city fiscal conditions in 2009 summary powerpoint

8/14/2019 City Fiscal Conditions in 2009 Summary Powerpoint

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By Christopher W. Hoene

and Michael A. Pagano

September 2009

City Fiscal Conditions in 2009


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City Fiscal Conditions in 2009

The nations city finance officers report that city fiscal conditionscontinue to weaken in 2009 due to:

National economic recession

Declining housing values

Restrictive credit markets

Slowed consumer spending

Rising unemployment


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Meeting Fiscal Needs

88 percent of city finance officers say their cities will be lessable to meet fiscal needs in 2009, compared to 2008 when 64

percent said they were less able to meet fiscal needs than in2007.

This is the worst change in the 24-year history of the survey.


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Regional Fiscal Outlook

Finance officers in the West (93 percent) say their cities areworse off in 2009 than cities in other regions.

Western Cities 93 percent

Southern Cities 84 percent

Midwest Cities 88 percent

Northeast Cities 85 percent


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Revenue and Spending Trends

For 2009, finance officers predict revenues will decrease by -0.4percent, while expenditures will increase by 2.5 percent.

This means that cities face a budget gap of 2.1 percent.


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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 torecent housing price increases, but this will slow to 1.6 percent bythe 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.


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Factors Influencing City Budgets

City budgets are facing spending pressures from a number ofsources: Decline of the local economy

Rising cost of providing services

Public safety and infrastructure costs

Employee-related costs for health care, pensions and wages


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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)


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Fiscal Actions Spending

Cities are taking a number of steps to cover budget shortfalls.

Some cities are decreasing the overall operation spending (49percent), while some are decreasing spending on municipalworkforce (49 percent).


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Spending Cuts& Responses to Shortfalls

To cover budget shortfalls and balance annual budgets, 91 percentof 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)


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Beyond 2009

City fiscal conditions tend to lag behind national fiscalconditions because of the time it takes for tax rates to reflect inthe economy.

Since national economic forecasts are not predictingimmediate and substantial improvements, city finances will beaffected in 2010, 2011 and beyond.


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Beyond 2009 (contd)

The concerns expressed by city finance officers for the nextyear 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


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The Lag Between Economic& City Fiscal Conditions

The lag refers to the gap between when national economicconditions change and when that impacts city economicconditions.

Typically anywhere from 18 months to several years, the lag islargely related to property tax collections, since a downturn in realestate prices may not be noticed for several years.

There is also some lag due to sales and income tax collection andadministration issues.


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About the Survey

The City Fiscal Conditions Survey is a national mail survey offinance 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 aresponse rate of 36.0 percent. The responses received allow us togeneralize about all cities with populations of 10,000 or more.


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About the National League of Cities

The National League of Cities is the nations oldest and largestorganization devoted to strengthening and promoting cities ascenters of opportunity, leadership and governance. NLC is aresource and advocate for more 1,600 member cities and the 49

state municipal leagues, representing 19,000 cities and towns andmore than 218 million Americans.

Through its Center for Research and Innovation, NLC provides an

applied think tank capacity by developing, conducting, andreporting research on issues affecting cities and towns.

city fiscal conditions in 2009 summary powerpoint

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