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Great Depression-Era Job Losses Expected In Austin Due To Coronavirus Pandemic

A business on South Congress is closed during the coronavirus pandemic. Nonessential businesses have been told to close to slow the spread of the disease.
Gabriel C. Pérez
A business on South Congress is closed during the coronavirus pandemic. Nonessential businesses have been told to close to slow the spread of the virus.

The City of Austin is expecting Great Depression-era job losses as the coronavirus continues to shut down the economy. Current forecasts predict a quarter of a million people in Austin could be without jobs in the next couple months, an unemployment rate of about 25%. 

Jon Hockenyos, the president of the Austin economic consulting firm TXP, Inc., told city council members Tuesday that this is just the beginning – it’s likely going to take two years for the Austin economy to get back to normal. 

“I’m hoping that is a slightly pessimistic scenario, but I think it is a realistic scenario,” Hockenyos said. 

Job losses are expected to hit the sales, production and hospitality sectors the hardest. This includes people who work in jobs that involve close contact with others, such as restaurant employees, hotel workers and flight attendants. 

RELATED | COVID-19 Is Costing People Their Jobs. Here's How To Apply For Unemployment In Texas

Ed Van Eenoo, the City of Austin’s deputy chief financial officer, said the city is planning to increase its budget to deal with many of the unforeseen costs caused by the coronavirus. This includes money for emergency management, personal protective equipment and public outreach. Projected costs for these services could reach $11 million by the end of May. 

Credit City of Austin

This comes as the city’s general fund is expected to lose up to $58 million in revenue this fiscal year – a 5% reduction. People staying home to help prevent the spread of COVID-19 has severely impacted the city’s sales tax revenue, mixed drink taxes, hotel occupancy taxes and airport revenues. 

“That’s our financial challenge as an organization,” Van Eenoo said. “We need to find ways to mitigate that by either looking at other revenue sources, cutting back on expenditures or tapping into our reserves.” 

The city has $148 million in the combined general fund reserves, which is slightly above what the current city policy calls for. Austin City Council members will vote Thursday on pulling $15 million from this savings pot to use as a relief fund for people who’ve been financially hit by the coronavirus.

Credit City of Austin

Since the COVID-19 pandemic hit, the city has rolled out other initiatives to try to hold on to more money. City Manager Spencer Cronk implemented a hiring freeze for nearly 600 nonessential staff positions. There have also been efforts to scale back discretionary spending among different departments.  

“We’re projecting just short of $15 million in savings coming in the current fiscal year from those efforts,” Van Eenoo said. 

He said they are also considering delaying some previously budgeted initiatives, such as waiting until next fiscal year to hire dozens of new Austin police officers. 

A rise in the property tax rate is also not off the table after Gov. Greg Abbott’s disaster declaration allowed cities more flexibility – reverting the revenue cap to an 8% increase for the next two fiscal years. Last year, the Texas Legislature had lowered the cap to 3.5% growth. 

Van Eenoo said the city is also planning to receive some financial relief from the federal government. He estimates that under the Cares Act the City of Austin will be reimbursed more than $150 million for expenses incurred during the coronavirus emergency response. This is part of the $2.2 trillion stimulus package Congress approved last month. 

“We’re still waiting for rules from the Treasury Department in regards to specifics of what reimbursable expenses will be,” Van Eenoo said. “But right now we know that, broadly, the federal government is going to be reimbursing cities.”

Both Van Eenoo and Hockenyos say these are only initial projections and the outlooks are likely to change over time. It’s still too early to know just how much of an effect the coronavirus is going to have on the local economy. 

“We’re doing as good a job as we can do to get our arms around this entire situation,” Hockenyos said. “As we go forward, hopefully, we’ll be able to provide new, more refined and better information [to] grapple with this unprecedented situation.” 

Got a tip? Email Nadia Hamdan at Follow her on Twitter @nadzhamz.

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Nadia Hamdan is a local news anchor and host for NPR's "Morning Edition" on KUT.
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