Cities’ continuing weak finances lead to more cuts in jobs and infrastructure
Cities’ finances continue to suffer from the poor economy, leading to more cuts to personnel and infrastructure projects, according to a new report from the Washington-based National League of Cities (NLC). NLC’s 26th annual City Fiscal Conditions report, released Sept. 27, found that general city revenues are projected to see a 2.3 percent decrease by the end of 2011, marking the fifth straight year of declines in revenue. It also predicts probable further declines in 2012.
Weak property tax collections from the suppressed property market is the main factor behind the revenue declines, according to the NLC report. Property tax collections are expected to decline by 3.7 percent with further declines likely in 2012 and 2013. Income tax receipts also are experiencing a decrease of 1.6 percent, and sales tax receipts remained largely flat at last year’s level, which saw the worst decrease in sales tax revenue in 15 years.
Cities are responding by cutting personnel (72 percent), delaying infrastructure projects (60 percent) and increasing service fees (41 percent), according to the report. One in three (36 percent) cities report modifications to employee health care benefits. “The cuts in personnel and the delaying of infrastructure projects are prudent and responsible actions by local officials,” NLC Executive Director Donald Borut said in a statement. “City officials are making difficult decisions and are working hard to find innovative solutions to reenergize their communities. But, without more resources and more cooperation, the outlook will continue to be challenging.”
Because national indicators in the property markets and consumer spending point to continued economic struggles at the local level, cities will have a difficult time in raising additional revenue for the immediate future, according to the report. Cities also have faced decreases in state aid. Since 2009, 50 percent of cities report cuts in general aid, 49 percent saw cuts in shared revenues, and 32 percent report reductions in reimbursements and other transfers, according to the report. Finally, the report found that, due to the revenue shortfalls, budget cuts, and state aid cuts, 57 percent of city finance officers report that their cities are less able to meet financial needs in 2011 than in 2010.
Download NLC’s City Fiscal Conditions report.