Tough Times Still Ahead: New City Fiscal Conditions Report Shows Revenues Continue to Fall

The economic downturn continues to take a toll on city finances and city fiscal conditions are expected to remain weakened in 2013 as city revenue collections lag economic transitions, according to the National League of Cities 27th annual City Fiscal Conditions report. For the sixth straight year, revenues continue to fall and city budgets are only exacerbated by state and federal aid cuts. The report found that cities’ general fund revenues in 2011 declined 2.3 percent from 2010 revenues and in 2012 general fund revenues will decline by 3.9 percent.

Property tax revenues are particularly critical for city funding and the report projects a decline for the third year in a row in 2012, dropping 2.1 percent. As a way to deal with tight budgets, personnel has been cut and infrastructure projects have been delayed or canceled. Twenty-five percent have cut key services and 48 percent have reduced their workforce.

However, it’s not all bad news. Sales tax revenues will continue to pick up and rise by 2.4 percent in 2012. And the report shows that there has been some progress in cities being able to meet their financial needs. For instance, back in 2009 88% of cities said they were less able to meet their financial needs and in 2012 that percentage has reduced to 43%.

Some highlights from the report are as follows:

  • Leading the list of factors that finance officers say have increased over the previous year are health benefit costs (81%) and pension costs (77%)
  • Leading factors that city finance officers report to have decreased are levels of federal aid (51%), state aid (50%), the local tax base (47%) and the health of the local economy (42%)
  • One in three city finance officers (33%) also report delaying or cancelling capital infrastructure projects.  
  • Only fifteen percent of cities cut public safety expenditures (compared to 44% reporting increased spending)
  • In 2012, the most common cut so far was a hiring freeze (45%)

You can read the full report here.

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