks for consumers and mortgage professionals, tells Axios.

As more people do their grocery and household shopping online, proximity to retail stores is no longer a real estate priority.

  • "We're not hearing as much around brick-and-mortar [or] where's the closest this-or-that," Kris Lindahl, CEO of a real estate agency in the Minneapolis-St. Paul area, tells Axios. "Instead it's: 'Can we get delivery here?'"

By the numbers: Existing home sales rose 20.7% in June over May, and median housing prices rose in every region of the country, according to the National Association of Realtors.

  • Sales growth is particularly pronounced in more affordable regions like the South and the Midwest, Lawrence Yun, NAR's chief economist, tells Axios.

Unlike in decades past, the move toward the suburbs does not represent "white flight," but rather the work-from-home phenomenon, Yun tells Axios.

  • "The people moving to the suburbs are of all races and ethnicities," Yun said, noting that equal access to housing in all areas is "the law of the land."

Inventory of available homes for sale — which was low even before the pandemic — has grown even scarcer, to the point that realtors are knocking on the doors of desirable homes and asking the occupants if they'd consider selling.

Go deeper: Elder millennials are fleeing to "hipsturbia"

3. Map du jour: Small-town America's growing diversity
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Data: IPUMS NHGIS, University of Minnesota, U.S. Census Bureau; Chart: Naema Ahmed/Axios

The new talk of small towns: discussions over racism and police use of force, spurred by the death of George Floyd.

  • This summer has seen protests in small towns ranging from Pine Island, Minnesota (pop. 3,400), to Somerset, Pennsylvania (pop 5,900), to Harvard, Nebraska (pop. 968).

The big picture: Many small towns are realizing for the first time how multiracial they are, Axios' Rashaan Ayesh reports, as projections show people of color will become the majority in the U.S. by 2054.

Between the lines: Many of the protesters in rural and small towns are white Americans who grew up in a more multiracial and cultural community than their parents or grandparents.

  • “Ten years ago, I was traveling into really rural communities and would be surprised when, out of nowhere, you would see this little Black kid run up and hug his white grandfather," former Iowa state lawmaker Helen Miller told the Washington Post.
  • "Now, that little boy is 16, 17 or 18 years old, and he’s still out there, and he’s not going anywhere."

The bottom line: Small towns offer the appeal of lower cost of living and jobs for Black Americans and Latinos, the Post notes.

  • Nearly 40% of counties saw the population of people of color under 30 grow faster than for white people over 55, per the Post.
  • Counties with 100,000 residents or less, particularly in the upper Midwest, made up 90% of the places where the population of young people of color grew the fastest.
4. Restaurants push for local laws to cap food delivery app fees

Illustration: Aïda Amer/Axios

A new campaign that launched this week is encouraging restaurants to lobby for local laws that cap commissions that food delivery apps like Grubhub, UberEats, Postmates and DoorDash can charge, Axios' Ashley Gold reports.

Context: Restaurants that can no longer serve most diners during the pandemic have turned to partnerships with food delivery apps. But in many cases, these apps charge the restaurants roughly 30% of every transaction.

  • Before the coronavirus, apps like DoorDash and UberEats provided eateries with a bonus on top of sales from in-person dining and drinks.
  • Now, when the whole business is takeout and delivery, they're being devastated by the fees, Katy Connors, executive director of the Independent Restaurant Alliance of Oregon, tells Axios.

Details: The American Economic Liberties Project, which is running the campaign, is providing restaurants with tips on contacting local legislators and encouraging them to sign a letter urging Federal Trade Commission to investigate the apps.

  • According to the group's tracking, at least 15 major cities in the U.S., and the state of New Jersey, have implemented delivery fee caps of anywhere from 5% to 20%, and dozens more are considering legislation.
  • Many of these caps are set to end whenever the coronavirus emergency does.

The other side: Food delivery apps generally defend their commissions by noting that the fees are their main source of revenue and pointing to the many services they provide their restaurant partners.

  • Those services include "things like paying and providing benefits to delivery couriers, marketing, customer service, courier support, exposure to new customers, and insurance," Ashley De Smeth, Postmates head of public affairs, tells Axios in a statement.
5. Confidence in public school system jumps

Illustration: Sarah Grillo/Axios

A Gallup poll released Wednesday shows America's confidence in the public school system rose by 12 points this year to 41% — its highest point since 2004, Axios' Orion Rummler writes.

Why it matters: "Double-digit increases in confidence for any institution are exceedingly rare," Gallup notes.

  • The jump comes as teachers, administrators and parents are still figuring out how to safely get kids back to school in the midst of a global pandemic.

Where it stands: Within one week of K-12 schools reopening in Georgia, 1,390 students have been told to quarantine in one school district after coming into contact with people who tested positive for COVID-19.

  • In Indiana, which set a new high last week for coronavirus infections recorded in a single day, 228 students in one school district were recently sent home to quarantine, AP reports.

Between the lines: Swiftly implemented quarantines show that schools are willing to take action to slow the spread.

The big picture: Gallup polling also found significant upticks in American confidence this year in banks, small businesses, organization, and the medical system. Confidence in the police fell five points to 48% — the first time in 27 years that Gallup has tracked this trend that approval fell below the majority threshold.

Go deeper: What a day at school looks like in a pandemic

6. Urban files
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Data: The COVID Tracking Project, state health departments; Map: Andrew Witherspoon, Danielle Alberti, Sara Wise/Axios

Coronavirus cases are falling, but don't get too comfortable (Axios)

Death of a smart city (OneZero)

Uber and Lyft's threat to suspend services in California (Axios)

It's uncomfortable: A mayor's life during the pandemic (Governing)

Cities lose lawsuit against FCC's 5G rules (Axios)

7. 1 😱 thing: The era of elevator anxiety

Illustration: Aïda Amer/Axios

Will you step back into an elevator any time soon?

Office building landlords and tenants are busy working out how many people to allow in an elevator at a time — with the dual goals of conveying people to their cubicles and keeping them safe at work, Axios' Felix Salmon writes.

The big picture: Office landlords are terrified that if most employees are unwilling to return to work, their tenants will downsize or abandon their leases entirely.

  • Commercial real estate loans have already seen a spike in default rates.
  • Ancillary businesses — like all those lunch spots near offices — are also suffering.

The intrigue: The science of COVID-19 transmission in elevators is far from settled, but the consensus is that the risk is low.

  • "Most elevators are very well ventilated," Richard Corsi, the dean of the engineering school at Portland State University, tells Axios.
  • "The short duration of any exposure" helps to bring the risk down, Professor Ben Cowling of the University of Hong Kong's School of Public Health told me.

Risk can be further reduced by implementing new rules:

  • Limiting capacity to no more than three or four people per car.
  • Ensuring that everybody wears a mask and doesn't speak.
  • Not pressing buttons with bare fingers.
  • Standing with one's face to the walls of the elevator rather than to the door.

If many employees are unwilling to get into elevators, that helps to solve much of the social-distancing problem.

  • Tactics to reduce elevator crowding include staggered arrival times and catered lunches (which reduce the lunchtime rush down and up).

Go deeper

See you next week!