City Fiscal Conditions 2016

Source: Christiana McFarland, Michael A. Pagano, National League of Cities, October 2016

This year’s City Fiscal Conditions survey finds that:
– General Fund revenues grew 3.73% in 2015, and are expected to grow 0.54% as cities close the books on 2016. Expenditures grew 3.57% in 2015 and are budgeted to increase 3.71% in 2016.
– Property tax revenue growth is returning to pre-recession levels, with a sizable increase of 3.77% in 2015 and anticipated growth of 2.60% in 2016.
– Sales tax revenues are continuing to post strong growth, with 5.49% in 2015 and 1.99% expected in 2016.
– Despite post-recession volatility, income tax revenues grew 5.82% in 2015 and are expected to grow 3.47% in 2016.
– Ending balances are returning to historic highs, standing at 24.48% of General Fund expenditures in 2015 and budgeted for 21.67% of expenditures in 2016.

Despite improved fiscal stability for day-to-day operations, local budgets continue to confront mounting challenges. Infrastructure and employee- and retiree-related costs, matched with inequitable recovery in some local housing and labor markets, threaten longer-term fiscal sustainability. These concerns are foremost on the minds of city leaders, some of whom are implementing pension reforms and leveraging fiscal planning tools.

These strategies are particularly important given that city revenues have not fully recovered from the Great Recession. As a result, many may be operating with suppressed revenues when and if another recession emerges in the coming years. For now, though, city fiscal conditions are showing signs of vitality, with local governments reinvesting in areas critical to growth and community quality of life including infrastructure and public safety.