The coronavirus pandemic disruptions and the resulting economic slowdown will wreak havoc on Prince George’s County government budgets, local elected officials say. The full picture isn’t yet clear, but officials near unanimously tell Route 1 Reporter they are bracing for a severe recession and multiple years of reduced tax revenue that could force them to make deep cuts to services, change they way they provide services, and delay long-term capital projects.
For elected officials just now starting their regular budget-planning seasons, the prospect of a deep and immediate recession caused by the pandemic makes it hard to do the forecasting necessary to even build a budget for the next fiscal year.
“It is a size-able hit. Everything I am reading implies it will be as bad or worse than the last recession we went through,” said County Councilor Dannielle Glaros in an interview. “To put it in perspective: We have 5,000 people who are laid off from National Harbor-MGM, we have 150 hotel workers let go from the hotel at the University of Maryland. We have a casino that contributes to our county budget which is no longer in operation.”
“It’s gonna be rough,” said County Councilor Deni Taveras. “We don’t have any tangible projections at this time of how severe the recession could potentially be in the country. We won’t be able to count on revenue that was expected for the next four months, which is a quarter of our total projected budget.”
Income tax shock
At least initially, the primary threat to local government budgets comes from a near-immediate reduction in expected income tax revenue and revenue from permits, fees, and taxes levied on commercial activity. At the county level, income taxes were expected to make up about 18 percent of Prince George’s County’s $3.6 billion 2020 budget, or about $664 million. But with a more than a quarter to go in the fiscal year, those projections are out the window. For context, a one percent decline in income tax revenue translates into about $6.6 million in lost revenue at the county level.
Municipalities, which generate the majority of their income from local property taxes, are more insulated against income tax revenue shocks in the near-term. But local income tax distributions still make up significant chunks of city budgets. Laurel, Maryland, projected it would take in $3.3 million this year in local income tax distributions, or more than 10 percent of the city’s expected $34.7 million in revenue this year. Hyattsville expected to receive $2.6 million in local income tax revenue through the end of the fiscal year. That’s nearly 8 percent of the city’s annual tax revenue, and the city’s second-largest source of funds. In Mount Rainier, state income tax distributions were expected to be about 10 percent of the city’s $7 million budget for 2020.
The bigger fear, according to Laurel Mayor Craig Moe, is that a deep recession sparked by a prolonged disruption in the commercial retail sector and its workforce or mass failures to pay rents and leases could undermine real estate values in the longer term.
“Next year is going to be devastating for us, in my view, if this thing drags on for months,” said Laurel Mayor Craig Moe. “We’re just not sure how long this will go on. I think it’s a few more months at least, and that could be very difficult for Laurel and other municipalities.”
“It’s too soon to predict the magnitude,” said Hyattsville Mayor Candace Hollingsworth in an email. “It’s fair to say that we anticipate the impact to our local economy to be significant and we will have a period of recovery.”
“It’s very volatile right now. Nobody can forecast when exactly this might end,” said College Park City Councilor Fazlul Kabir. “If we lose revenue, that will impact our major capital projects, certainly anything the next Council might take on.”
The long-term impacts on local government in Prince George’s County are still hazy. On the Route 1 Corridor, tightly-packed with municipalities, Mount Rainier City Councilor Luke Chesek said a funding crisis may prompt smaller municipalities to consider combining services – perhaps even police – to save money.
“I think the recession is likely at this point,” said Chesek, noting that his city is surrounded by the towns of Colmar Manor, Cottage City, Brentwood, North Brentwood and others. “We each have a police department for a square mile. Each of us are spending $200,000 of loaded labor costs on police chiefs. That could be a really good opportunity to talk with our neighboring jurisdictions about sharing services.”
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