Unemployment rates are falling and state-level finances are in decent shape, but many cities and towns are struggling due to weak tax revenue, The Wall Street Journal reports.
A weak housing market is depressing property-tax collections, while the rising costs for pensions and employee healthcare plans are soaking up money.
Local tax revenue fell 2.34 percent in the fourth quarter of 2010 compared with the year-earlier period, according to the Commerce Department, and things aren't looking up.
|A weak housing market is depressing property-tax collections.
(Getty Images photo)
Local tax revenue depends heavily on property taxes while state revenue comes from incomes and sales taxes, the latter of which generally pick up as the overall economy improves.
With no meaningful recovery seen in the housing market, tough times loom in mayors' offices across the country.
Local finances "are continuing to get worse and are likely to worsen further," says Don Boyd, senior fellow at the Nelson A. Rockefeller Institute of Government, according to the Journal.
A poll of U.S. homebuilders suggests the housing market won't recover in 2011.
The National Association of Home Builders says its industry outlook index for May remains unchanged at 16, a level where it has hovered for six of the past seven months, according to the Associated Press.
Any reading below 50 indicates negative sentiment, and the index hasn't been above that level since April 2006.
"You can get existing homes at a much cheaper price now, mainly due to foreclosures," says Paul Dales, senior U.S. economist at Capital Economics, according to the Associated Press.
"New homes really aren't competitively priced."
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