Baltimore Unrest May Cause Lasting Harm to Local Economy

The Freddie Gray protests and riots rocked Baltimore for days. While this unrest has already caused considerable damage and economic harm, economists fear the long-term damage may be more devastating.

The Freddie Gray protests and riots rocked Baltimore for days. While this unrest has already caused considerable damage and economic harm, economists fear the long-term damage may be more devastating.

According to a report by credit rating agency Moody’s, the city has suffered and will continue to suffer serious economic harm long after the riots have ended. The immediate effects will include lost tourism and lower home values, cutting significantly into the city’s revenue base. For example, the city has lost at least three major conventions that would have brought thousands of people and millions of dollars into the city. Other conventions and events are likely to follow suit, as well as any other form of tourism that would have flowed through town.

A bigger concern, however, is the out migration of Baltimore residents. The riots have already left thousands feeling uneasy about staying in the city, and many have already fled. If this relocation trend becomes permanent, home values could freefall.  This would cascade into other areas of the city’s finances, further cutting into its revenues and stretching its ability to serve remaining residents and repay its obligations.

Over the last few years, Baltimore has made a number of population gains. This had been of enormous benefit to the local economy. According to the U.S. Census Bureau, Baltimore consistently lost population for many years (nearly 36 percent since 1980). Since 2010, the city has been slowly gaining population. Baltimore’s current population is 622,104. Thanks to the current unrest, this trend is likely to reverse again, and some fear this could leave Baltimore to slowly crumble into a near ghost town, much as Detroit, Michigan did after the onset of the “Great Recession” in 2008.

Nevertheless, Moody’s does indicate that Baltimore has “healthy reserves” of more than $300 million that “are likely sufficient to enable it to absorb unexpected costs related to the unrest.” However, Baltimore has lacked the strong identity of other well-established large cities, making it easier for populations to move away from the city without feeling as if they have lost part of their identity like a New Yorker or Philadelphian might.

Thus, the chances of long-term out-migration is particularly high in Baltimore, which has caused Moody’s to note concerns about possible long-term credit worthiness due to inability to repay. The longer the riots continue, the more likely the city will dip deeper into financial loss.