The gist: Retail sales are plummeting nationwide, while plunged oil prices remain bottomed out. That means local governments face the possibility of massive deficits. Citing “unprecedented fiscal challenges,” Lafayette’s mayor-president is setting expectations for deep cuts.
“Now more than ever, this must be a time of fiscal discipline,” M-P Josh Guillory said at his daily coronavirus press briefing. The city’s general fund — money not dedicated to specific government purposes — is already running at an $18 million deficit from the current year’s operating budget. The previous administration and council passed millions in pay raises for city police, fire and public employees, Guillory pointed out in explaining the financial predicament. When passed, the raises were widely supported despite mounting budget pressure. Guillory campaigned as a budget hawk and himself publicly stumped for the police and fire pay bumps. “Everything is on the table,” Guillory said of what he and the council will have to cut out of the budget.
Coronavirus has wrecked retail sales, with March recording the worst drop in activity on record. National sales dropped 8.7 percent from February, topping the previous one-month record set during the 2008 financial crisis that kicked off the Great Recession. Back then, sales ultimately plunged by 12 percent over the course of months, a depth the current crisis could reach in a matter of weeks. About 70% of the city of Lafayette’s tax revenue comes from sales taxes.
Nationally, there is concern rating agencies will downgrade cities’ and states’ bond ratings. In effect, that would increase governments’ cost to borrow money at bond markets, often the financial lifeblood of major infrastructure improvements. Higher interest rates are passed on to taxpayers through sales taxes that are indexed to debt.
LCG is positioning itself to restructure $312 million in debt. Resolutions that will appear before the councils this month would permit the finance department to apply to the state bond commission to refund and restructure bonds before LCG’s bond ratings are downgraded, putting more pressure on capital funds. That could mean stretching the debt over a longer period of time. LCG Chief Communications Officer Jamie Angelle says the administration is trying to keep options on the table ahead of stormy weather.