Cities are still coping with the prolonged effects of the economic downturn, according to a new report by the National League of Cities (NLC). The 27th annual City Fiscal Conditions report shows that city revenues have fallen for the sixth straight year, as financial pressures such as infrastructure, health care, and pension costs combine with cuts in state and federal aid to weigh heavily on cities' bottom lines.
As a result of these pressures, cities are making personnel cuts, delaying or canceling infrastructure projects, and cutting local services, according to a survey of city finance officers conducted for the report. The report also projects that 2013 will continue to present challenges to city budgets because of stagnant housing markets, high unemployment, and looming federal budget cuts.
There are, however, some signs of fiscal improvement. In the 2012 survey, 43 percent of city finance officers indicated that they are less able to meet city needs than last year; that compares to 57 percent in 2011, and considerably better than the 87 percent reported in 2010 and the 88 percent reported in 2009.
It is still too early to say that cities have turned the corner. The broader economy is still growing at a slow rate, and housing values, income levels, and consumer spending--the main determinants of tax receipts--are not improving significantly, the report notes.
Finance officers who answered the survey mentioned a number of concerns that are playing a role in the fiscal health of cities. Most cited increased health-care costs (81 percent), pension costs (77 percent), infrastructure costs (75 percent), and public safety demands (61 percent). Respondents...