If 88% of city finance officers believe “their cities are 'less able' to meet fiscal needs this year than they were last year,” has Greensboro’s economy improved enough to increase in the City’s overall debt by $185,860,000? (31.79%)

Survey: Worst of recession has yet to hit U.S. cities' coffers

 

While optimistic federal officials hint at an economic turnaround, city finance officers say the picture remains bleak for city governments. This is chiefly because a top source of municipal income -- property tax revenue -- tends to lag behind changes in the market.

 

Because cities typically phase in property tax assessments, the full weight of declining real estate values in the past two years will not be felt by cities until 2010, 2011 and 2012, city officials say.

 

The takeaway: Residents can expect cities to continue to cut municipal work forces, services and construction projects, while bumping up taxes and fees, experts say.

 

Cities are still "on the front end" of the recession, said Christopher Hoene, who co-authored the National League of Cities study with Michael Pagano. "Things are likely to worsen before they improve."

 

The league said pessimism among city finance officers is at its highest in the 24-year history of the survey. Eighty-eight percent of the finance officers who responded said their cities are "less able" to meet fiscal needs this year than they were last year. That's a marked decline from just two years ago, when 70 percent of finance officers said they were "better able" to meet financial needs than in the previous year.

 

The dismal financial picture is the largely the result of declines in all three major areas of municipal revenue -- property taxes, sales taxes and income taxes.

 

Property-tax collections actually increased 6.9 percent (or 6.2 percent when adjusted for inflation) in 2008 as assessments caught up with previous growth in the real estate market. And revenues are projected to grow 1.7 percent (or 1.6 percent adjusted) this year.

 

But city finance officers project a drop in the next three years as declining property values are reflected in property tax rolls.

 

Meanwhile, reduced consumer confidence is resulting in less spending and declining sales tax receipts. City finance officers project a decline of 3.8 percent this year, the survey says.

 

Finally, rising unemployment is hurting income-tax receipts; officials project income-tax revenues will decline 1.2 percent this year and "will likely intensify in future years," the National League of Cities report says.

 

…Some 45 percent of cities have raised fees to help balance budgets. Fee increases are so popular, they led to a NYTimes.com headline: "What's Next, Sidewalk Tolls?"

 

…cities are also using reserves -- money carried from one year to the next -- to balance their budgets. But that comes at a cost.

 

Bond underwriters see reserves as an indicator of fiscal responsibility, the report says. And when reserves decline, the cost of debt increases, putting additional financial burden on the city.

 

Mike M. Ahlers

CNN, September 1, 2009