Marion County finances in line for ‘big wallop’ from coronavirus slump

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INDIANAPOLIS, Ind. — The U.S. Economy slumped nearly five percent in the first quarter of this year, state revenues plunged six percent in March and the economic shut down brought on by the coronavirus pandemic will deal a “big wallop” to Marion County tax revenues according to Ball State University Economist Dr. Michael Hicks.

“The real local effect, particularly in Indianapolis, is going to be on the food and beverage tax, the innkeepers tax is going to be affected immediately and then other taxes that go to the Capitol Improvement Board,” said Hicks, “and I also think we have to look down the road at a gas tax and how that’s going to affect repaving and road construction well into 2021 and I think for local governments into 2022.”

While local unemployment numbers are plunging to depths not seen since the Great Depression, Hicks said the way income tax revenues are computed and reimbursed by the state won’t impact Indianapolis until 2021 and 2022, thus creating an expected second wave of fiscal bad news.

“At the state level, certainly personal income tax, corporate income tax, sales tax, you’re going to be clobbered. I would say planning for ten or more percent reductions over a 12-month period hitting like in March of next year probably makes sense.”

Hicks predicts Indiana municipalities will see a $500 million revenue set back this year while Marion County should prepare for $25 million in losses from reduced revenues related to the tourism and convention industry shutdown.

“We do not have a hard dollar number at this point in terms of lost economic impact,” said Chris Gahl, Vice President of Visit Indy. “To date we do know that there have been more than 80 conventions that have cancelled, and it tallies hundreds of millions of dollars in economic impact.”

Gahl said 83,000 people in central Indiana draw paychecks related to the hospitality industry and several hotel and expansion projects on the drawing table for downtown Indianapolis have been put on hold.

“There were multiple hotel projects that were being discussed and, in the mix, pre-COVID-19,” he said. “We know in talking to hotel owners and those prospective projects that many have fallen out of the pipeline. They will simply not take shape and that’s because of the dire needs of this crisis financially.”

Gahl said the proposed Pan Am Project which includes a signature hotel and expansion of the Indiana Convention Center is still moving forward.

“It’s hard to tell what a new post-COVID-19 Indianapolis will look like,” said Gahl, citing the $5.6 billion impact the tourism industry had in Indianapolis last year.

Regarding the coronavirus shut down impact on city finances, Ken Clark, controller for Indianapolis-Marion County city-county government, told Fox 59 News:

“Over the last four years, Mayor Hogsett and the City-County Council have focused on strengthening the city’s fiscal outlook and smart-sizing local government. These efforts have resulted in three years of structurally balanced budgets, bolstered reserves, and good credit.

“While it will be some time before we know the full fiscal effects of COVID-19, we are continuing to practice strong fiscal management.  Thus far, we have implemented a hiring freeze on all non-essential personnel, limited discretionary spending, and instructed departments to focus on solidifying their reserves. Moving forward we will institute additional cost-saving strategies to ensure we are efficiently delivering services to residents. Additionally, we continue to collaborate with state and federal partners to secure flexible funding that can adequately address the potential long-term effects of the pandemic.”

Dr. Hicks said some communities, such as Kokomo where General Motors is building ventilators and Warsaw, home to numerous medical device manufacturers, may fare better in responding to the economic slowdown.

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