More Gloom Lies Ahead for Cities, Report Says
Published: September 27, 2011
Nearly a third of the nation’s cities are laying off workers this year. More than half have canceled or delayed infrastructure projects. And two out of five have raised their fees.
One of the main culprits is the property tax, which many cities and local governments rely on heavily. Property tax collections, which are usually quite resilient, are projected to fall by 3.7 percent this year — their second year in a row of declines — as tax assessments belatedly catch up with the lower property values left behind by the battered real estate market. Sales tax collections are projected to be slightly higher this year, but income tax collections are projected to be slightly lower, as unemployment and lower wages take their toll in many places.
“For cities, the collective impact of property values continuing at levels far below their 2007 peaks, consumer spending slowing, consumer confidence eroding and markets possibly entering a double-dip recession is the worst since the Great Depression,” according to the survey, a copy of which was obtained by The New York Times. The report raises the possibility that “lower property values and declining sales may portend something entirely new, a ‘new normal.’ ”
In what passes for a bright spot in an overwhelmingly gloomy report, the number of city finance officers who said their cities would be less able to meet their fiscal needs has dropped. This year 57 percent of the 272 finance officers surveyed said their cities would be less able to meet their needs than they were last year. In 2010, 87 percent said so. But the number was still high this year when it came to cities that rely heavily on property taxes: nearly three quarters said they were less able to meet their needs.
One of the report’s authors, Christopher W. Hoene, said many cities were still unsure if the worst was over. “The question is, are we going into the low point or are we emerging out of it?” said Mr. Hoene, director of the Center for Research and Innovation at the league of cities. “Right now, in the early fall of 2011, the answer to that question is unclear.”
Cities have been unable to look for help in some of the traditional places. Half of the cities reported that their state aid has been cut since 2009, as states struggled to balance their own budgets.
So many cities have resorted to service cuts. Two in five report cutting things like libraries and parks and recreation programs. Nearly a fifth are making cuts to public safety. Nearly three-quarters are cutting their personnel costs through hiring freezes, wage freezes or reductions, layoffs or reduced health benefits for their workers.
In recent days mayors from both parties have gone to Washington to speak in support of President Obama’s proposal to increase infrastructure spending and give more aid to states and cities, but the proposal is still deeply unpopular with Republicans in Congress.
With cities and states required to balance their budgets, city officials see the federal government as the one entity that can spend more money now to get them through the lingering downturn. The survey finds that the outlook for cities next year was not much brighter. “The effects of depressed real estate markets, low levels of consumer confidence and high levels of unemployment,” the report said, “will continue to play out in cities through 2011, 2012 and beyond.”