Income tax rates, fiscal conditions, budget shortfalls, development fees, tax collection, Property tax rates, 49 percent, 25 percent, ICMA, Internet Resources, Fiscal Crisis, Alliance for Innovation Navigating, tax revenues, real estate prices, Slow recovery, Northeast Cities, Spending Trends, Southern Cities, property tax revenues, Western Cities, Finance officers, economic downturn, economic conditions, real estate market, city finance officers, National League of Cities, Political constraints, � State government budget shortfalls, Midwest Cities
City Fiscal Conditions in 2009 By Christopher W. Hoene and Michael A. Pagano September 2009
About the Survey · The City Fiscal Conditions Survey is a national mail survey of finance officers in U.S. cities. · Surveys were mailed to a sample of 1,055 cities, including all cities with populations greater than 50,000. · The survey was conducted from April to June 2009. · The 2009 survey data are drawn from 379 responding cities, for a response rate
of 36.0 percent. The responses received allow us to generalize about all cities with populations of 10,000 or more.
City Fiscal Conditions in 2009 · The nation's city finance officers report that city fiscal conditions continue to weaken in 2009 due to: National economic recession Declining housing values Restrictive credit markets Slowed consumer spending Rising unemployment
Meeting Fiscal Needs · 88 percent of city finance officers say their cities will be less able to meet fiscal needs in 2009, compared to 2008 when 64 percent said they were less able to meet fiscal needs than in 2007. · This is the worst change in the 24-year history of the survey.
Regional Fiscal Outlook · Finance officers in the West (93 percent) say their cities are worse off in 2009 than cities in other regions. Western Cities 93 percent Southern Cities 84 percent Midwest Cities 88 percent Northeast Cities 85 percent
Revenue and Spending Trends · For 2009, finance officers predict revenues will decrease by -0.4 percent, while expenditures will increase by 2.5 percent. · This means that cities face a budget gap of 2.1 percent.
Tax Revenues · This budget gap is the result of slowing property tax revenues (1.6 percent), combined with sales and income tax
declines. · Property tax revenues increased by 6.2 percent in 2008, due to recent housing price increases, but this will slow to 1.6 percent by the end of 2009. · City sales tax revenues (-3.8 percent) and income tax revenues (-1.3 percent) are predicted to decline through the end of 2009.
Factors Influencing City Budgets · City budgets are facing spending pressures from a number of sources: Decline of the local economy Rising cost of providing services Public safety and infrastructure costs Employee-related costs for health care
, pensions and wages
Fiscal Actions Revenue · Cities are responding by finding new revenue and increasing: Level of fees for services (45 percent) Number of fees (27 percent) Level of impact and development fees (19 percent) Property tax rates (25 percent) Sales tax rates (5 percent) Income tax rates (1 percent) Other tax rates (6 percent)
Fiscal Actions Spending · Cities are taking a number of steps to cover budget shortfalls. Some cities are decreasing the overall operation spending (49 percent), while some are decreasing spending on municipal workforce (49 percent).
Spending Cuts & Responses to Shortfalls · To cover budget shortfalls and balance annual budgets, 91 percent of cities are making spending cuts in 2009, while 81 percent predict they will make further cuts in 2010. · These cuts are coming from: Hiring freezes/layoffs (67 percent) Delaying/cancelling capital infrastructure projects (62 percent)
Beyond 2009 · City fiscal conditions tend to lag behind national fiscal conditions because of the time it takes for reported tax revenues to reflect changes in the economy. · Since national economic forecasts are not predicting immediate and substantial improvements, city finances will be affected in 2010, 2011 and beyond.
Beyond 2009 (cont'd) · The concerns expressed by city finance officers for the next year include: Slow recovery of the real estate
market state government
budget shortfalls Employee-related health care, pensions and wages Tightened credit markets Drawing down ending balances Political constraints on local authority
, limiting tools to offset economic downturn Consumer spending, unemployment and wages
The Lag Between Economic & City Fiscal Conditions · The "lag" refers to the gap between when national economic conditions
change and when that impacts city economic conditions. · Typically anywhere from 18 months to several years, the lag is largely related to property tax collections, since a downturn in real estate prices may not be noticed for several years. · There is also some lag due to sales and income tax collection and administration issues.
About the National League of Cities The National League of Cities is the nation's oldest and largest organization devoted to strengthening and promoting cities as centers of opportunity, leadership and governance. NLC is a resource and advocate for more 1,600 member cities and the 49 state municipal leagues, representing 19,000 cities and towns and more than 218 million Americans. Through its Center for Research and Innovation, NLC provides an applied think tank capacity by developing, conducting, and reporting research on issues affecting cities and towns.
Some Internet resource
s · Alliance for Innovation Navigating the Fiscal Crisis site: http://www.transformgov.org/FiscalCrisis.aspx?id=2128 · GFOA Fiscal First Aid site: http://www.gfoa.org/index.php?option=com_content&task=view&id= 937&Itemid=416 · ICMA Economic Crisis main page: http://icma.org/economiccrisis · ICMA Resource Center economic crisis page: http://icma.org/main/topic.asp?tpid=16&stid=151&hsid=10 · NLC research report
CW Hoene, MA Pagano