A survey conducted for the Allegheny Conference on Community Development suggests that Indiana County municipalities could lose from $1.5 million to $6.5 million in revenues as a result of COVID-19.
The survey conducted for the University of Pittsburgh’s Center for Metropolitan Studies suggests that two to four of the county’s 37 municipalities could face some sort of cash insolvency this year, while up to 12 could be insolvent by the end of 2021 if a longer shutdown scenario were to occur.
”COVID-19 has created a revenue crisis for municipalities just months after their annual budgets were set,” said Dr . George W. Dougherty Jr., a professor at Pitt.
And the center said its initial findings conclude that 2020 is only the beginning of a significant municipal financial crisis, with an even more dire situation looming in 2021.
“With the potential of upwards of 20 percent of our region’s municipalities facing financial distress, we know major collaborative efforts will need to be mounted to address these extraordinary and potentially catastrophic financial circumstances heightened by the COVID-19 pandemic,” said Center for Metropolitan Studies Director Dr. David Miller. “We need to mobilize all partners immediately to begin coordinating and planning for the recovery of our region’s local governments.”
Specific municipalities were not named by researchers, who wanted to consult those communities first, but Dr. Brian K. Jensen, senior director of policy and advocacy at the Allegheny Conference, said boroughs and townships that depend on earned income tax hadn’t been getting it.
“It just simply boils down to this: If you are not working you are not obliged to pay,” Jensen said.
Using figures available from the Pennsylvania Department of Community and Economic Development, the Pitt center estimated that revenue losses across a 10-county region of Southwestern Pennsylvania could range from $123.1 million to $484.5 million.
Much of that projected deficit appears headed for municipalities in Allegheny County, from $82.7 million to $323.1 million, and Indiana County is at the low end of projections along with Armstrong and Greene counties.
Nine municipalities, including two in Indiana County, were on shaky ground before COVID-19, according to the DCED data as interpreted by Pitt researchers.
“Four of those governments reported zero or negative fund balances at the end of 2018 and were struggling before the pandemic began,” Dougherty said. “Three additional municipalities (all outside Indiana County) would be cash insolvent in 2021 if the low revenue loss scenario were repeated.”
Using factors in those annual financial reports to DCED, including structural surpluses/deficits, cumulative surpluses/deficits, occasions when budgets were in the red between 2014 and 2018, and whether a municipality had a sufficient fund balance, the researchers found:
• Five Indiana County municipalities at high risk over the long term, of 65 across southwestern Pennsylvania.
• Fifteen with some risk of 165 municipalities in 10 counties.
• Twelve at low risk among 167 similar cases in the region.
• Five municipalities with no long-term risk, among 128 municipalities in the 10-county region.
Indiana Borough officials are keeping an eye on budgetary matters.
“It is going to be really tough for us to have a handle on this for another month,” borough Manager C. Michael Foote said Friday. Still, “we could see a very significant reduction in our budgeted revenue.”
White Township Assistant Manager Chris Anderson acknowledged that municipality operates for the most part on earned income tax, and that “there may be some impacts” but it is too early to tell how much. “I don’t foresee any of our assets being compromised,” Anderson predicted. “Our supervisors have been fiscally sensitive.”
White Township utilizes Pennsylvania State Police, whose barracks are near the interchange of Route 422 and Route 286. As Dougherty pointed out, public safety “is typically the largest single expense a municipality has.”
Dougherty said the analysis provided by the Pitt center “provides a starting point to assist those advocating for state and federal attention and assistance and to inform continuing conversations about multi-municipal cooperation and the potential for shared services.” He added that “the greatest likelihood for these efforts to succeed would arise from a bottom-up approach with state and federal officials responding to the expertise and data backed needs of local government leaders.”