Hard times will carry on for cities
The recession is far from over for most cities, according to a report released in October 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.
Cities are now “in the eye of the storm” in terms of the recession’s effect on their budgets, says Chris Hoene, director of NLC’s Center for Research and Innovation. “Their revenue is down, and they’re making cuts to balance their budgets,” he says.
NLC’s “City Fiscal Conditions in 2010” found that 87 percent of 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.
The ongoing weakness in the housing market, along with poor retail sales, are the primary causes of the drop in revenue, according to the report. In previous recessions, retail sales had time to recover before cities felt the loss of property tax revenue because of a delay of one to two years in collection of the latter, but that is not the case this time. But, now both are down at the same time, says Michael Pagano, dean of the Center for Urban Planning and Public Affairs at the University of Illinois at Chicago and creator of the NLC survey.
In the end, Hoene says, the recession, and the budget cuts, will continue for cities until at least 2011. “Everything’s on the table, and there aren’t any sacred cows at this point,” Hoene says.
NLC’s “City Fiscal Conditions in 2010” is available at www.nlc.org.
Some findings of NLC’s annual “City Fiscal Conditions” 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 made service cuts and public safety cuts, the latter being usually reduced only as a last resort.