The editors of Financial Times warn of an “urban doom loop” for Aemrica’s “old line” major cities:
Anyone who has strolled through the business districts of San Francisco, Chicago, New York or any number of other large, old-line US cities can sense the lingering effects of the pandemic. Commercial office space available for lease is at record highs in the US, as cities — particularly large ones in the north — have struggled to bring workers back to the office full time. The trend, which may well get worse before it gets better, threatens to create an urban doom loop that puts the future of some large cities themselves into question.
Mobile phone data collected from city centres tells a dismal story. According to the private equity firm Apollo, phone activity in San Francisco is at 31 per cent of pre-pandemic levels, New York is at 74 per cent and Chicago at 50 per cent of 2019 levels. Boston is at 54 per cent of pre-pandemic levels. This has implications not only for office vacancy rates, but for the shops, restaurants and services around big commercial centres. Once bustling areas, such as San Francisco’s Union Square, now seem down at heel. Petty crime is rising, as are homelessness and open drug use.
All of this further discourages efforts to get workers back to city centres. Given that commercial tenants are typically the largest taxpayers in urban areas, public budgets are suffering too.
In Chicago the situation is even more complicated than that. Downtown property taxes are actually discounted already. If downtown office buildings were taxed in a way strictly analogous to residential properties, they would be paying much higher taxes than at present. That’s a strategy which has actually been pretty successful to date in keeping the downtown area from becoming a ghost town.
That’s just one of the “doom loops” we’re facing. There are others.
One of them is that city administrative structures do not respond in an agile manner to a declining population. Chicago’s population peaked in 1950 and it now has almost a million fewer residents than then—a 30% decline. That doesn’t mean that the number of city employees has declined. 
We have about the same number of firefighters as we did in 1980. The same is true of Chicago public school teachers and most other groups of Chicago public employees.
It’s also true of facilities like firehouses, schools, streets, and sewers.
We’re also paying for retired city employees. About 20% of Chicago’s budget goes to pensions. Almost no one other than public employees has a guaranteed benefit pension plan.
We can’t tax our way out of these “doom loops”. As taxes rise those who are most portable, generally those with the highest incomes, leave the city and the city becomes poorer.
Raising taxes to buffer the slew of bad policy making is a punitive solution to creating revenue. Eventually people get sick of it and move to more people/business friendly locations. That’s happening more and more in CA, as the anxiety of residing in more unaffordable areas increases. This type of disgruntlement is common, citing California’s high prices and taxes as they measure up to an increasingly lower satisfaction in the state’s cleanliness and maintenance of their cities, along side an increase in crime and homelessness. San Francisco, for example, once an iconic jewel on the west coast, has become the poster child of lawlessness and filth. My husband and I skirt it every time we go up to our N coast home, making excuses to friends who live there as to why we want to meet them outside the city rather than at their mid city homes. However, while stores like Whole Foods, who are abandoning their SF mid city locations, do create a stunned reaction in people, the local politicians do little to stem the root problems causing the exodus of both business and people from their metropolitan areas.
I’m skeptical this covid trend will last, but I do think the migration trends to southern and western cities at the expense of the mid-west and north-east will continue.
The city’s in a bit of a bind. We already have among the highest sales taxes in the country. Same with property taxes. The city doesn’t have the authority to impose either an income tax or a city earnings tax. It sold off the parking meter rights long ago.
Just about all it can do is increase fees (which it has been doing) or (gasp!) economize. It should have moved to a defined contributions pension scheme decades ago but that is anathema to the unions.
Amazing, isn’t it, how when you pay a stipend to homeless people, you get more homeless people?