The nation’s cities are in their worst fiscal shape in at least a quarter of a century and have probably not yet hit the bottom of their slide, according to a new report by the National league of Cities.
The report finds many cities, which are in their fourth straight year of declining revenues, are only now beginning to see lower property values translate into lower property tax collections, which are the backbone of many city budgets. 87% of city finance officers report their cities are worse off financially than in 2009.
It can take several years for appraisers to catch up to real estate market conditions, and this year, for the first time since the housing bubble burst, cities are projecting a 1.8% decrease in property tax collections.
With sales tax collections still down and unemployment and stagnant salarie, cities are seeing their revenues drop even faster than many of them have been able to cut spending. They also face the additional burden of paying rising health care and pension costs for their employees.
“The effects of a depressed real estate market, low levels of consumer confidence, and high levels of unemployment will likely play out in cities through 2010, 2011 and beyond,” the report says.
Cities around the country have made steep cuts to stay afloat, from layoffs of firefighters and police officers to turning off street lights. The report, which surveyed finance officers in 338 cities, found that two-thirds of them were canceling or delaying construction and maintenance projects, a third were laying off workers and a quarter were cutting public safety.
Financial pressures are forcing cities to layoff workers (79%), delay or cancel capital infrastructure projects (69%), and modify health benefits (34%). There were also significant increases in the number of financial officials reporting across-the-board services cuts (25%) and public safety cuts (25%). Public safety is usually reduced only as a last resort option.
Christopher W. Hoene, one of the authors of the report, says the length of the downturn has dealt cities an unusual blow: in most recessions, he says sales tax collections start to improve by the time property tax collections drop to reflect lower home values.
“This time around, the recession has been deep enough that we have the two major sources of revenue down at the same time,” Hoene says.
And cities have few places to turn for help, leaving tax increases and service cuts as their main options.
“Right now there isn’t really anywhere to turn,” Hoene says, noting that many states are now cutting aid to cities, not increasing it. “The state budgets are in a position where they are more likely to hurt than to help.”
Mayor Ronald O. Loveridge of Riverside, California and president of NLC, says. “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.”
The full National League of Cities report can be found at by clicking here: “City Fiscal Conditions in 2010”
Information courtesy of Unified Government
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