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Cities face financial hard times as revenues fall, costs increase
Many may be forced to lay off workers and cut back services
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Published: September 15, 2008
COLUMBUS, Ohio
Declining property-tax revenues, high energy prices and other financial headwinds will create greater economic hardships in 2009 for most cities across the U.S., a new report says.
City budget officials say they anticipate more layoffs for municipal workers, cutbacks in parks and recreation programs and library hours, and higher fees for everything from garbage pickup to building permits.
"Cities for a long while now have been on the upside of the curve, generally experiencing pretty good growth in revenues," said Chris Hoene, the director of policy and research for the National League of Cities, which collected data from 319 municipalities in its annual survey. "Now we're coming over the top of the curve and heading down the wrong side of it."
The housing crisis has already damaged municipal coffers in 2008, especially in the West, with rising foreclosures and falling home prices resulting in decreased property-tax revenues. Four out of five budget officials who responded to the survey of U.S. cities say that next year is likely to be worse.
Small but fast-growing suburbs that used low tax rates to attract families are most vulnerable to budget constraints.
The three main sources of revenue for cities -- income tax, property tax and sales tax -- are all declining, the report warns. Meanwhile, health care, public safety and fuel are getting more expensive.
Two of every three cities with more than 50,000 residents say that it is harder to meet basic city needs this year than last, the survey found. One in two budget officials responding to the survey say they have raised fees on city services during the past year.
The report follows a litany of gloomy financial news for the nation's local and state governments in recent months.
The Center on Budget and Policy Priorities reported Sept. 8 that midyear shortfalls opened in the budgets of at least 13 states in the current budget year. At least 29 states and the District of Columbia faced or are facing combined budget shortfalls of $48 billion in the fiscal year that began July 1.
The Rockefeller Institute for Government said in July that adjusted state-tax revenues remained in decline for the third quarter in a row and that sales-tax collections were flat for the first time in six years.
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