Mid-Sized And Smaller Cities, Counties Now Eligible Under Federal Debt Relief Program
On Monday, the Federal Reserve expanded an emergency lending program aimed at providing short-term credit to state and local governments during the coronavirus pandemic.
The loans are designed to provide cash-strapped cities and counties emergency funds during the COVID-19 pandemic. The new, lower thresholds mean cities with populations of 250,000 and counties of 500,000 are now eligible. That's an adjustment downward from 1 million and 2 million respectively.
"Revenues for a lot of our municipalities around the country are going to have quite a big dip. How do you cover those gaps? And that's, I believe, what the Federal Reserve is really trying to do here is really keeping any of these markets, particularly on the municipal debt side, from freezing up," said Congressman David Schweikert, 6th District of Arizona.
He said local governments are looking to the federal government right now for help.
"Having an alternative to provide liquidity, you may still that debt but do it a year or two years from now, when the revenue picture for your municipality is more clear," he said.
The original program was criticized largely for its high population threshold leaving out many mid-sized and smaller cities with notable minority populations including Tucson, New Orleans and Baltimore.
"This actually produces that liquidity instead of having to go into that traditional bond, debt market and pay, sometimes, some very large premiums or actually where there may be some liquidity squeeze," Schweikert said.
There are 87 cities that have populations above 250,000 as of 2018 and 140 counties that have populations above 500,000 as of 2019, according to Census Bureau statistics.
The facility, which is not yet operational, is among nine programs announced by the Fed to limit the economic harm from the virus as businesses close.
