Many Cities Imposing Broad Cuts as Revenue Shrinks

Tuesday, 27 Sep 2011 03:00 PM

 

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WASHINGTON — More than half of cities have cut staff, canceled construction projects or raised fees this year, according to a report from the National League of Cities that catalogs the vast damage from shrunken property- and income-tax revenue.

Cities are struggling from the same problems that have left the national economy sputtering: high unemployment, a depressed housing market and weak consumer spending. Those factors have reduced the taxes that cities collect for a fifth straight year. Many have had to make up the gap by laying off employees, freezing pay, cutting services, raising fees or suspending construction projects.

Two-thirds of city finance officers said they had delayed or canceled public works projects this year. Two in five reported raising fees for city services. One in five had cut spending on public safety. Nearly one in three had laid off staffers.

"We hoped the worst would be over at this point, but given where the economic considerations are, that seems to be very unclear here in the fall of 2011," said Christopher Hoene, director of the league's research arm and one of the report's authors.

Cities typically suffer the full force of a recession later than states and the nation as a whole do. Many cities rely heavily on property tax revenue, which can take several years to fully reflect falling home prices.

By comparison, states rely mostly on income and sales taxes. Income-tax revenue usually falls steeply within months after layoffs. State sales tax revenue also drops as people spend less.

The hardest-hit cities have been those that depend most on income from property taxes, the report said. Many are in the Northeast, Hoene said. By contrast, Midwestern cities tend to have steeper income taxes. And cities in the West, South and Southeast typically rely more on sales-tax revenue.

All three categories of tax revenue are expected to decline in 2011, Hoene said.

The report is based on a survey taken this spring and summer, before worsening economic data and fears about Europe's debt woes hurt consumer confidence and caused wild swings in the stock market.

"There may be a reconsideration of that as this year continues to unfold," said another co-author, Michael Pagano, dean of the College of Urban Planning at the University of Illinois and Chicago. "We're looking at at least another two or three years of very troubling fiscal signals for cities and municipalities."

The report is based on an annual survey of finance officers from cities and municipalities with more than 10,000 residents.


© Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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