City Fiscal Conditions in 2010

Source: Christopher W. Hoene & Michael A. Pagano, National League of Cities, Research Brief, October 2010

The nation’s city finance officers report that the fiscal condition of the nation’s cities continues to weaken in 2010 as cities confront the effects of the economic downturn.

Local and regional economies characterized by struggling housing markets, slow consumer
spending, and high levels of unemployment are driving declines in city revenues. In response, cities are cutting personnel, infrastructure investments and key services.

Findings from the National League of Cities’ latest annual survey of city finance officers include:
– Nearly nine in ten city finance officers report that their cities are less able to meet fiscal needs in 2010 than in the previous year;
– As finance officers look to the close of 2010, they report declining revenues and spending cutbacks in response to the economic downturn;
– Property tax revenues are beginning to decline in 2010, after years of annual growth, reflecting the gradual, but inevitable, impact of housing market declines in recent years;
– City sales tax revenues declined dramatically in 2009 and are declining further in 2010;
– Fiscal pressures confronting cities include declining local economic health, public safety and infrastructure costs, employee-related costs for health care, pensions, and wages, and cuts in state aid;
– To cover budget shortfalls and balance annual budgets, cities are making a variety of personnel cuts, delaying or cancelling infrastructure projects, and cutting basic city services; and,
– Ending balances, or “reserves,” while still at high levels, decreased for the second year in a row as cities used these balances to weather the effects of the downturn.

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