Report: Recession’s effects will continue for cities
The recession is far from over for most cities, according to a report released Wednesday by the Washington-based National League of Cities (NLC). Cities will be less able to meet their fiscal needs in 2011 and beyond, and municipal financial officers report the largest spending cuts and loss of revenue in the 25-year history of NLC’s annual “City Fiscal Conditions” survey.
NLC’s “City Fiscal Conditions in 2010” found that 87 percent of city finance officers report their cities are worse off financially than in 2009. City revenues — as generated in property, sales and income taxes — will decline 3.2 percent in inflation-adjusted dollars, according to the NLC report. City officials compensate for the loss of revenue by cutting spending, and the study found that expenditures declined by 2.3 percent between 2009 and 2010, the largest cutbacks in spending in the history of the survey and the fourth year in a row that revenue declined.
“This historic recession has forced city officials to make difficult decisions that impact the social and economic fabric of their communities,” said Riverside, Calif., Mayor and NLC President Ronald Loveridge. “This recession is making city officials fundamentally rethink and repurpose the provision of services in their communities. Some are innovating and finding creative solutions but, regrettably, without the necessary resources, cities will continue to have a difficult time assisting their residents through these trying economic times.”
Other findings in the survey include:
• 79 percent of respondents have been forced to layoff workers
• 69 percent have had to delay or cancel capital infrastructure projects
• 34 percent have had to modify health benefits
• 25 percent have implemented across-the-board service cuts and public safety cuts, the latter being traditionally reduced only as a last resort.
The ongoing weakness in the housing market, along with poor retail sales, are the primary causes of the drop in city revenue, according to the report. Because most tax revenue is collected at specific points during the year, and because it takes time for housing assessments to catch up to current values, cities still will be feeling the full effect of the downturn in 2011, and the national economy’s slow recovery also means cities could feel the recession’s effects for several more years. “These stark numbers continue the trend we’ve been seeing for the past several years: lower revenue and reduced services at a time when there is an increased demand for services,” said the study’s co-author, NLC Center for Research and Innovation Director Christopher Hoene. “Unfortunately, because of the loss in revenue, cities will face even more difficult circumstances in the months, if not years, to come.”
Download NLC’s City Fiscal Conditions in 2010.