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Potential US debt default to have financial impact on local governments

By John Daley | Posted - Jul. 25, 2011 at 6:57 p.m.



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SALT LAKE CITY — The impact of a national debt default would be felt in every community, and city mayors across the country are worried. In fact, Salt Lake City Mayor Ralph Becker says if a deal can't be reached, it will have a direct impact on city projects and city services.


It'll affect everything from every development going on in our city to people getting their Social Security checks and assistance with their rent checks.

–Mayor Ralph Becker


"It'll affect everything from every development going on in our city to people getting their Social Security checks and assistance with their rent checks," Becker said Monday.

Last week mayors from around the country met in Los Angeles. A group of 50, including Becker, issued a resolution calling for Congress and the Obama administration to "step back from bickering and pass a debt ceiling plan." Default "must be avoided at all costs," they say.

Louisville, Ky.'s, mayor, in town visiting Utah relatives, says federal funds account for 15 to 25 percent of the average city's budget. He says the deadlock is distracting the U.S. government from other challenges.

Related:

"What we're struggling as a country, right now, is jobs. So the impact of this not happening — the effect on jobs, on people not paying their rent anymore, landlords going out of business — the ripple effect on jobs and employment, we can't afford that as a country right now," Mayor Greg Fischer said.

Becker said thanks to the impasse, projects already in the pipeline could now be at risk — like a new two-mile Sugar House streetcar line, which is counting on $26 million in federal funds.

Other new developments and municipal projects like the Salt Lake police station could see costs skyrocket if there's a federal default and interest rates rise.

"So you bump up those interest rates and all of the sudden there are road projects, there are sidewalk projects, there are lighting projects; all kinds of things become less affordable and we will have to stop doing some of those," Becker said.

Of course, time is running out with an August deadline looming, now less than 10 days away.

Email: jdaley@ksl.com

John Daley

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