Cities will continue to feel financial pain
The effects of the recession will continue to drag down city budgets beyond 2010 as tax revenues continue to sag, according to a report by the Washington-based National League of Cities (NLC). To compensate, some cities are expecting to raise their tax rates and make further cuts to their budgets.
The report, “City Fiscal Conditions in 2009,” found that cities face significant budget gaps this year because of a 1.3 percent decline of income tax and a 3.8 percent decrease in sales tax collections. Property taxes, which make up the bulk of city revenue nationwide, grew only 1.6 percent as declining housing values drag down real property assessments. Because of delays in tax revenue, cities typically lag 18 months behind the rest of the economy in responding to changes.
After battling a budget shortfall of $190 million since the beginning of its fiscal year on Oct. 1, 2008, Dallas is getting ready for another hard year in 2010, says City Councilman Steve Salazar. The city will probably increase its property tax rate in 2010, a step it has so far avoided, Salazar says.
The city had expected to cut 800 jobs by Oct. 1, but an influx of money from the American Recovery and Reinvestment Act (ARRA) has allowed the city to retain about 600 of those employees. “But, we know that [ARRA money] may not be there next year,” Salazar says.
Phoenix, meanwhile, has had to cut 1,800 city jobs and trim $370 million from its budget, says City Manager Frank Fairbanks. Fairbanks also would not rule out a tax increase next year. “There is absolutely no evidence that the economy is turning around or has even found the bottom in Arizona,” Fairbanks says.
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WHERE IS THE LAG?
“Because reporting of city fiscal conditions occurs, in most cases, on an annual basis, impacts [from economic changes] tend to not become evident until some point after the changes have started to occur.”
Source: “City Fiscal Conditions in 2009”
